Document:

<PAGE>
                                                                   EXHIBIT 10.16

                             BB&T SECURITY AGREEMENT

         THIS SECURITY AGREEMENT ("Security Agreement") is made as of the
September 1, 2004, by and between ABSORPTION CORP., a Nevada corporation (the
"Borrower" or the "Debtor"), and BRANCH BANKING AND TRUST COMPANY, a North
Carolina banking corporation (the "Secured Party").

         WHEREAS, arrangements have been made pursuant to a Letter of Credit and
Reimbursement Agreement of even date herewith between the Borrower and the
Secured Party (the "Reimbursement Agreement") for the issue by the Secured Party
of its irrevocable letter of credit in the aggregate amount of $4,956,384.00
(the "Letter of Credit") to Branch Banking and Trust Company, as trustee (the
"Trustee") to secure those $4,900,000 Tax-Exempt Industrial Development Revenue
Bonds (Absorption Corp. Project), Series 2004 (the "Bonds") issued by the Wayne
County Industrial Development Authority (the "Authority") under an Indenture of
Trust dated as of September 1, 2004 between the Authority and the Trustee (the
"Indenture"); and

         WHEREAS, capitalized terms appearing within but not otherwise defined
shall have the meanings ascribed to them in the Reimbursement Agreement; and

         WHEREAS, the Secured Party is unwilling to extend credit to and to
otherwise deal with the Borrower unless the Borrower grants to the Secured Party
a security interest in certain personal property of the Borrower; and

         WHEREAS, the Borrower is desirous of further securing to the Secured
Party the payment of all obligations which are payable under the Reimbursement
Agreement, including, but without limitation any Swap Agreement and the
performance of the covenants and agreements contained herein and in the
Reimbursement Agreement, the other Related Documents and all other documents
related thereto, as each of the foregoing may from time to time be amended;

         NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises herein contained, the parties hereto agree as follows:

I.       DEFINITIONS.

         1.1   COLLATERAL. Unless specific items of personal property are
               described below, the Collateral shall consist of all now owned
               and hereafter acquired and wherever located personal property of
               Debtor identified below, each capitalized term as defined in
               Article 9 of the Georgia Uniform Commercial Code ("UCC") (check
               applicable items):

         [ ]   (i)     Accounts, including all contract rights and
                       health-care-insurance receivables;

         [ ]   (i-a)   The Account(s), contract right(s) and/or
                       Health-Care-Insurance Receivables specifically described
                       as follows:

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ---------------------------------------------------------

         [ ]   (ii)    Inventory, including all returned inventory;

         [ ]   (ii-a)  The Inventory specifically described as follows:

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ---------------------------------------------------------

<PAGE>

         [X]   (iii)   Equipment, including all Accessions thereto, and all
                       manufacturer's warranties, parts and tools therefor;

         [ ]   (iii-a) The Equipment, including all Accessions thereto, all
                       manufacturer's warranties therefor, and all parts and
                       tools therefor, specifically described as follows:

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ---------------------------------------------------------

         [ ]   (iv)    Investment Property, including the following
                       certificated securities and/or securities account(s)
                       specifically described as follows:

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ---------------------------------------------------------

         [ ]   (v)     Instruments, including all promissory notes and
                       certificated certificates of deposit specifically
                       described as follows:

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ---------------------------------------------------------

         [ ]   (vi)    Deposit Accounts with Secured Party specifically
                       described below (list account number(s)):

         [ ]   (vi-a)  The Deposit Accounts with other financial institutions
                       specifically described as follows (list financial
                       institution and account numbers):

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ---------------------------------------------------------

         [ ]   (vii)   Chattel Paper (whether tangible or electronic);

         [ ]   (vii-a) The Chattel Paper specifically described as follows:

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ---------------------------------------------------------

         [ ]   (viii)  Goods, including all Fixtures and timber to be cut,
                       located or situated on the real property specifically
                       described as follows (list legal description as shown on
                       deed including county and state):

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                                       2
<PAGE>

         [ ]   (ix)    Farm Products, including all crops grown, growing or to
                       be grown, livestock (born and unborn), supplies used or
                       produced in a farming operation, and products of crops
                       and livestock;

         [ ]   (ix-a)  The Farm Products specifically described as follows:

                       ---------------------------------------------------------

                       ---------------------------------------------------------

         [ ]   (x)     As-Extracted Collateral from the following location(s)
                       (list legal description including county and state):

                       ---------------------------------------------------------

         [ ]   (xi)    The Letter-of-Credit Rights under the following letter(s)
                       of credit (list issuer, number and amount):

                       ---------------------------------------------------------

         [ ]   (xii)   Documents of Title, including all warehouse receipts and
                       bills of lading specifically described as follows:

                       ---------------------------------------------------------

         [ ]   (xiii)  Commercial Tort Claim(s) more specifically described as
                       follows:

                       ---------------------------------------------------------

         [ ]   (xiv)   Money, including currency and/or rare coins delivered to
                       and in possession of the Secured Party specifically
                       described as follows:

                       ---------------------------------------------------------

         [ ]   (xv)    Software specifically described as follows:

                       ---------------------------------------------------------

         [ ]   (xvi)   Manufactured Home(s):

               <Table>
               <Caption>
                                                                               Doublewide
                      Model            Year         Serial Number 1         Serial Number 2
               -------------------------------------------------------------------------------
               <S>                     <C>          <C>                     <C>
               1.
               -------------------------------------------------------------------------------
               2.
               -------------------------------------------------------------------------------
               </Table>

                                       3
<PAGE>

         [ ]   (xvii)  Vehicles, including recreational vehicles and watercraft
                       described below:

               <Table>
               <Caption>
                                                                                  VIN Number/
                      New/Used           Year/Make        Model/Body Type        Serial Number
               ---------------------------------------------------------------------------------------
               <S>                       <C>              <C>                    <C>
               1.
               ---------------------------------------------------------------------------------------
               2.
               ---------------------------------------------------------------------------------------
               3.
               ---------------------------------------------------------------------------------------
               4.
               ---------------------------------------------------------------------------------------
               5.
               ---------------------------------------------------------------------------------------
               </Table>

         [ ]   (xviii) General intangibles, including all Payment Intangibles,
                       copyrights, trademarks, patents, tradenames, tax refunds,
                       company records (paper and electronic), rights under
                       equipment leases, warranties, software licenses, and the
                       following, if any:

                       ---------------------------------------------------------

         [ ]   (xix)   Supporting Obligations;

         [X]   (xx)    to the extent not listed above as original collateral,
                       all proceeds (cash, insurance and non-cash) and products
                       of the foregoing.

         1.2   OBLIGATIONS. This Security Agreement secures the following
               (collectively, the "Obligations"):

               (i)     the payment of all obligations which are payable under
                       the Reimbursement Agreement, including, but without
                       limitation any Swap Agreement and the performance of the
                       covenants and agreements contained herein and in the
                       Reimbursement Agreement and the Related Documents, and
                       all other documents related thereto, as each of the
                       foregoing may from time to time be amended (collectively,
                       the "Loan Documents");

               (ii)    all of Debtor's or Borrower's present and future
                       indebtedness and obligations to Secured Party;

               (iii)   the repayment of (a) any amounts that Secured Party may
                       advance or spend for the maintenance or preservation of
                       the Collateral, and (b) any other expenditures that
                       Secured Party may make under the provisions of this
                       Security Agreement or for the benefit of Debtor or
                       Borrower;

               (iv)    all amounts owed under any modifications, renewals,
                       extensions or substitutions of any of the foregoing
                       obligations;

               (v)     all Default Costs, as defined in Paragraph VIII of this
                       Security Agreement; and

               (vi)    any of the foregoing that may arise after the filing of a
                       petition by or against Debtor or Borrower under the
                       Bankruptcy Code, even if the obligations do not accrue
                       because of the automatic stay under Bankruptcy Code
                       Section 362 or otherwise.

         1.3   UCC DEFINITIONS. Any term used in the UCC and not otherwise
               defined in this Security Agreement has the meaning given to the
               term in the UCC.

II.      GRANT OF SECURITY INTEREST.

         Debtor grants a security interest in the Collateral to Secured Party to
         secure the payment and performance of the Obligations.

                                       4
<PAGE>

III.     PERFECTION OF SECURITY INTERESTS.

         3.1   FILING OF SECURITY INTERESTS.

               (i)     Debtor authorizes Secured Party to file any financing
                       statement (the "Financing Statement") describing the
                       Collateral in any location deemed necessary and
                       appropriate by Secured Party.

               (ii)    Debtor authorizes Secured Party to file a Financing
                       Statement describing any agricultural liens or other
                       statutory liens held by Secured Party.

               (iii)   Secured Party shall receive prior to the closing an
                       official report from the Secretary of State of each Place
                       of Business and the Debtor State, each as defined below,
                       collectively (the "Filing Reports") indicating that
                       Secured Party's security interest is prior to all other
                       security interests or other interests reflected in the
                       report.

         3.2   POSSESSION.

               (i)     Debtor shall have possession of the Collateral, except
                       where expressly otherwise provided in this Security
                       Agreement or where Secured Party chooses to perfect its
                       security interest by possession in addition to the filing
                       of a Financing Statement.

               (ii)    Where Collateral is in the possession of a third party,
                       Debtor will join with Secured Party in notifying the
                       third party of Secured Party's security interest and
                       obtaining an acknowledgment from the third party that it
                       is holding the Collateral for the benefit of Secured
                       Party.

         3.3   CONTROL AGREEMENTS. Debtor will cooperate with Secured Party in
               obtaining a control agreement in form and substance satisfactory
               to Secured Party with respect to Collateral consisting of (check
               appropriate items):

               [ ]     Deposit Accounts (for deposit accounts at other
                       financial institutions);

               [ ]     Investment Property (for securities accounts, mutual
                       funds and other uncertificated securities;

               [ ]     Letter-of-credit rights; and/or

               [ ]     Electronic chattel paper.

         3.4   MARKING OF CHATTEL PAPER. If Chattel Paper is part of the
               Collateral, Debtor will not create any Chattel Paper without
               placing a legend on the Chattel Paper acceptable to Secured Party
               indicating that Secured Party has a security interest in the
               Chattel Paper.

IV.      POST-CLOSING COVENANTS AND RIGHTS CONCERNING THE COLLATERAL.

         4.1   INSPECTION. The Secured Party may inspect any Collateral in the
               Debtor's possession, at any time upon reasonable notice.

         4.2   PERSONAL PROPERTY. Except for items specifically identified by
               Debtor and Secured Party as Fixtures, the Collateral shall remain
               personal property at all times, and Debtor shall not affix any of
               the Collateral to any real property in any manner which would
               change its nature from that of personal property to real property
               or to a fixture.

         4.3   SECURED PARTY'S COLLECTION RIGHTS. Secured Party shall have the
               right at any time to enforce Debtor's rights against any account
               debtors and obligors.

         4.4   LIMITATIONS ON OBLIGATIONS CONCERNING MAINTENANCE OF COLLATERAL.

               (i)     RISK OF LOSS. Debtor has the risk of loss of the
                       Collateral.

               (ii)    NO COLLECTION OBLIGATION. Secured Party has no duty to
                       collect any income accruing on the Collateral or to
                       preserve any rights relating to the Collateral.

                                       5
<PAGE>

         4.5   NO DISPOSITION OF COLLATERAL. Secured Party does not authorize,
               and Debtor agrees not to:

               (i)     make any sales or leases of any of the Collateral, except
                       for sales of inventory in the ordinary course of
                       business;

               (ii)    license any of the Collateral; or

               (iii)   grant any other security interest in any of the
                       Collateral, except for purchase money security interests
                       permitted by the Reimbursement Agreement.

         4.6   PURCHASE MONEY SECURITY INTERESTS. To the extent Debtor uses the
               Bonds to purchase Collateral, Debtor's repayment of the
               Obligations shall apply on a "first-in-first-out" basis so that
               the portion of the Bonds used to purchase a particular item of
               Collateral shall be paid in the chronological order the Debtor
               purchased the Collateral.

         4.7   INSURANCE. Debtor shall obtain and keep in force such insurance
               on the Collateral as is normal and customary in the Debtor's
               business or as the Secured Party may require, all in such
               amounts, under such forms of policies, upon such terms, for such
               periods and written by such insurance companies as the Secured
               Party may approve. All policies of insurance will contain the
               long-form Lender's Loss Payable clause in favor of the Secured
               Party, and the Debtor shall deliver the policies or complete
               copies thereof to the Secured Party. Such policies shall be
               noncancellable except upon thirty (30) days' prior written notice
               to the Secured Party. The proceeds of all such insurance, if any
               loss should occur, may be applied by the Secured Party to the
               payment of the Obligations or to the replacement of any of the
               Collateral damaged or destroyed, as the Secured Party may elect
               or direct in its sole discretion, except as provided in the Deed
               of Trust. The Debtor hereby appoints (which appointment
               constitutes a power coupled with an interest and is irrevocable
               as long as any of the Obligations remain outstanding) Secured
               Party as its lawful attorney-in-fact with full authority to make,
               adjust, settle claims under and/or cancel such insurance and to
               endorse the Debtor's name on any instruments or drafts issued by
               or upon any insurance companies.

V.       DEBTOR'S REPRESENTATIONS AND WARRANTIES.

         Debtor represents and warrants to Secured Party:

         5.1   TITLE TO AND TRANSFER OF COLLATERAL. It has rights in or the
               power to transfer the Collateral and its title to the Collateral
               is free of all adverse claims, liens, security interests and
               restrictions on transfer or pledge except as created by this
               Security Agreement.

         5.2   LOCATION OF COLLATERAL. All collateral consisting of goods
               (equipment, inventory, fixtures, crops, unborn young of animals,
               timber to be cut, manufactured homes; and other tangible, movable
               personal property) is located solely in the following States (the
               "Collateral States"):

                     Georgia
               -----------------------------------------------------------------

         5.3   LOCATION, STATE OF INCORPORATION AND NAME OF EACH DEBTOR.
               Debtor's:

               (i)     chief executive office (if Debtor has more than one place
                       of business), place of business (if Debtor has one place
                       of business), or principal residence (if Debtor is an
                       individual), is located in the following State and
                       address (with regard to each Debtor, the "Place of
                       Business"):

                       Absorption Corp.

                       6960 Salashan Parkway

                       Ferndale, WA 98248

               (ii)    state of incorporation or organization for Debtor is
                       Nevada (as applicable to each Debtor, the "Debtor
                       State");

                                       6
<PAGE>

               (iii)   exact legal name is as set forth in the first paragraph
                       of this Security Agreement.

         5.4   BUSINESS PURPOSE. None of the Obligations is a Consumer
               Transaction, as defined in the UCC and none of the Collateral has
               been or will be purchased or held primarily for personal, family
               or household purposes.

VI.      DEBTOR'S COVENANTS.

         Until the Obligations are paid in full, Debtor agrees that it will:

         6.1   preserve its legal existence and not, in one transaction or a
               series of related transactions, merge into or consolidate with
               any other entity, or sell all or substantially all of its assets;

         6.2   not change the Debtor's State of its registered organization;

         6.3   not change its registered name without providing Secured Party
               with 30 days' prior written notice; and

         6.4   not change the state of its Place of Business or, if Debtor is an
               individual, change his state of residence without providing
               Secured Party with 30 days' prior written notice.

VII.     EVENTS OF DEFAULT.

         The occurrence of any of the following shall, at the option of Secured
         Party, be an Event of Default:

         7.1   Any Event of Default by Borrower or Debtor under the Loan
               Documents or any of the other Obligations;

         7.2   Debtor's failure to comply with any of the provisions of, or the
               incorrectness of any representation or warranty contained in,
               this Security Agreement or in any other document relating to the
               Obligations which is not cured within 30 days following written
               notice from Bank to Debtor of such failure;

         7.3   Transfer or disposition of any of the Collateral, except as
               expressly permitted by this Security Agreement;

         7.4   Attachment, execution or levy on any of the Collateral;

         7.5   Debtor voluntarily or involuntarily becoming subject to any
               proceeding under (a) the Bankruptcy Code or (b) any similar
               remedy under state statutory or common law;

         7.6   Debtor shall fail to comply with, or become subject to any
               administrative or judicial proceeding under any federal, state or
               local (a) hazardous waste or environmental law, (b) asset
               forfeiture or similar law which can result in the forfeiture of
               property, or (c) other law, where noncompliance may have any
               significant effect on the Collateral; or

         7.7   Secured Party shall receive at any time following the closing a
               UCC filing report indicating that Secured Party's security
               interest is not prior to all other security interests or other
               interests reflected in the report.

VIII.    DEFAULT COSTS.

         8.1   Should an Event of Default occur, Debtor will pay to Secured
               Party all costs incurred by the Secured Party for the purpose of
               enforcing its rights hereunder, including:

               (i)     costs of foreclosure;

               (ii)    costs of obtaining money damages; and

               (iii)   a reasonable fee for the service of attorneys employed by
                       Secured Party for any purpose related to this Security
                       Agreement or the Obligations, including without
                       limitation consultation, drafting documents, sending
                       notices or instituting, prosecuting or defending
                       litigation or arbitration.

                                       7
<PAGE>

IX.      REMEDIES UPON DEFAULT.

         9.1   GENERAL. Upon any Event of Default, Secured Party may pursue any
               remedy available at law (including those available under the
               provisions of the UCC), or in equity to collect, enforce or
               satisfy any Obligations then owing, whether by acceleration or
               otherwise.

         9.2   CONCURRENT REMEDIES. Upon any Event of Default, Secured Party
               shall have the right to pursue any of the following remedies
               separately, successively or concurrently:

               (i)     File suit and obtain judgment and, in conjunction with
                       any action, Secured Party may seek any ancillary remedies
                       provided by law or at equity, including levy of
                       attachment and garnishment.

               (ii)    Take possession of any Collateral if not already in its
                       possession without demand and without legal process. Upon
                       Secured Party's demand, Debtor will assemble and make the
                       Collateral available to Secured Party as it directs.
                       Debtor grants to Secured Party the right, for this
                       purpose, to enter into or on any premises where
                       Collateral may be located.

               (iii)   Without taking possession, sell, lease or otherwise
                       dispose of the Collateral at public or private sale in
                       accordance with the UCC.

X.       FORECLOSURE PROCEDURES.

         10.1  NO WAIVER. No delay or omission by Secured Party to exercise any
               right or remedy accruing upon any Event of Default shall (a)
               impair any right or remedy, (b) waive any default or operate as
               an acquiescence to the Event of Default, or (c) affect any
               subsequent default of the same or of a different nature.

         10.2  NOTICES. Secured Party shall give Debtor such notice of any
               private or public sale as may be required by the UCC.

         10.3  CONDITION OF COLLATERAL. Secured Party has no obligation to
               repair, clean-up or otherwise prepare the Collateral for sale.

         10.4  NO OBLIGATION TO PURSUE OTHERS. Secured Party has no obligation
               to attempt to satisfy the Obligations by collecting them from any
               other person liable for them and Secured Party may release,
               modify or waive any collateral provided by any other person to
               secure any of the Obligations, all without affecting Secured
               Party's rights against Debtor. Debtor waives any right it may
               have to require Secured Party to pursue any third person for any
               of the Obligations.

         10.5  COMPLIANCE WITH OTHER LAWS. Secured Party may comply with any
               applicable state or federal law requirements in connection with a
               disposition of the Collateral and compliance will not be
               considered adversely to affect the commercial reasonableness of
               any sale of the Collateral.

         10.6  WARRANTIES. Secured Party may sell the Collateral without giving
               any warranties as to the Collateral and may specifically disclaim
               any warranties of title or the like. This procedure will not be
               considered adversely to affect the commercial reasonableness of
               any sale of the Collateral.

         10.7  SALES ON CREDIT. If Secured Party sells any of the Collateral
               upon credit, Debtor will be credited only with payments actually
               made by the purchaser, received by Secured Party and applied to
               the indebtedness of the purchaser. In the event the purchaser
               fails to pay for the Collateral, Secured Party may resell the
               Collateral and Debtor shall be credited with the proceeds of the
               sale as and when received, less expenses.

         10.8  PURCHASES BY SECURED PARTY. In the event Secured Party purchases
               any of the Collateral being sold, Secured Party may pay for the
               Collateral by crediting some or all of the Obligations of the
               Debtor.

         10.9  NO MARSHALLING. Secured Party has no obligation to marshal any
               assets in favor of Debtor, or against or in payment of:

               (i)     this Security Agreement,

                                       8
<PAGE>

               (ii)    any of the other Obligations, or

               (iii)   any other obligation owed to Secured Party, Debtor or any
                       other person.

XI.      MISCELLANEOUS.

         11.1  ASSIGNMENT.

               (i)     BINDS ASSIGNEES. This Security Agreement shall bind and
                       shall inure to the benefit of the successors and assigns
                       of Secured Party, and shall bind all heirs, personal
                       representatives, executors, administrators, successors
                       and permitted assigns of Debtor.

               (ii)    NO ASSIGNMENTS BY DEBTOR. Secured Party does not consent
                       to any assignment by Debtor except as expressly provided
                       in this Security Agreement.

               (iii)   SECURED PARTY ASSIGNMENTS. Secured Party may assign its
                       rights and interests under this Security Agreement. If an
                       assignment is made, Debtor shall render performance under
                       this Security Agreement to the assignee. Debtor waives
                       and will not assert against any assignee any claims,
                       defenses or set-offs which Debtor could assert against
                       Secured Party except defenses which cannot be waived.

         11.2  SEVERABILITY. Should any provision of this Security Agreement be
               found to be void, invalid or unenforceable by a court or panel of
               arbitrators of competent jurisdiction, that finding shall only
               affect the provisions found to be void, invalid or unenforceable
               and shall not affect the remaining provisions of this Security
               Agreement.

         11.3  NOTICES. Any notices required by this Security Agreement shall be
               delivered in accordance with the Reimbursement Agreement.

         11.4  HEADINGS. Section headings used in this Security Agreement are
               for convenience only. They are not a part of this Security
               Agreement and shall not be used in construing it.

         11.5  GOVERNING LAW. This Security Agreement is being executed and
               delivered and is intended to be performed in the State of Georgia
               and shall be construed and enforced in accordance with the laws
               of the State of Georgia, except to the extent that the UCC
               provides for the application of the law of the Debtor State.

         11.6  RULES OF CONSTRUCTION.

               (i)     No reference to "proceeds" in this Security Agreement
                       authorizes any sale, transfer, or other disposition of
                       the Collateral by the Debtor except in the ordinary
                       course of business.

               (ii)    "Includes" and "including" are not limiting.

               (iii)   "Or" is not exclusive.

               (iv)    "All" includes "any" and "any" includes "all."

         11.7  INTEGRATION AND MODIFICATIONS.

               (i)     This Security Agreement is the entire agreement of the
                       Debtor and Secured Party concerning its subject matter.

               (ii)    Any modification to this Security Agreement must be made
                       in writing and signed by the party adversely affected.

         11.8  WAIVER. Any party to this Security Agreement may waive the
               enforcement of any provision to the extent the provision is for
               its benefit.

         11.9  FURTHER ASSURANCES. Debtor agrees to execute any further
               documents, and to take any further actions, reasonably requested
               by Secured Party to evidence or perfect the security interest
               granted herein or to effectuate the rights granted to Secured
               Party herein.

                                       9
<PAGE>

         The parties have signed this Security Agreement under seal as of the
day and year first above written.

                                        ABSORPTION CORP.

                                        By:      /s/ Doug Ellis
                                                 -------------------------------
                                                 Douglas E. Ellis
                                                 President

                                        BRANCH BANKING AND TRUST COMPANY

                                        By:      Daniel Smith
                                                 -------------------------------
                                                 Daniel L. Smith
                                                 Senior Vice President

                                       10<PAGE>
                                                                   EXHIBIT 10.17

                                      BB&T
                               GUARANTY AGREEMENT

BRANCH BANKING AND TRUST COMPANY                               September 1, 2004

Dear Sirs:

      As an inducement to Branch Banking and Trust Company ("Bank") to extend
credit to and to otherwise deal with ABSORPTION CORP ("Borrower") and, in
consideration thereof, the undersigned (and each of the undersigned jointly and
severally if more than one) hereby absolutely and unconditionally guarantees to
bank and its successors and assigns the due and punctual payment of any and all
notes, drafts, debts, obligations and liabilities, primary or secondary (whether
by way of endorsement or otherwise), of Borrower, at any time, now or hereafter,
incurred with or held by Bank, together with interest, as and when the same
become due and payable, whether by acceleration or otherwise, in accordance with
the terms of any such notes, drafts, debts, obligations or liabilities or
agreements evidencing any such indebtedness, obligation or liability including
all renewals, extensions and modifications thereof. The obligation of the
undersigned is a guarantee of payment and not of collection.

      The undersigned is Bank's debtor for all indebtedness, obligations and
liabilities for which this Guaranty is made, and Bank shall also at all times
have a lien on and security interest in all stocks, bonds and other securities
of the undersigned at any time in Bank's possession and the same shall at Bank's
option be held, administered and disposed of as collateral to any such
indebtedness, obligation or liability of the Borrower, and Bank shall also at
all times have the right of set-off against any deposit account of the
undersigned with Bank in the same manner and to the same extent that the right
of set-off may exist against the Borrower.

      It is understood that any such notes, drafts, debts, obligations and
liabilities may be accepted or created by or with Bank at any time and from time
to time without notice to the undersigned, and the undersigned hereby expressly
waives presentment, demand, protest, and notice of dishonor of any such notes,
drafts, debts, obligations and liabilities or other evidences of any such
indebtedness, obligation or liability.

      Bank may receive and accept from time to time any securities or other
property as collateral to any such notes, drafts, debts, obligations and
liabilities, and may surrender, compromise, exchange and release absolutely the
same or any part thereof at any time without notice to the undersigned and
without in any manner affecting the obligation and liability of the undersigned
hereby created, The undersigned agrees that Bank shall have no obligation to
protect, perfect, secure or insure any security interests, liens or encumbrances
now or hereafter held for the indebtedness, obligations and liabilities for
which this Guaranty is made.

      If allowed by applicable law, the undersigned hereby subordinates any and
all indebtedness of Borrower now or hereafter owed to the undersigned to all
indebtedness of Borrower in favor of Bank, and agrees with Bank that the
undersigned shall not demand or accept any payment of principal or interest from
Borrower, shall not claim any offset or other reduction of the undersigned's
obligations hereunder because of any such indebtedness and shall not take any
action to obtain any of the security described In and encumbered by the
documents evidencing the indebtedness owed by Borrower ("Loan Documents");
provided, however, that, if Bank so requests, such indebtedness shall be
collected, enforced and received by the undersigned as trustee for Bank and
shall be paid over to Bank on account of the indebtedness of Borrower to Bank,
but without reducing or affecting any manner the liability of the undersigned
under the other provisions of this Guaranty Agreement.

      This obligation and liability on the part of the undersigned shall be a
primary, and not a secondary, obligation and liability, payable immediately upon
demand without recourse first having been had by Bank against the Borrower or
any other guarantor, person, firm or corporation, and without first resorting to
any property held by Bank as collateral security; and the undersigned hereby
waives the benefits of all provisions of law, including but not limited to the
provisions of O.C.G.A, section 10-7-24 or its successor, for stay or delay of
execution or sale of property or other satisfaction of judgment against the
undersigned on account of obligation and liability hereunder until judgment be
obtained therefor against the Borrower and execution thereon returned
unsatisfied, or until it is shown that the Borrower has no property available
for the satisfaction of the indebtedness, obligation or liability guaranteed
hereby, or until any other proceedings can be had; and the undersigned hereby
agrees to indemnify the Bank for all costs of collection, including but not
limited to the costs of repossession, foreclosure, reasonable attorneys' fees,
and court costs incurred by the Bank in the event that the Bank should first be
required by the undersigned to resort to any property held by the Bank or in
which the Bank has a security interest or to obtain execution or other
satisfaction of a judgment against the Borrower on account of Borrower's
obligation and liability for its indebtedness guaranteed hereby; and the
undersigned further agrees that the undersigned is responsible for any
obligation or debt, or portion thereof, of the Borrower to the Bank which has
been paid by the Borrower to the Bank and which the Bank is subsequently
required to return, to the Borrower or a trustee for the Borrower in any
bankruptcy or insolvency proceeding; and the undersigned further agrees that
none of the undersigned shall have any right of subrogation, reimbursement or
indemnity whatsoever, nor any right of recourse to security for the debts and
obligations of the Borrower to Bank unless and until all of the debts and
obligations of the Borrower to Bank have been paid in full. The undersigned
hereby waives, to the extent avoidable under any provision of the Bankruptcy
Code, any right arising upon payment by the undersigned of any obligation under
this Guaranty to assert a claim against the bankruptcy estate of the Borrower.

      In addition to the other waivers set forth elsewhere in this Guaranty, the
undersigned also hereby waives and agrees not to assert or take advantage of (a)
if allowed by applicable law, the defense of the statute of limitations in any
action hereunder or for the collection of the indebtedness or the performance of
any obligation hereby guaranteed; (b) any defense that may arise by reason of
the incapacity, lack of authority, death or disability of the undersigned,
Borrower, or any other party or entity, or the failure of Bank to file or
enforce a claim against the estate (either in administration, bankruptcy or any
other proceeding) of Borrower or any other party or entity; (c) any defense
based upon the failure of Bank to give notice of the existence, creation or
incurring of any new or additional indebtedness or obligation or the failure of
Bank to

ACCOUNT # / NOTE #                                            Initials: ________

1457GA (0311)                                                        Page 1 of 3

<PAGE>

give notice of the existence, creation or incurring of any new or additional
indebtedness or obligation or the failure of Bank to give notice of any action
or non-action on the part of any other party whomsoever, in connection with any
obligation hereby guaranteed; (d) any defense based upon an election of remedies
by Bank which destroys or otherwise impairs any subrogation rights of the
undersigned to proceed against Borrower for reimbursement, or both; (e) any
defense based upon failure of Bank to commence an action against Borrower or any
other guarantor of the indebtedness guaranteed hereby; (f) any duty of the part
of Bank to disclose to the undersigned any fact that it may know or hereafter
know regarding Borrower; (g) acceptance or notice of acceptance of this Guaranty
by Bank; (h) as stated above, notice of presentment and demand for payment of
any of the Indebtedness or performance of any of the obligations hereby
guaranteed except as otherwise required in this Guaranty; (i) as set forth
above, protest and notice of dishonor or of default to the undersigned or to any
other party with respect to the indebtedness or performance of obligations
hereby guaranteed; (j) except as otherwise provided herein, any and all other
notices whatsoever to which the undersigned might otherwise be entitled; (k) any
defense based on lack of due diligence by the Bank and the collection,
protection or realization upon any collateral securing the indebtedness
evidenced by the Note or any of the other Loan Documents, or both; (I) any
transfer by Borrower of all or any part of the security encumbered by the Loan
Documents; and (m) any other legal or equitable defenses whatsoever to which the
undersigned might be entitled, to the extent permitted by law, unless such
defenses are based upon the willful misconduct of the Bank.

      In the event of the occurrence of a "Default" or "Event of Default"
otherwise relating to the indebtedness evidenced by the Note(s) or evidenced or
secured by any of the other Loan Documents or any of them, or relating to the
transactions contemplated by the Loan Documents or any of them in any order, all
rights powers and remedies available to Bank in such event shall be
non-exclusive and cumulative of all other rights, powers and remedies provided
thereunder or hereunder or by law or in equity. Accordingly, the undersigned
hereby authorizes and empowers Bank upon the occurrence of Default or Event of
Default under the Note(s) or Loan Documents, at its sole discretion, and, except
as otherwise provided herein, without notice to the undersigned, to exercise and
cause to be exercised any right or remedy which Bank may have, including, but
not limited to, judicial foreclosure, non-judicial foreclosure by exercise of
power of sale, acceptance of a deed or assignment in lieu of foreclosure,
appointment of a receiver to collect rents and profits, exercise of remedies
against personal property, or enforcement of any assignment of leases, rents,
profits, accounts and certificates of deposit, or any other security, whether
real, personal or tangible or intangible, at any public or private sale of any
security or collateral for any indebtedness or any part hereof guaranteed
hereby, whether by foreclosure or otherwise, Bank may, in its discretion,
purchase all of any part of such security or collateral so sold or offered for
sale for its own account and may apply against the amount bid therefor the
balance due it pursuant to the Note(s) or any of the other Loan Documents
without prejudice to Bank's remedies hereunder against the undersigned for
deficiencies, if allowed by applicable law. If the indebtedness guaranteed
hereby is partially paid by reason of the election of Bank, its successors,
endorsees or assigns, to pursue any of the remedies available to Bank or if such
indebtedness is otherwise partially paid, then this Guaranty shall nevertheless
remain in full force and effect, and the undersigned shall remain liable for the
entire balance of the indebtedness guaranteed hereby, even though any rights
which the undersigned may have against Borrower may be destroyed or diminished
by the exercise of any such remedy.

Check applicable box:

[X]   This Guaranty is unlimited and applies to all indebtedness of Borrower,
      whether now existing or hereafter arising.

[ ]   This Guaranty applies to all indebtedness of Borrower evidenced by its
      promissory note number _____ dated ____________________ (including all
      extensions, renewals, and additional advances and modifications thereof)
      in the initial principal amount of $________________.

[ ]   This Guaranty is limited to an amount of $______________________ plus
      accrued interest, late fees, costs of collection and reasonable attorneys'
      fees and all other obligations and indebtedness which may accrue or be
      incurred with respect to the Borrower's indebtedness and obligations to
      Bank

      To secure the payment of all obligations of the undersigned hereunder, the
undersigned hereby grants a security interest and lien in the following goods
and property owned by the undersigned:

N/A
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

("Collateral"). The undersigned hereby agrees to execute and deliver to Bank any
security agreement, security deed, mortgage, UCC financing statement, or other
document required by the Bank in order to protect its security interest or lien
in the Collateral. This document shall constitute a security agreement under the
Uniform Commercial Code of Georgia ("Code"), and in addition to having all other
legal rights and remedies, the Bank shall have all rights and remedies of a
secured party under the Code.

      The undersigned covenants to (i) deliver to Bank, as soon as available
each year, complete copies (including all schedules) of all British Columbia and
Canadian tax returns filed by Guarantor; and (ii) not, without the prior written
consent of Bank, transfer or sell more than 20% of is ownership interest in
Borrower.

      This agreement shall inure to the benefit of Bank, its successors and
assigns, and the owners and holders of any of the indebtedness, obligations and
liabilities hereby guaranteed, and shall remain in force until a written notice
revoking it has been received by Bank; but such revocation shall not release the
undersigned from liability to Bank, its successors and assigns, or the owners
and holders of any of the indebtedness, obligations and liabilities hereby
guaranteed, for any indebtedness, obligation or liability of the Borrower which
is hereby guaranteed and then in existence or from any renewals, additional
advances, extensions or modifications thereof in whole or in part, whether such
renewals, additional advances, extensions or modifications are made before or
after such revocation, with or without notice to the undersigned. The
undersigned waives presentment, demand, protest and notices of every kind and
assents to any one or more extensions, modifications, additional advances,
renewals or postponements of the time or amount of payment or any other
Indulgences given to Borrower. The undersigned shall be responsible for and
shall reimburse the Bank for all costs and expenses and reasonable attorneys'
fees incurred by the Bank in connection with the enforcement of this Guaranty or
the protection or preservation of any right or claim of the Bank in connection
herewith, including without limitation costs and expenses incurred by the Bank
in connection with its attempts to collect the indebtedness, obligations, and
liabilities guaranteed hereby. Time is of the essence of this Agreement.

      If the Borrower is an organization, this instrument covers all
indebtedness, obligations and liabilities to Bank purporting to be made or
undertaken on behalf of such organization by any such officer or agent of said
organization without regard to the actual authority of such officer or agent.
The term "organization" shall include associations of all kinds and all
purported corporations, partnership, limited liability companies and the like,
whether correctly and legally chartered and organized.

1457GA (0311)                                                        Page 2 of 3

<PAGE>

      The undersigned covenants, warrants, and represents to the Bank that: (i)
this guaranty is enforceable against the undersigned in accordance with its
terms; (ii) the execution and delivery of this Guaranty does not violate or
constitute a breach of any agreement to which the undersigned is a party; (iii)
that there is no litigation, claim, action or proceeding pending or, to the best
knowledge of the undersigned, threatened against the undersigned which would
materially adversely affect the financial condition of the undersigned or his
ability to fulfill his obligations hereunder; (iv) that the undersigned has
knowledge of the Borrower's financial condition and affairs; and (v) unless
otherwise required in a Loan Agreement, if applicable, as long as any
Obligations remain outstanding or as long as Bank remains obligated to make
advances, the undersigned shall furnish annually an updated financial statement
in a form satisfactory to Bank, which, when delivered shall be the property of
Bank.

      This Guaranty is made in and shall be construed in accordance with the
laws and judicial decisions of the State of Georgia. The undersigned agrees that
any dispute arising out of this Guaranty shall be adjudicated in either the
state or federal courts of Georgia and in no other forum. For that purpose, the
undersigned hereby submits to the jurisdiction of the state and/or federal
courts of Georgia. The undersigned waives any defense that venue is not proper
for any action brought in any federal or state court in the State of Georgia.

NOTICE. All notices, requests, demands, waivers, and other communications given
as provided in this Guaranty will be in writing, and unless otherwise
specifically provided in this Guaranty, will be deemed to have been given: (i)
if delivered in person, upon delivery, or (ii) if mailed by certified or
registered mail, postage prepaid, return receipt requested, and addressed to
either Guarantor or Bank at the addresses provided below on the second business
day after deposit in the United States Mail if addressed to an address located
within a State other than the State in which the notice is being mailed, or
(iii) if sent by overnight express delivery service, enclosed in a prepaid
envelope and addressed to Bank or Guarantor at the address provided below, on
the first business day after deposit with the service, or (iv) if sent by tested
telex, telegram, telecopy, facsimile, or other form of rapid transmission
confirmed by mailing (as provided in this section), at substantially the same
time as the rapid transmission. Either Guarantor or Bank may Change its
respective address as provided in this section by giving written notice of the
change as provided in this section. The addresses for notice are,

<Table>
<S>                   <C>                                             <C>                 <C>
Notice to Guarantor:  1569 Dempsey Road                               With a copy to:
                      -----------------------------------------                            -----------------------------------------
                      North Vancouver, British Columbia
                      -----------------------------------------                            -----------------------------------------

                      -----------------------------------------                            -----------------------------------------

Notice to Bank:       Branch Banking and Trust Company                With a copy to:
                      200 West Second Street                                               -----------------------------------------
                      Winston-Salem, North Carolina 27101
                                                                                           -----------------------------------------
</Table>

      Witness the signature and seal of each of the undersigned.

<Table>
<S>                                                           <C>
WITNESS                                                       INTERNATIONAL ABSORBENTS, INC.

/s/ David Thompson                                            By:    /s/ Gordon Ellis                                        (SEAL)
-----------------------------------------------------------          -----------------------------------------------------
                                                              Name:  Gordon L. Ellis
-----------------------------------------------------------          -----------------------------------------------------
                                                              Title: Chief Executive Officer
-----------------------------------------------------------          -----------------------------------------------------
                                   Address of Guarantor(s):          1569 Dempsey Road
                                                                     -----------------------------------------------------
                                                                     North Vancouver, British Columbia
                                                                     -----------------------------------------------------
</Table>

Signed, Sealed and delivered in the presence of:

<Table>
<S>                                                                  <C>
/s/ Mike Watson                                                      /s/ Karina Favro
-----------------------------------------------------------          ---------------------------------------------------------------
                      Unofficial Witness                                                      Notary Public
                                                                                             [NOTARIAL SEAL]

My Commission Expiration Date:
                               ----------------------------
</Table>

1457GA (0311)                                                        Page 3 of 3

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