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Employment Agreement

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (?Agreement?) is made and entered into as of the 29th day of September, 2003, by and between Hythiam, Inc., a Delaware corporation (?Employer?), and Terren S. Peizer, an individual (?Employee?).

A. WHEREAS, Employer has agreed to employ Employee and Employee has agreed to enter into employment as the Chief Executive Officer (?CEO?) of Employer, on the terms set forth in this Agreement.

B. WHEREAS, Employer acknowledges that Employee desires definition of his compensation and benefits, and other terms of his employment.

NOW, THEREFORE, in consideration thereof and of the covenants and conditions contained herein, the parties agree as follows:

1. TERM OF AGREEMENT

1.1 Initial Term. The initial term of this Agreement shall begin on September 29, 2003 (?Commencement Date?) and shall continue until the earlier of: (a) the date on which it is terminated pursuant to Section 5; or (b) five (5) years following the Commencement Date (?Initial Term?). At the conclusion of the Initial Term, and each successive term thereafter, the Agreement shall be automatically renewed for an additional five-year term, unless either party gives written notice of its intention to terminate the Agreement at least two (2) years prior to the automatic renewal date.

2.1 Employment of Employee. Employer agrees to employ Employee to render services on the terms set forth herein. Employee hereby accepts such employment on the terms and conditions of this Agreement.

2.2 Position and Duties. Employee shall serve as Employer?s CEO, reporting directly to Employer?s Board of Directors (?Board?), and shall have the general powers, duties and responsibilities of management usually vested in that office in a corporation and such other additional powers and duties as may be prescribed from time to time by the Board.

In the event that Employee?s duties and responsibilities shall be significantly diminished or there shall be assigned to him duties and responsibilities materially inconsistent with his position and either situation continues for thirty (30) days after notice of either such situation is given such occurrence shall constitute a termination without Good Cause under Section 5.3.

2.3 Board Membership. Employer acknowledges that Employee is currently a member and Chairman of the Board, and subject to the Board?s fiduciary obligations will take all reasonable action necessary to assure that Employee remains Chairman throughout the term of this Agreement. The Employee shall, to the extent appointed or elected, serve as a member of any committee of the Board, or the equivalent bodies in a subsidiary or affiliate, in all cases, without additional compensation or benefits and any compensation paid to the Employee, or benefits provided to the Employee, in such capacities shall be a credit with regard to the amounts due hereunder from the Employer.

2.4 Other Services. Employer acknowledges and pre-approves Employee?s current responsibility as Chairman and CEO of Clearant, Inc. (?Clearant?). Employer is hereby notified and acknowledges that Employee is subject to a Confidentiality Agreement under the terms of his employment with Clearant. In addition, Employer acknowledges that Employee may do charity work and conduct personal business as long as such activities do not materially interfere with the Employee?s duties hereunder.

2.5 Relocation or Change of Duties. Employer shall not, without Employee?s consent, require Employee to permanently relocate outside of Los Angeles, California. If Employer relocates more than thirty (30) miles outside of Los Angeles, and Employee elects not to relocate, such action shall be considered a resignation with Good Reason under Section 5.4. If Employer requests and Employee agrees to relocate, Employer will pay for reasonable and standard relocation costs of Employee and Employee?s family, including, but not limited to, closing points on the sale of Employee?s house and purchase of a new house, temporary housing, travel and moving expenses.

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