EXHIBIT 10.19 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this 26th day of August, 2004, and by and between Absorption Corp., a Nevada Corporation (the "Company"), and Doug Ellis, an individual resident of the Province of British Columbia, (the "Executive"). WITNESSETH: WHEREAS, the Executive has heretofore been engaged by International Absorbents, Inc. (the "Parent Company") to look after manufacturing, production and operations of the Company and has the experience to provide services; WHEREAS, the Company desires to retain the services of the executive, and the Executive desires to be employed by the Company for the term of this Agreement and each wants the terms and conditions as set out herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the Company and the Executive, intending to be legally bound, hereby agree as follows: 1. EMPLOYMENT The Company hereby employs the Executive as Chief Operations Officer in charge of manufacturing, production and operations and the Executive accepts such employment and agrees to perform services for the Company, subject always to such resolutions as are established from time to time by the Board of Directors of the Company, for the period and upon the other terms and conditions set forth in this Agreement. This contract shall be valid through October 20, 2005, which is the term of the employee's work visa. If the work visa is renewed then this contract will be extended subject to the terms of section 2.(retirement). 2. RETIREMENT It is further understood that at the age of 60 years the contract shall be reduced to a term of one year and renewable each year automatically if neither party gives 90 days written notice to the other of their intention to terminate this agreement. The term of the Executive's employment hereunder is subject to earlier termination as hereafter specified save and except that there will be no severance pay or benefits that extends beyond the age of 65 years. 3. POSITION AND DUTIES 3.1 SERVICE WITH THE COMPANY During the term of this Agreement, the Executive agrees to perform the duties of Chief Operations Officer in charge of manufacturing, production and operations including additional executive duties as the Company's Board of Directors (the "Board") shall assign to him from time to time, and is customary for a similar position within the Company's industry. 3.2 HOME OFFICE The Company recognizes that as the Executive resides in Canada that he may need from time to time to have an office at home with the necessary tools and services to be able to carry on his functions from there. It is understood that such additional equipment, furniture, other supplies and/or other services will be at the Executive's cost. Nothing in this clause is to relieve the Executive of his duties which include being available on a day to day basis when the Company requires him. 3.3 NO CONFLICTING DUTIES 1 During the term hereof, the Executive shall devote reasonable time, effort and skill to managing the manufacturing production and operations as Chief Operations Officer of the Company, and will offer any directly relevant business opportunity he encounters to the Company. The Executive hereby confirms that he is under no contractual commitments inconsistent with his obligations set forth in this Agreement, and that during the term of this Agreement, he will not render or perform services, or enter into any contract to do so, for any other company, firm, entity or person which are inconsistent with the provisions of this Agreement. 4. COMPENSATION 4.1 BASE SALARY As compensation for all services to be rendered by the Executive under this Agreement, the Company shall pay to the Executive a base annual salary of $11,212.50 per month (the "Base Salary") which shall be paid commencing on February 1, 2004 on a regular basis in accordance with the Company's normal payroll procedures and policies together with all the Company's benefits. The Executive's compensation will be reviewed on the same schedule as the other executives of the Company. 4.2 BONUS The Board of Directors of the Company shall set and determine each year how bonuses will be awarded based on criteria agreed to by the Executive and the Company. The bonus to be distributed will be determined by the Compensation Committee in consultation with such persons as are necessary as soon as possible after the financial results from the year are available. It will be based primarily upon the target criteria as set at the beginning of the fiscal year. 4.3 LONG TERM INCENTIVE The Company agrees to maintain a long term incentive plan using stock options, stock grants or other long term incentives which may provide for cash, other remuneration or the issuance of stock options and granting of shares under the rules and policies of the applicable governing securities exchange rules for the stock of The Parent Company. 4.4 PARTICIPATION IN BENEFIT PLANS The Executive shall be included to the extent eligible thereunder in any and all plans of the Company providing general benefits for the Company's Executives, including but not limited to Group Life Insurance, Hospitalization, Disability, Medical, Dental, Pension, Profit Sharing, Savings and Stock Bonus Plans. The Executive's participation in any such plan or program shall be subject to the provisions, rules and regulation applicable thereto. If for any reason the Executive cannot participate in such program, his compensation will be adjusted in the cash equivalent. Also, if the Executive pays United States payroll taxes for which he currently is not eligible to receive benefits as a result of his current or prior Canadian residency, his compensation will be adjusted in the cash equivalent. 4.5 EXPENSES In accordance with the Company's policies established from time to time, the Company will pay or reimburse the Executive for all reasonable and necessary out-of-pocket expenses incurred by him in the performance of his duties under this Agreement, subject to the presentment of appropriate vouchers. 4.6 VACATION TIME Executive shall be entitled to take paid vacation time of up to four (4) weeks per year, in addition to the normal holidays when the business office is closed. 5. COMPENSATION UPON THE TERMINATION OF THE EXECUTIVE'S EMPLOYMENT 2 The Executive has been engaged by International Absorbents, Inc. since April 4, 1986. 5.1 SEVERANCE WAGES The Executive is to receive severance compensation and benefits under the terms of this Agreement, the compensation and bonus shall be 24 months. The bonus calculation will be based on the previous 2 year average. 5.2 SEVERANCE BENEFITS In the event of termination of the Executive and his entitlement to severance wages as provided in 5.1 the Executive shall be entitled to receive the same severance benefits that went along with his salary for the length of time set out in paragraph 5.1. If the executive has not moved to the United States during the term of this contract and has not qualified to receive U.S. Social Security benefits at the end of this severance salary continuation, then he shall be compensated for Social Security payroll taxes paid since January 1, 2004. In lieu of this compensation, the company reserves the right to extend severance wages with the minimum payment(s) that would complete the Executive's qualification for Social Security benefits. 5.3 DISABILITY BENEFITS In the event the Executive is terminated pursuant to Section 8.1 (disability) and is entitled to receive benefits from a plan to which the Company contributed to disability benefits and such disability benefits cease prior to the time set out in paragraph 5.1. Then the Company will continue to pay the Executive his salary for the balance of the time remaining as set out in 5.1 together with his benefits that may still be applicable and not being covered by the disability insurance as set out in 5.2. If the benefits are not covered in the disability plan or the disability plan term has run out prior to the time set out in 5.1 then the Company will pay the same directly to the Executive or pursuant to the Executive's direction to the provider of such coverage. Any stock options or stock grants shall continue until they expire or such shorter period of time as is required under securities legislation in Washington State, The United States of America and British Columbia. The Compensation Committee will evaluate the appropriateness of partial bonus achievement prior to the time of disability. 5.4 SEVERANCE ON DEATH. In the event the Executive's employment is terminated pursuant to Section 8.2 (death), the Executive's beneficiary or a beneficiary designated by the Executive in writing to the Company, or in the absence of such beneficiary, the Executive's estate, shall be entitled to receive the Group Life Insurance which are part of the Company benefits and in the absence of any group life insurance or other life insurance benefits contributed to or organized by the Company then the estate of the executive shall receive the amounts set out in 5.1 and those that may be payable to the estate under 5.2. Any options or stock grants shall continue to their expiry date or such shorter period of time as is required under securities legislation in Washington State and The United States of America and British Columbia. 5.5 SEVERANCE ON TERMINATION FOR CAUSE In the event that the Executive's employment is terminated pursuant to Sections 8.3 (termination for cause), then he shall not be entitled to any compensation other than his current Base Salary which has accrued and any benefits set out in 5.2 calculated only to the date of termination. In the event that Executive's employment is terminated pursuant to Section 8.4 (resignation), he shall be entitled to his then current Base Salary, any benefits to the date of termination only and any bonus, if such, is accrued or calculated monthly through to the date of termination. 5.6 SEVERANCE ON TERMINATION WITHOUT CAUSE 3 In the event the Executive is terminated by the Company pursuant to Section 8.5 (Termination without Cause), the Executive shall receive severance as set out in Sections 5.1 and 5.2 of this Agreement. 5.7 PAYMENT OF SEVERANCE All payments required to be made by the Company to the Executive pursuant to this Section 5 shall be paid in the manner and at the times specified in Section 4.1 hereof. Any notice given to the Executive pursuant to Section 8 shall be counted as part of the time calculated and the payments of benefits. 6. CONFIDENTIALITY INFORMATION. Except as permitted or directed by the Company's Board, the Executive shall not during the term of his employment under this Agreement or at any time thereafter divulge, furnish, disclose or make accessible (other than in the ordinary course of the business of the Company) to anyone for use in any way, any confidential or secret knowledge or information of the Company which the Executive has acquired or become acquainted with or will acquire or become acquainted with during the period of his employment by the Company (including employment by the Company prior to the date of this Agreement), whether developed by himself or by others, concerning any trade secrets, confidential or secret designs, processes, formulae, software or computer programs, plans, devices or material (whether or not patented or patentable, copyrighted or copyrightable) directly or indirectly useful in any aspect of the business of the Company, any confidential customer or supplier lists of the Company, any confidential or secret development or research work of the Company, price lists, know how, forecasts, or any other confidential, secret or non-public aspects of the business of the Company. The Executive acknowledges that the above-described knowledge or information constitutes a unique and valuable asset of the Company acquired at great time and expense by the Company, and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. Both during and after the term of this Agreement, the Executive will refrain form any acts or omissions that would reduce the value of the use of such knowledge or information to the Company. The foregoing obligations of confidentiality, however, shall not apply to any knowledge or information which is now published or which subsequently becomes generally publicly known, other that as direct or indirect result of the breach of this Agreement by the Executive. 7. NON COMPETITION The Executive agrees that during the term of this Agreement, he will not, directly or indirectly, assist or encourage any other person in carrying out, directly or indirectly, any activity that would be prohibited by the above provisions of this Section, if such activity were carried out by the Executive, either directly or indirectly, and in particular the Executive agrees that he will not, directly or indirectly, induce any employee of the Company to carry out, directly or indirectly, any such activity. 7.1 The Executive agrees not to directly or indirectly or otherwise assist, encourage any person to be involved in any manner to invest or promote any business or activity of a similar nature if the Executive has terminated this Agreement pursuant to Sections 8.1, 8.4 or 8.6 of this Agreement for a period of ONE (1) YEAR or for the length of the severance pay, whichever is the longer, from the date of termination. 8. TERMINATION PRIOR TO EXPIRATION OF THE TERM 8.1 DISABILITY The Executive's employment shall terminate upon the Executive's becoming totally or permanently disabled for a period of six (6) months or more for purposes of this Agreement, the term "totally or permanently disabled" or "total or permanent disability" means Executive's inability on account of sickness or accident whether or not job-related, to engage in regularly or to perform adequately his assigned duties under this Agreement. The Board of Directors shall determine, acting reasonably and bona fide, whether 4 the Executive can engage in regularly or perform adequately his assigned duties using the reports of doctors and such other information as may be helpful. The Board may seek such advice as it deems necessary to make such determination. 8.2 DEATH OF EXECUTIVE The Executive's employment shall terminate immediately upon the death of the Executive. 8.3 TERMINATION FOR CAUSE The Company may terminate the Executive's employment at any time for "Cause" (as hereinafter defined) immediately upon written notice to Executive. Such written notice shall set forth with reasonable specificity the Company's basis for such termination. As used herein, the term "Cause" shall mean that the Executive shall have (i) in the reasonable judgment of the Board of Directors committed a criminal act or an act of fraud, embezzlement, breach of trust or other act of gross misconduct, (ii) willfully violated written corporate policy or rules of the Company, or (iii) in the reasonable judgment of the Board of Directors, willfully refused to follow the reasonable written directions given by the Board of Directors from time to time or breached any covenant or obligation under this Agreement or other agreement with the Company or (iv) has acted in such a manner that his actions constitute gross dereliction of his duties as set out by the Company from time to time. 8.4 RESIGNATION The Executive's employment shall be terminated on the earlier of the date that is one (1) month following the written submission of the Executive's resignation to the Board or the earlier date such resignation is accepted by the Board. 8.5 TERMINATION WITHOUT CAUSE The Company may terminate the Executive's employment without cause upon written notice to the Executive. Termination "without cause" shall mean termination of employment on any basis other than termination of Executive's employment hereunder pursuant to Sections 8.1, 8.2. 8.3 or 8.4. Notice by the Company that this Agreement shall not be renewed as defined in Section 2 herein, shall be defined as termination without cause entitling the Executive to compensation as defined in Section 5.1 and 5.2 with the maximum payment being only to age 65. The company shall make every reasonable effort to renew the work Visa and any action that that may hinder this objective shall be deemed "Termination without cause". 8.6 SALE OF COMPANY OR INTERNATIONAL ABSORBENTS INC. Should the Company's assets be sold or more than 51% of the capital stock of the Company be sold or should the control of International Absorbents Inc. (the owner of 100% of the issued and out standing shares of the Company) change such that sixty (60%) percent of the then present Board changes and not because of retirement, incapacity, sickness or voluntary resignation causing a change in management practice of the Company then the Executive shall be entitled to receive all options or stock grants made subject to the provisions of the option plan or stock grant plan in force with the Company at the time and any additional incentive packages granted, but which have not vested immediately upon the sale of the Company or change of control being completed and all such compensation shall be dealt with in the same manner as for all other Executives of the Company, unless such Executive has different terms to his/her contract. Should the management change the Executive's duties or make the execution of the duties such that the Executive would have the right to claim constructive dismissal then the executive shall have the right to claim severance as if he had been terminated without cause. The Executive has an equivalent right to severance if such constructive dismissal results from the sale of the Company assets. Should the Executive be successful in such claim then the Executive shall be entitled to all reasonable lawyer's costs and disbursements that he has incurred in prosecuting such suit including any other costs that were necessary. 5 8.7 SURRENDER OF RECORDS AND PROPERTY Upon termination of his employment with the Company, the Executive shall deliver promptly to the Company all records, manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof, which are the property of the Company and which relate in any way to the business, products, practices or techniques of the Company, and all other property, trade secrets and confidential information of the Company, including, but not limited to, all documents which in whole or in part contain any trade secrets or confidential information of the Company, which in any of these cases are in his possession or under his control. 9. ASSIGNMENT This Agreement shall not be assignable, in whole or in part, by either party without the written consent of both parties, except for a Change in Control as defined in Paragraph 8 and 8.6. Upon such assignment by the Company, the Company shall obtain the Assignees' written agreement enforceable by Executive to assume and perform, from and after the date of such assignment the terms, conditions and provisions imposed by the Agreement upon the Company. After any such assignment by the Company and such written agreement by the Assignee, the Company shall be discharged from all further liability hereunder and such assignee shall thereafter be deemed to be the Company for the purposes of all provisions of this Agreement including the Section 9. It is agreed by both parties to this Agreement that in the case of a change of control of the Company as defined in Section 8.6 of this Agreement, that this Agreement shall be automatically assigned to the new controlling entity. 10 INDEMNIFICATION The Company shall indemnify Executive as provided in the Company's Bylaws. 10.1 DIRECTORS AND OFFICERS INSURANCE The Company shall maintain Directors and Officers insurance as decided by the Board of Directors from time to time required to protect the Executive from claims made against him as a result of his duties and performance of his employment with the Company. 11 GENERAL PROVISIONS 11.1 GOVERNING LAW This Agreement is made under and shall be governed by and construed in accordance with the laws of the State of Washington. 11.2 WITHHOLDING TAXES The Company may withhold from any benefits payable under this Agreement all federal, provincial, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 11.3 AMENDMENTS No amendment or modification of this Agreement shall be deemed effective unless made in writing signed by the parties hereto. 11.4 NO WAIVER No term or condition of this Agreement shall be deemed to have been waived nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party 6 against whom enforcement of the waiver or estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 11.5 SEVERABILITY To the extent any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted here from and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect. In furtherance and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by any provision of this Agreement be in excess of that which is valid and enforceable under applicable law, then such provision shall be construed to cover only that duration, extent or activities which may validly and enforceably be covered. The Executive acknowledges the uncertainty of the law in this respect and expressly stipulated that this Agreement shall be given the construction which renders its provisions valid and enforceably to the maximum extent (not exceeding its express terms) possible under applicable law. 11.6 SURVIVAL Sections 6, 7, 8.7 and 9 shall survive termination of this Agreement. 11.7 ENTIRE AGREEMENT This Agreement constitutes the entire understanding and agreement between Executive and Company with respect to the transactions contemplated herein and supersedes any and all prior or contemporaneous oral or written communications with respect to the subject matter hereof, all of which are merged herein. It is expressly understood and agreed that, there being no expectations to the contrary between the parties hereto no usage of trade or other regular practice or method of dealing between the parties hereto shall be used to modify, interpret, supplement or alter in any manner the express terms of this Agreement or any part hereof. This Agreement shall not be modified, amended or in any way altered except by an instrument in writing signed by both of the parties hereto. IN WITNESS WHEREOF, the parties have executed and sealed this Agreement as of the day and year set forth above. ABSORPTION CORP. GORDON ELLIS, CEO DANIEL WHITTLE, INTERNATIONAL Absorbents, Inc. Compensation Comm /s/ Gordon Ellis Daniel Whittle - ------------------------------ --------------------------------- DOUG ELLIS /s/ Doug Ellis - ------------------------------ ATTEST: /s/ David Thompson - ------------------------------ 7