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                                                                    EXHIBIT 10.3


                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 1st day of October, 1998, by and between International Absorbents Inc., a
British Columbia corporation (the "Company"), Gordon Lloyd Ellis, an individual
resident of the Province of British Columbia, Canada, (the "Executive"), and
Absorption Corp ("Subsidiary"), a Nevada corporation.

                                   WITNESSETH:


         WHEREAS, the Executive has heretofore been serving as the Chairman and
President of the Company and serves as a member of The Board of Directors of the
Company and has the experience to provide services of an extraordinary character
which gives such services a peculiar value, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law; and


         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.


         WHEREAS, The Company's stock is publicly traded on the Over the Counter
Bulletin Board of the Dealers Association of.........(NASDAQ) or other stock
exchange as the Company determines appropriate.


         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 the Chairman
and President 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.

         2. TERM. The term of the Executive's employment hereunder shall be for
a period of five (5) years, commencing on the date of this Agreement and shall
be automatically extended for additional two (2) year periods unless either
party sends the other party a notice of its intention not to extend within 90
days before the expiration of the agreement or any extension.. The term of the
Executive's employment hereunder is subject to earlier termination as hereafter
specified.


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3.       POSITION AND DUTIES.

         3.1 SERVICE WITH THE COMPANY. During the term of this Agreement, the
         Executive agrees to perform such executive employment 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. As necessary, the executive will spend up to fifty
         percent of his time (20 hours per week) on Company related activities.

         The Executive's responsibilities shall include:

         Overall guidance as to corporate direction and major decision-making
         directly below the Board level.

         Direct and assist in identifying and negotiating acquisitions,
         divestitures and joint venture and other strategic relationships.

         Direct and assist in identifying, vetting and selecting new employees
         at a senior level.

         Direct or carry out termination of senior employees.

         Direct and participate in legal action, both as aggressor and defense.

         Ongoing communication with staff concerning operating activities and
         corporate performance for purposes of keeping the Board informed.

         Coordinating investment relations activities.

         Respond to shareholder demands and investor questions.

         Chair board meetings, management meetings and shareholder meetings as
         required and directed by the Board.

         Raise Capital, negotiate financing and banking services.

         3.2 NO CONFLICTING DUTIES. During the term hereof, the Executive shall
         devote his time, effort and skill to the operation 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 corporation, firm, entity or person which are inconsistent
         with the provisions of this Agreement.

4.       COMPENSATION.

         4.1(a) 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 $4,000 per month (the "Base Salary")
         which shall be paid on a regular basis in accordance with the Company's
         normal payroll procedures and policies. The Base Salary shall be
         increased on June 1, 1999, to US$5,000 for the ensuing year. In each
         successive year of the Executive's employment, the Employee shall
         receive an increase in his base salary commencing June 1 of each year
         so that the amount shall be 65% of the base salary of the average of


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         the 2 highest paid managers/executives of the Company as of May of the
         then current year

         4.2 INCENTIVE BONUS. The Board of Directors of the Corporation shall
         determine in April/May of each year on the basis of how much time and
         effort the employee has contributed to the Corporation and the success
         of the Corporation over the past year.

         4.3 INCENTIVE COMPENSATION. The Company agrees to maintain an incentive
         stock option plan which provides for shares under the rules and
         policies of the applicable governing securities exchange rules for the
         Company's stock. The Executive will receive a minimum of 200,000 stock
         options in the first year which number will be reviewed annually. In
         any one year, the Executive will be able to exercise his options at
         which time he will be eligible for immediate reissue of an equal number
         of new options. Such options shall be offered at the lowest price as
         options issued to any other employees at that time and exercisable at
         the earliest date permissible under the rules and policies of the
         applicable governing securities exchange rules for the Company's stock.
         If and when the Company instigates and EVA program, the Executive will
         participate in the EVA program.

         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 employees, 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 regulations applicable thereto.

         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 on a basis
         consistent with prior practice 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 six (6) weeks per year, in addition to the normal
         holidays when the business is closed.


5.       COMPENSATION UPON THE TERMINATION OF THE EXECUTIVE'S EMPLOYMENT BY THE
COMPANY.


         (a) In the event that the Executive is terminated pursuant to Section
         8.01 (disability), then the Executive shall be entitled to receive the
         Executive's then current Base Salary


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         for a period of three months after he is terminated or a total of nine
         months from the start of the total disability of the Employee whichever
         is the longer.

         (b) In the event the Executive's employment is terminated pursuant to
         Section 8.02 (death), 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 Executive's then current Base Salary through the end of
         the month in which his death occurs.

         (c) In the event that the Executive's employment is terminated pursuant
         to Sections 8.03 (termination for cause), then he shall not be entitled
         to any compensation other than his then current Base Salary which has
         accrued through his date of termination. In the event that Executive's
         employment is terminated pursuant to Section 8.04 (resignation), he
         shall be entitled to his then current Base Salary which has accrued
         through the date of termination.

         (d) In the event the Executive is terminated by the Company pursuant to
         Section 8.05 (Termination Without Cause), the Company shall continue to
         pay to the Executive his monthly base salary for the remainder of the
         sixty month period following the date of execution of this Agreement.
         For Example, if the Executive is terminated without cause at the
         conclusion of his second year of this contract, he shall be entitled to
         receive his base salary for a period of three additional years for a
         total of five years salary.

         (e) In the event that the Executive's employment is terminated pursuant
         to Sections 8.01, 8.02, 8.04 or 8.05, then Executive (or Executive's
         beneficiary or estate in the case of termination pursuant to Section
         8.02) shall also be entitled to annual incentive compensation prorated
         as of the date of termination in the manner set forth in Section 4.02
         above.

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
4.01 hereof.

         6. CONFIDENTIAL 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 prior to the termination of 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


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         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 from 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 than as a
         direct or indirect result of the breach of this Agreement by the
         Executive.

         7. NON COMPETITION.

               (a) If the term of Executive's employment under this Agreement is
               terminated pursuant to Section 8.05, and the Company continues to
               compensate the Executive under Section 5 of this Agreement, then
               the Executive shall refrain from competing with the Company for
               so long as he is entitled to receive compensation under this
               agreement. In all other circumstances should the Executive agrees
               he shall not, directly or indirectly engage in competition with
               the Company in any manner or capacity (e.g., as a management
               consultant, principal, partner, officer, director, stockholder or
               management employee), in any phase of the Company's business for
               a period of two years following the date on which the Executive
               leaves the Corporation.

               (b) The Executive further 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 7 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.

         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 the Executive can engage in regularly or
               perform adequately his


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               assigned duties using the reports of doctors and such other
               information as may be helpful.

               8.2 DEATH OF EXECUTIVE. The Executive's employment shall
               terminate immediately upon the death of 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, has
                     willfully refused to follow the 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.

               8.4   RESIGNATION. The Executive's employment shall be terminated
                     on the earlier of the date that is three (3) months
                     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 8.01, 8.02, 8.03 or
               8.04.

               8.6 CHANGE OF CONTROL. In the event of change of control of the
               Company, the Executive shall be entitled to receive all options,
               whether vested or not, and any additional incentive packages
               granted but which have not vested immediately upon the 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.

               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


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               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 the other party.
         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 this 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 this Section 9.

         10. INJUNCTIVE RELIEF. The Executive agrees that it would be difficult
         to compensate the Company fully for damages for any violation of the
         provisions of this Agreement, including without limitation the
         provisions of Sections 6 and 8.03. Accordingly, the Executive
         specifically agrees that the Company shall be entitled to temporary and
         permanent injunctive relief to enforce the provisions of this
         Agreement. This provision with respect to injunctive relief shall not,
         however, diminish the right of the Company to claim and recover damages
         in addition to injunctive relief.

         11. INDEMNIFICATION. The Company shall indemnify Executive as provided
         in the Company's Bylaws.

         12. MISCELLANEOUS.

               12.1 GOVERNING LAW. This Agreement is made under and shall be
               governed by and construed in accordance with the laws of the
               Province of British Columbia.

               12.2 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.

               12.3 AMENDMENTS. No amendment or modification of this Agreement
               shall be deemed effective unless made in writing signed by the
               parties hereto.

               12.4 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 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.


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               12.5 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 stipulates that this Agreement
               shall be given the construction which renders its provisions
               valid and enforceable to the maximum extent (not exceeding its
               express terms) possible under applicable law.

               12.6 SURVIVAL. Sections 6, 7 and 9 shall survive termination of
               this Agreement.


               12.7 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.

THE COMPANY:

INTERNATIONAL ABSORBENTS INC.


By: /s/ JOHN SUTHERLAND
    -------------------

Title: Director
       ----------------

ATTEST:


/s/ STEPHEN SILBERNAGEL
-----------------------
Director/Secretary


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[CORPORATE SEAL]


THE EXECUTIVE:

GORDON ELLIS


/s/ GORDON ELLIS
-----------------------


ATTEST:

/s/ STEPHEN SILBERNAGEL
-----------------------
Director/Secretary

[CORPORATE SEAL]


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