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                                                                   Exhibit 10.10


                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

          INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement" dated as of
March 19, 2004, by and among Aquatic Cellulose International Corp., a Nevada
corporation (the "Company"), and the secured parties signatory hereto and their
respective endorsees, transferees and assigns (collectively, the "Secured
Party").

                                   WITNESSETH:

     WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof, between Company and the Secured Party (the "Purchase Agreement"),
Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company's 10% Secured Convertible
Debentures, due two years from the date of issue (the "Debentures"), which are
convertible into shares of Company's Common Stock, par value $.001 per share
(the "Common Stock"). In connection therewith, Company shall issue the Secured
Party certain Common Stock purchase warrants dated as of the date hereof to
purchase the number of shares of Common Stock indicated below each Secured
Party's name on the Purchase Agreement (the "Warrants"); and

     WHEREAS, in order to induce the Secured Party to purchase the Debentures,
Company has agreed to execute and deliver to the Secured Party this Agreement
for the benefit of the Secured Party and to grant to it a first priority
security interest in certain Intellectual Property (defined below) of Company to
secure the prompt payment, performance and discharge in full of all of Company's
obligations under the Debentures and exercise and discharge in full of Company's
obligations under the Warrants; and

     NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

          1. Defined Terms. Unless otherwise defined herein, terms which are
defined in the Purchase Agreement and used herein are so used as so defined; and
the following terms shall have the following meanings:

               "Company" shall mean, collectively, Company and all of the
present and future subsidiaries of Company, a list of which is contained in
Schedule A, attached hereto.

               "Software Intellectual Property" shall mean:

               (a) all software programs (including all source code, object code
and all related applications and data files), whether now owned, upgraded,
enhanced, licensed or leased or hereafter acquired by the Company, above;

               (b) all computers and electronic data processing hardware and
firmware associated therewith;

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               (c) all documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to such software, hardware and
firmware described in the preceding clauses (a) and (b); and

               (d) all rights with respect to all of the foregoing, including,
without limitation, any and all upgrades, modifications, copyrights, licenses,
options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications and substitutions, replacements, additions, or model
conversions of any of the foregoing.

               "Copyrights" shall mean (a) all copyrights, registrations and
applications for registration, issued or filed, including any reissues,
extensions or renewals thereof, by or with the United States Copyright Office or
any similar office or agency of the United States, any state thereof, or any
other country or political subdivision thereof, or otherwise, including, all
rights in and to the material constituting the subject matter thereof,
including, without limitation, any referred to in Schedule B hereto, and (b) any
rights in any material which is copyrightable or which is protected by common
law, United States copyright laws or similar laws or any law of any State,
including, without limitation, any thereof referred to in Schedule B hereto.

               "Copyright License" shall mean any agreement, written or oral,
providing for a grant by the Company of any right in any Copyright, including,
without limitation, any thereof referred to in Schedule B hereto.

               "Intellectual Property" shall means, collectively, the Software
Intellectual Property, Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks, Trademark Licenses and Trade Secrets.

               "Obligations" means all of the Company's obligations under this
Agreement and the Debentures, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated
or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later decreased, created or
incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time.

               "Patents" shall mean (a) all letters patent of the United States
or any other country or any political subdivision thereof, and all reissues and
extensions thereof, including, without limitation, any thereof referred to in
Schedule B hereto, and (b) all applications for letters patent of the United
States and all divisions, continuations and continuations-in-part thereof or any
other country or any political subdivision, including, without limitation, any
thereof referred to in Schedule B hereto.

               "Patent License" shall mean all agreements, whether written or
oral, providing for the grant by the Company of any right to manufacture, use or
sell any invention covered by a Patent, including, without limitation, any
thereof referred to in Schedule B hereto.


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               "Security Agreement" shall mean the a Security Agreement, dated
the date hereof between Company and the Secured Party.

               "Trademarks" shall mean (a) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or acquired,
all registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or any political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in Schedule B hereto, and (b) all reissues,
extensions or renewals thereof.

               "Trademark License" shall mean any agreement, written or oral,
providing for the grant by the Company of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule B hereto.

               "Trade Secrets" shall mean common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
the Company (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule B hereto, and including the right to sue
for and to enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or enforcement of any
such Trade Secret license.

          2. Grant of Security Interest. In accordance with Section 3(m) of the
Security Agreement, to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, the Company
hereby, unconditionally and irrevocably, pledges, grants and hypothecates to the
Secured Party, a continuing security interest in, a continuing first lien upon,
an unqualified right to possession and disposition of and a right of set-off
against, in each case to the fullest extent permitted by law, all of the
Company's right, title and interest of whatsoever kind and nature in and to the
Intellectual Property (the "Security Interest").

          3. Representations and Warranties. The Company hereby represents and
warrants, and covenants and agrees with, the Secured Party as follows:

               (a) The Company has the requisite corporate power and authority
to enter into this Agreement and otherwise to carry out its obligations
thereunder. The execution, delivery and performance by the Company of this
Agreement and the filings contemplated therein have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company. This Agreement constitutes a legal, valid and binding obligation of
the Company enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditor's rights generally.


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               (b) The Company represents and warrants that it has no place of
business or offices where its respective books of account and records are kept
(other than temporarily at the offices of its attorneys or accountants) or
places where the Intellectual Property is stored or located, except as set forth
on Schedule A attached hereto;

               (c) The Company is the sole owner of the Intellectual Property
(except for non-exclusive licenses granted by the Company in the ordinary course
of business), free and clear of any liens, security interests, encumbrances,
rights or claims, and is fully authorized to grant the Security Interest in and
to pledge the Intellectual Property. There is not on file in any governmental or
regulatory authority, agency or recording office an effective financing
statement, security agreement, license or transfer or any notice of any of the
foregoing (other than those that have been filed in favor of the Secured Party
pursuant to this Agreement) covering or affecting any of the Intellectual
Property. So long as this Agreement shall be in effect, the Company shall not
execute and shall not knowingly permit to be on file in any such office or
agency any such financing statement or other document or instrument (except to
the extent filed or recorded in favor of the Secured Party pursuant to the terms
of this Agreement), except for a financing statement covering assets acquired by
the Company after the date hereof, provided that the value of the Intellectual
Property covered by this Agreement along with the Collateral (as defined in the
Security Agreement) is equal to at least 150% of the Obligations.

               (d) The Company shall at all times maintain its books of account
and records relating to the Intellectual Property at its principal place of
business and its Intellectual Property at the locations set forth on Schedule A
attached hereto and may not relocate such books of account and records unless it
delivers to the Secured Party at least 30 days prior to such relocation (i)
written notice of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that the necessary documents have
been filed and recorded and other steps have been taken to perfect the Security
Interest to create in favor of the Secured Party valid, perfected and continuing
first priority liens in the Intellectual Property to the extent they can be
perfected through such filings.

               (e) This Agreement creates in favor of the Secured Party a valid
security interest in the Intellectual Property securing the payment and
performance of the Obligations and, upon making the filings required hereunder,
a perfected first priority security interest in such Intellectual Property to
the extent that it can be perfected through such filings.

               (f) Upon request of the Secured Party, the Company shall execute
and deliver any and all agreements, instruments, documents, and papers as the
Secured Party may request to evidence the Secured Party's security interest in
the Intellectual Property and the goodwill and general intangibles of the
Company relating thereto or represented thereby, and the Company hereby appoints
the Secured Party its attorney-in-fact to execute and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations have been fully satisfied and are paid in full.

               (g) The execution, delivery and performance of this Agreement
does not conflict with or cause a breach or default, or an event that with or
without the passage of time


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or notice, shall constitute a breach or default, under any agreement to which
the Company is a party or by which the Company is bound. No consent (including,
without limitation, from stock holders or creditors of the Company) is required
for the Company to enter into and perform its obligations hereunder.

               (h) The Company shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected first priority
liens and security interests in the Intellectual Property to the extent they can
be perfected by filing in favor of the Secured Party until this Agreement and
the Security Interest hereunder shall terminate pursuant to Section 11. The
Company hereby agrees to defend the same against any and all persons. The
Company shall safeguard and protect all Intellectual Property for the account of
the Secured Party. Without limiting the generality of the foregoing, the Company
shall pay all fees, taxes and other amounts necessary to maintain the
Intellectual Property and the Security Interest hereunder, and the Company shall
obtain and furnish to the Secured Party from time to time, upon demand, such
releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interest hereunder.

               (i) The Company will not transfer, pledge, hypothecate, encumber,
license (except for non-exclusive licenses granted by the Company in the
ordinary course of business), sell or otherwise dispose of any of the
Intellectual Property without the prior written consent of the Secured Party.

               (j) The Company shall, within ten (10) days of obtaining
knowledge thereof, advise the Secured Party promptly, in sufficient detail, of
any substantial change in the Intellectual Property, and of the occurrence of
any event which would have a material adverse effect on the value of the
Intellectual Property or on the Secured Party's security interest therein.

               (k) The Company shall permit the Secured Party and its
representatives and agents to inspect the Intellectual Property at any time, and
to make copies of records pertaining to the Intellectual Property as may be
requested by the Secured Party from time to time.

               (l) The Company will take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the Intellectual
Property.

               (m) The Company shall promptly notify the Secured Party in
sufficient detail upon becoming aware of any attachment, garnishment, execution
or other legal process levied against any Intellectual Property and of any other
information received by the Company that may materially affect the value of the
Intellectual Property, the Security Interest or the rights and remedies of the
Secured Party hereunder.

               (n) All information heretofore, herein or hereafter supplied to
the Secured Party by or on behalf of the Company with respect to the
Intellectual Property is accurate and complete in all material respects as of
the date furnished.


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               (o) Schedule A attached hereto contains a list of all of the
subsidiaries of Company.

               (p) Schedule B attached hereto includes all Licenses, and all
Patents and Patent Licenses, if any, owned by the Company in its own name as of
the date hereof. Schedule B hereto includes all Trademarks and Trademark
Licenses, if any, owned by the Company in its own name as of the date hereof.
Schedule B hereto includes all Copyrights and Copyright Licenses, if any, owned
by the Company in its own name as of the date hereof. Schedule B hereto includes
all Trade Secrets and Trade Secret Licenses, if any, owned by the Company as of
the date hereof. To the best of the Company's knowledge, each License, Patent,
Trademark, Copyright and Trade Secret is valid, subsisting, unexpired,
enforceable and has not been abandoned. Except as set forth in Schedule B, none
of such Licenses, Patents, Trademarks, Copyrights and Trade Secrets is the
subject of any licensing or franchise agreement. To the best of the Company's
knowledge, no holding, decision or judgment has been rendered by any
Governmental Body which would limit, cancel or question the validity of any
License, Patent, Trademark, Copyright and Trade Secrets. No action or proceeding
is pending (i) seeking to limit, cancel or question the validity of any License,
Patent, Trademark, Copyright or Trade Secret, or (ii) which, if adversely
determined, would have a material adverse effect on the value of any License,
Patent, Trademark, Copyright or Trade Secret. The Company has used and will
continue to use for the duration of this Agreement, proper statutory notice in
connection with its use of the Patents, Trademarks and Copyrights and consistent
standards of quality in products leased or sold under the Patents, Trademarks
and Copyrights.

               (q) With respect to any Intellectual Property:

                    (i)   such Intellectual Property is subsisting and has not
                          been adjudged invalid or unenforceable, in whole or in
                          part;

                    (ii)  such Intellectual Property is valid and enforceable;

                    (iii) the Company has made all necessary filings and
                          recordations to protect its interest in such
                          Intellectual Property, including, without limitation,
                          recordations of all of its interests in the Patents,
                          Patent Licenses, Trademarks and Trademark Licenses in
                          the United States Patent and Trademark Office and in
                          corresponding offices throughout the world and its
                          claims to the Copyrights and Copyright Licenses in the
                          United States Copyright Office and in corresponding
                          offices throughout the world;

                    (iv)  other than as set forth in Schedule B, the Company is
                          the exclusive owner of the entire and unencumbered
                          right, title and interest in and to such Intellectual
                          Property and no claim has been made that the use of
                          such Intellectual Property infringes on the asserted
                          rights of any third party; and


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                    (v)   the Company has performed and will continue to perform
                          all acts and has paid all required fees and taxes to
                          maintain each and every item of Intellectual Property
                          in full force and effect throughout the world, as
                          applicable.

               (r) Except with respect to any Trademark or Copyright that the
Company shall reasonably determine is of negligible economic value to the
Company, the Company shall

                    (i) maintain each Trademark and Copyright in full force free
     from any claim of abandonment for non-use, maintain as in the past the
     quality of products and services offered under such Trademark or Copyright;
     employ such Trademark or Copyright with the appropriate notice of
     registration; not adopt or use any mark which is confusingly similar or a
     colorable imitation of such Trademark or Copyright unless the Secured Party
     shall obtain a perfected security interest in such mark pursuant to this
     Agreement; and not (and not permit any licensee or sublicensee thereof to)
     do any act or knowingly omit to do any act whereby any Trademark or
     Copyright may become invalidated;

                    (ii) not, except with respect to any Patent that it shall
     reasonably determine is of negligible economic value to it, do any act, or
     omit to do any act, whereby any Patent may become abandoned or dedicated;
     and

                    (iii) notify the Secured Party immediately if it knows, or
     has reason to know, that any application or registration relating to any
     Patent, Trademark or Copyright may become abandoned or dedicated, or of any
     adverse determination or development (including, without limitation, the
     institution of, or any such determination or development in, any proceeding
     in the United States Patent and Trademark Office, United States Copyright
     Office or any court or tribunal in any country) regarding its ownership of
     any Patent, Trademark or Copyright or its right to register the same or to
     keep and maintain the same.

               (s) Whenever the Company, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Patent, Trademark or Copyright with the United States Patent and
Trademark Office, United States Copyright Office or any similar office or agency
in any other country or any political subdivision thereof or acquire rights to
any new Patent, Trademark or Copyright whether or not registered, report such
filing to the Secured Party within five business days after the last day of the
fiscal quarter in which such filing occurs.

               (t) The Company shall take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents, Trademarks and


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Copyrights, including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.

               (u) In the event that any Patent, Trademark or Copyright included
in the Intellectual Property is infringed, misappropriated or diluted by a third
party, promptly notify the Secured Party after it learns thereof and shall,
unless it shall reasonably determine that such Patent, Trademark or Copyright is
of negligible economic value to it, which determination it shall promptly report
to the Secured Party, promptly sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution, or take such other
actions as it shall reasonably deem appropriate under the circumstances to
protect such Patent, Trademark or Copyright. If the Company lacks the financial
resources to comply with this Section 3(t), the Company shall so notify the
Secured Party and shall cooperate fully with any enforcement action undertaken
by the Secured Party on behalf of the Company.

          4. Defaults. The following events shall be "Events of Default":

               (a) The occurrence of an Event of Default (as defined in the
Debentures) under the Debentures;

               (b) Any representation or warranty of the Company in this
Agreement or in the Security Agreement shall prove to have been incorrect in any
material respect when made;

               (c) The failure by the Company to observe or perform any of its
obligations hereunder or in the Security Agreement for ten (10) days after
receipt by the Company of notice of such failure from the Secured Party; and

               (d) Any breach of, or default under, the Warrants.

          5. Duty To Hold In Trust. Upon the occurrence of any Event of Default
and at any time thereafter, the Company shall, upon receipt by it of any
revenue, income or other sums subject to the Security Interest, whether payable
pursuant to the Debentures or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum,
hold the same in trust for the Secured Party and shall forthwith endorse and
transfer any such sums or instruments, or both, to the Secured Party for
application to the satisfaction of the Obligations.

          6. Rights and Remedies Upon Default. Upon occurrence of any Event of
Default and at any time thereafter, the Secured Party shall have the right to
exercise all of the remedies conferred hereunder and under the Debentures, and
the Secured Party shall have all the rights and remedies of a secured party
under the UCC and/or any other applicable law (including the Uniform Commercial
Code of any jurisdiction in which any Intellectual Property is then located).
Without limitation, the Secured Party shall have the following rights and
powers:


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               (a) The Secured Party shall have the right to take possession of
the Intellectual Property and, for that purpose, enter, with the aid and
assistance of any person, any premises where the Intellectual Property, or any
part thereof, is or may be placed and remove the same, and the Company shall
assemble the Intellectual Property and make it available to the Secured Party at
places which the Secured Party shall reasonably select, whether at the Company's
premises or elsewhere, and make available to the Secured Party, without rent,
all of the Company's respective premises and facilities for the purpose of the
Secured Party taking possession of, removing or putting the Intellectual
Property in saleable or disposable form.

               (b) The Secured Party shall have the right to operate the
business of the Company using the Intellectual Property and shall have the right
to assign, sell, lease or otherwise dispose of and deliver all or any part of
the Intellectual Property, at public or private sale or otherwise, either with
or without special conditions or stipulations, for cash or on credit or for
future delivery, in such parcel or parcels and at such time or times and at such
place or places, and upon such terms and conditions as the Secured Party may
deem commercially reasonable, all without (except as shall be required by
applicable statute and cannot be waived) advertisement or demand upon or notice
to the Company or right of redemption of the Company, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of Intellectual
Property, the Secured Party may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Intellectual Property being
sold, free from and discharged of all trusts, claims, right of redemption and
equities of the Company, which are hereby waived and released.

          7. Applications of Proceeds. The proceeds of any such sale, lease or
other disposition of the Intellectual Property hereunder shall be applied first,
to the expenses of retaking, holding, storing, processing and preparing for
sale, selling, and the like (including, without limitation, any taxes, fees and
other costs incurred in connection therewith) of the Intellectual Property, to
the reasonable attorneys' fees and expenses incurred by the Secured Party in
enforcing its rights hereunder and in connection with collecting, storing and
disposing of the Intellectual Property, and then to satisfaction of the
Obligations, and to the payment of any other amounts required by applicable law,
after which the Secured Party shall pay to the Company any surplus proceeds. If,
upon the sale, license or other disposition of the Intellectual Property, the
proceeds thereof are insufficient to pay all amounts to which the Secured Party
is legally entitled, the Company will be liable for the deficiency, together
with interest thereon, at the rate of 15% per annum (the "Default Rate"), and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency. To the extent permitted by applicable law, the Company waives
all claims, damages and demands against the Secured Party arising out of the
repossession, removal, retention or sale of the Intellectual Property, unless
due to the gross negligence or willful misconduct of the Secured Party.

          8. Costs and Expenses. The Company agrees to pay all out-of-pocket
fees, costs and expenses incurred in connection with any filing required
hereunder, including without limitation, any financing statements, continuation
statements, partial releases and/or termination statements related thereto or
any expenses of any searches reasonably required by the Secured Party. The
Company shall also pay all other claims and charges which in the reasonable
opinion of the Secured Party might prejudice, imperil or otherwise affect the
Intellectual Property or the


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Security Interest therein. The Company will also, upon demand, pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
the Secured Party may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Intellectual Property, or (iii) the
exercise or enforcement of any of the rights of the Secured Party under the
Debentures. Until so paid, any fees payable hereunder shall be added to the
principal amount of the Debentures and shall bear interest at the Default Rate.

          9. Responsibility for Intellectual Property. The Company assumes all
liabilities and responsibility in connection with all Intellectual Property, and
the obligations of the Company hereunder or under the Debentures and the
Warrants shall in no way be affected or diminished by reason of the loss,
destruction, damage or theft of any of the Intellectual Property or its
unavailability for any reason.

          10. Security Interest Absolute. All rights of the Secured Party and
all Obligations of the Company hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures, the Warrants or any agreement entered into in connection with
the foregoing, or any portion hereof or thereof; (b) any change in the time,
manner or place of payment or performance of, or in any other term of, all or
any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Debentures, the Warrants or any other agreement entered
into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Intellectual Property, or any release or amendment
or waiver of or consent to departure from any other Intellectual Property for,
or any guaranty, or any other security, for all or any of the Obligations; (d)
any action by the Secured Party to obtain, adjust, settle and cancel in its sole
discretion any insurance claims or matters made or arising in connection with
the Intellectual Property; or (e) any other circumstance which might otherwise
constitute any legal or equitable defense available to the Company, or a
discharge of all or any part of the Security Interest granted hereby. Until the
Obligations shall have been paid and performed in full, the rights of the
Secured Party shall continue even if the Obligations are barred for any reason,
including, without limitation, the running of the statute of limitations or
bankruptcy. The Company expressly waives presentment, protest, notice of
protest, demand, notice of nonpayment and demand for performance. In the event
that at any time any transfer of any Intellectual Property or any payment
received by the Secured Party hereunder shall be deemed by final order of a
court of competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or
shall be deemed to be otherwise due to any party other than the Secured Party,
then, in any such event, the Company's obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied by any
prior payment thereof and/or cancellation of this Agreement, but shall remain a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof. The Company waives all right to require the Secured Party to
proceed against any other person or to apply any Intellectual Property which the
Secured Party may hold at any time, or to marshal assets, or to pursue any other
remedy. The Company waives any defense arising by reason of the application of
the statute of limitations to any obligation secured hereby.


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          11. Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures have been made
in full and all other Obligations have been paid or discharged. Upon such
termination, the Secured Party, at the request and at the expense of the
Company, will join in executing any termination statement with respect to any
financing statement executed and filed pursuant to this Agreement.

          12. Power of Attorney; Further Assurances.

               (a) The Company authorizes the Secured Party, and does hereby
make, constitute and appoint it, and its respective officers, agents, successors
or assigns with full power of substitution, as the Company's true and lawful
attorney-in-fact, with power, in its own name or in the name of the Company, to,
after the occurrence and during the continuance of an Event of Default, (i)
endorse any notes, checks, drafts, money orders, or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Intellectual Property that may come into possession of the
Secured Party; (ii) to sign and endorse any UCC financing statement or any
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Intellectual Property; (iii)
to pay or discharge taxes, liens, security interests or other encumbrances at
any time levied or placed on or threatened against the Intellectual Property;
(iv) to demand, collect, receipt for, compromise, settle and sue for monies due
in respect of the Intellectual Property; and (v) generally, to do, at the option
of the Secured Party, and at the Company's expense, at any time, or from time to
time, all acts and things which the Secured Party deems necessary to protect,
preserve and realize upon the Intellectual Property and the Security Interest
granted therein in order to effect the intent of this Agreement, the Debentures
and the Warrants, all as fully and effectually as the Company might or could do;
and the Company hereby ratifies all that said attorney shall lawfully do or
cause to be done by virtue hereof. This power of attorney is coupled with an
interest and shall be irrevocable for the term of this Agreement and thereafter
as long as any of the Obligations shall be outstanding.

               (b) On a continuing basis, the Company will make, execute,
acknowledge, deliver, file and record, as the case may be, in the proper filing
and recording places in any jurisdiction, including, without limitation, the
jurisdictions indicated on Schedule C, attached hereto, all such instruments,
and take all such action as may reasonably be deemed necessary or advisable, or
as reasonably requested by the Secured Party, to perfect the Security Interest
granted hereunder and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to the Secured Party the grant or
perfection of a security interest in all the Intellectual Property.

               (c) The Company hereby irrevocably appoints the Secured Party as
the Company's attorney-in-fact, with full authority in the place and stead of
the Company and in the name of the Company, from time to time in the Secured
Party's discretion, to take any action and to execute any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Intellectual Property without the signature of the Company where permitted
by law.


                                       11

<PAGE>

          13. Notices. All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by facsimile, upon receipt of proof of sending thereof,
(iii) if sent by nationally recognized overnight delivery service (receipt
requested), the next business day or (iv) if mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, four days after
posting in the U.S. mails, in each case if delivered to the following addresses:

     If to the Company:         Aquatic Cellulose International Corp.
                                2504 43rd Street
                                Suite 5
                                Vernon, British Columbia
                                Canada VIT 6L1
                                Attention: President and Chief Executive Officer
                                Telephone: 250-558-4216
                                Facsimile: 250-558-3846

     With copies to:            Naccarato & Associates
                                1960 Fairchild
                                Suite 260
                                Irvine, California 92612
                                Attention: Owen Naccarato
                                Telephone: (949) 851-9261
                                Facsimile: (949) 851-9262

     If to the Secured Party:   AJW Partners, LLC
                                AJW Offshore, Ltd.
                                AJW Qualified Partners, LLC
                                1044 Northern Boulevard
                                Suite 302
                                Roslyn, New York 11576
                                Attention: Corey Ribotsky
                                Facsimile: 516-739-7115

     With copies to:            Ballard Spahr Andrews & Ingersoll, LLP
                                1735 Market Street, 51st Floor
                                Philadelphia, Pennsylvania 19103
                                Attention: Gerald J. Guarcini, Esquire
                                Facsimile: 215-864-8999

          14. Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Intellectual Property or by the
guarantee, endorsement or property of any other person, firm, corporation or
other entity, then the Secured Party shall have the right, in its sole
discretion, to pursue, relinquish, subordinate, modify or take any other action
with respect thereto, without in any way modifying or affecting any of the
Secured Party's rights and remedies hereunder.


                                       12

<PAGE>

          15. Miscellaneous.

               (a) No course of dealing between the Company and the Secured
Party, nor any failure to exercise, nor any delay in exercising, on the part of
the Secured Party, any right, power or privilege hereunder or under the
Debentures shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.

               (b) All of the rights and remedies of the Secured Party with
respect to the Intellectual Property, whether established hereby or by the
Debentures or by any other agreements, instruments or documents or by law shall
be cumulative and may be exercised singly or concurrently.

               (c) This Agreement and the Security Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and is
intended to supersede all prior negotiations, understandings and agreements with
respect thereto. Except as specifically set forth in this Agreement, no
provision of this Agreement may be modified or amended except by a written
agreement specifically referring to this Agreement and signed by the parties
hereto.

               (d) In the event that any provision of this Agreement is held to
be invalid, prohibited or unenforceable in any jurisdiction for any reason,
unless such provision is narrowed by judicial construction, this Agreement
shall, as to such jurisdiction, be construed as if such invalid, prohibited or
unenforceable provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable. If, notwithstanding the foregoing, any provision of
this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.

               (e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default or right, whether of the same or similar nature or
otherwise.

               (f) This Agreement shall be binding upon and inure to the benefit
of each party hereto and its successors and assigns.

               (g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in order to
carry out the provisions and purposes of this Agreement.

               (h) This Agreement shall be construed in accordance with the laws
of the State of New York, except to the extent the validity, perfection or
enforcement of a security interest hereunder in respect of any particular
Intellectual Property which are governed by a


                                       13

<PAGE>

jurisdiction other than the State of New York in which case such law shall
govern. Each of the parties hereto irrevocably submit to the exclusive
jurisdiction of any New York State or United States Federal court sitting in
Manhattan county over any action or proceeding arising out of or relating to
this Agreement, and the parties hereto hereby irrevocably agree that all claims
in respect of such action or proceeding may be heard and determined in such New
York State or Federal court. The parties hereto agree that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
The parties hereto further waive any objection to venue in the State of New York
and any objection to an action or proceeding in the State of New York on the
basis of forum non conveniens.

               (i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRAIL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING
OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR
EACH PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY
RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO
A JURY TRIAL FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING
THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE
EVENT OF A LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

               (j) This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all of
which taken together shall constitute one and the same Agreement. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       14

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.

                                       AQUATIC CELLULOSE INTERNATIONAL CORP.


                                       By: /s/ Sheridan Westgarde
                                           -------------------------------------
                                           Sheridan B. Westgarde
                                           President and Chief Executive Officer


                                       AJW PARTNERS, LLC
                                       By: SMS Group, LLC


                                       By:
                                           -------------------------------------
                                           Corey S. Ribotsky
                                           Manager


                                       AJW OFFSHORE, LTD.
                                       By: First Street Manager II, LLC


                                       By:
                                           -------------------------------------
                                           Corey S. Ribotsky
                                           Manager


                                       AJW QUALIFIED PARTNERS, LLC
                                       By: AJW Manager, LLC


                                       By:
                                           -------------------------------------
                                           Corey S. Ribotsky
                                           Manager


                                       15

<PAGE>

                                   SCHEDULE A

Principal Place of Business of the Company:

Locations Where Intellectual Property is Located or Stored:

List of Subsidiaries of the Company:


                                       A-1

<PAGE>

                                   SCHEDULE B

A. Licenses, Patents and Patent Licenses

                                                        Registration or
   Patent   Application or Registration No.   Country   Filing Date
   ------   -------------------------------   -------   ---------------

B. Trademarks and Trademark Licenses

                                                        Registration or
   Patent   Application or Registration No.   Country   Filing Date
   ------   -------------------------------   -------   ---------------

C. Copyrights and Copyright Licenses

                                                        Registration or
   Patent   Application or Registration No.   Country   Filing Date
   ------   -------------------------------   -------   ---------------

D. Trade Secrets and Trade Secret Licenses

                                                        Registration or
   Patent   Application or Registration No.   Country   Filing Date
   ------   -------------------------------   -------   ---------------


                                       B-1

<PAGE>

                                   SCHEDULE C

Jurisdictions:


                                       C-1