Exhibit 10.7

  EXECUTIVE
    CHAIRMAN AGREEMENT



     

    This
      Executive Chairman Agreement (“Agreement”)
      is
      made and entered into on August 10, 2007, for services commencing as of July
      1,
      2007 (“Commencement
      Date”),
      by
      and between Xcorporeal, Inc., a Delaware corporation (“Company”),
      and
      Terren S. Peizer, an individual (“Chairman”).

     

    1. Term.
      The
      initial term of this Agreement shall begin on the Commencement Date and continue
      for a period of three years (“Initial
      Term”).
      At
      the conclusion of the Initial Term, and each successive term thereafter, the
      Agreement shall be automatically renewed for an additional one-year term, unless
      either party gives written notice of its intention to terminate the Agreement
      at
      least six months prior to the automatic renewal date (collectively, the
“Term”).

     

    2. Services.

     

    (a) Excutive
      Chairman.
      During
      the Term the Chairman shall serve as Executive Chairman of the Board of
      Directors (“Board”)
      of
      Company. Chairman is currently a director and Chairman of the Board of Company,
      and subject to the Board’s fiduciary obligations will take all reasonable action
      necessary to assure that Chairman remains Chairman of the Board. Chairman shall,
      to the extent appointed or elected, continue to serve as Executive Chairman
      of
      the Board throughout the Term.

     

    (b) Position
      and Duties.
      Chairman shall have the general powers, duties and responsibilities usually
      vested in the office of the Executive Chairman of a corporation, and such other
      additional powers as may be prescribed from time to time by the Board. In the
      event that Chairman’s shall be assigned to him duties and responsibilities
      materially inconsistent with Chairman’s position and such situation continues
      for 10 days after notice is given such occurrence shall constitute a termination
      without Good Cause under Section
      4(c).

     

    (c) Other
      Services.
      Company
      acknowledges and pre-approves Chairman’s current responsibilities as Chairman
      and Chief Executive Officer (CEO) of Hythiam, Inc. (“Hythiam”).
      Company further acknowledges that Chairman is subject to a Confidentiality
      Agreement under the terms of Chairman’s employment and directorship with
      Hythiam. In addition, Company acknowledges that Chairman may do charity work
      and
      conduct personal business, as long as such activities do not materially
      interfere with the performance of Chairman’s duties hereunder.

     

    3. Compensation.
      During
      the term of this Agreement, Company shall pay the amounts and provide the
      benefits described in this section, and Chairman agrees to accept such amounts
      and benefits in full payment for Chairman’s services under this
      Agreement.

     

    (a) Cash
      Compensation.
      Chairman’s initial cash compensation will be $450,000 per annum, payable in
      accordance with the Company’s standard practices. In addition, Chairman will
      receive a one-time signing bonus of $225,000 upon full execution of this
      Agreement. Throughout the Term, Company shall pay to Chairman annual cash
      compensation no less than the median cash compensation of similarly positioned
      Executive Chairmen of similarly situated companies, subject to increases as
      provided below. 

     

    
      
        
        

      

      
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    (b) Bonus.
      Subject
      to the foregoing and any restrictions under federal or state law of the rules
      of
      any exchange upon which the shares of Company’s common stock are then traded,
      Chairman shall receive annual bonus cash compensation as determined in the
      reasonable discretion of the Board or its Compensation Committee, targeted
      at no
      less than 100% of annual base cash compensation, and based on (1) the level
      of
      service of Chairman, (2) the achievement of designated individual goals and
      milestones, and (3) the overall performance and profitability of Company
      (collectively, the “Factors”).
      The
      Factors will be established as soon as reasonably practicable and reevaluated
      on
      an annual basis by mutual agreement of Chairman and the Board or its
      Compensation Committee. The bonus will be based on a calendar year and paid
      no
      later than April 15th
      of the
      following year.

     

    (d) Annual
      Review.
      Upon
      each anniversary of the Commencement Date, Chairman’s cash compensation and
      bonus target shall be reevaluated by the Board or its Compensation Committee
      and, if appropriate, increased to ensure appropriate compensation in the
      competitive marketplace based on the position and level of service of
      Chairman.

     

    (e) Replacement
      Review.
      In the
      event that the Company appoints a Co-Chairman, CEO or other officer or director
      who performs a substantial portion of the duties and responsibilities of
      Chairman, Chairman’s cash compensation and bonus target shall be reevaluated,
      and the Board or its Compensation Committee will mutually agree with Chairman
      on
      a decrease or adjustment, if appropriate, to ensure appropriate compensation
      in
      light of any material decrease or adjustment in the required level of service
      of
      Chairman.

     

    (f) Equity
      Incentive Plan.

     

    (1) Chairman
      shall be entitled to participate in any equity compensation, stock option,
      restricted stock, phantom stock right, equity pool, or other such plans or
      arrangements which may exist during the Term, provided that Chairman’s
      entitlement is not inconsistent with the terms of any such arrangement or
      plan.

     

    (2) Chairman
      shall be granted options to purchase shares of Company’s common stock under the
      provisions of Company’s stock incentive plan, at 110% of the fair market value
      on the date of grant, in amounts and at such times as agreed between Chairman
      and the Board or its Compensation Committee based upon the Factors. Except
      as
      otherwise set forth herein, vesting of options will cease upon the termination
      of all of Chairman’s services to Company.

     

    (g) Reimbursement
      of Expenses.
      Company
      shall pay to or reimburse Chairman for all reasonable business, travel,
      promotional and similar expenditures incurred by Chairman.

     

    (h) Deductions.
      Company
      shall deduct and withhold from all compensation payable to Chairman all amounts
      required to be deducted or withheld pursuant to any present or future law,
      ordinance, regulation, order, writ, judgment or decree requiring such deduction
      and withholding. To the extent legally permissible, the Company shall not treat
      any fringe benefits or expense reimbursement as income to Chairman.

     

    
      
        
        

      

      
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    4. Termination

     

    (a) Termination
      With Good Cause or Without Good Reason.
      Company
      may terminate Chairman’s services at any time, with or without notice or Good
      Cause (as defined below). If Company terminates Chairman’s services with Good
      Cause, or if Chairman resigns without Good Reason (as defined below), Company
      shall pay Chairman any accrued but unpaid cash compensation, prorated through
      the date of termination, at the rate in effect at the time notice of termination
      is given, together with any benefits accrued through the date of termination.
      Company shall have no further obligations to Chairman under this Agreement
      or
      any other agreement, and all unvested options will terminate. To the extent
      legally permissible under the incentive compensation plan, all vested options
      shall be exercisable until the end of their original term.

     

    (b) Termination
      Without Good Cause or with Good Reason.
      Chairman shall have the right to terminate Chairman’s services to Company with
      notice and Good Reason. If Company terminates Chairman’s employment without Good
      Cause, or Chairman resigns for Good Reason:

     

    (1) Company
      shall pay Chairman’s cash compensation prorated through the date of termination,
      at the rate in effect at the time notice of termination is given, together
      with
      any benefits accrued through the date of termination;

     

    (2) Company
      shall pay Chairman in a lump sum an amount equal to three years’ of additional
      (i) cash compensation (at the rate in effect at the time of termination) and
      (ii) bonus (based on 100% of the targeted bonus for the year of
      termination);

     

    (3) All
      of
      Chairman’s unvested stock options will vest immediately, and remain exercisable
      for the full term thereof; and

     

    Company
      shall have no further obligations to Chairman under this Agreement or any other
      agreement.

     

    (c) Good
      Cause.
      For
      purposes of this Agreement, a termination shall be for “Good
      Cause”
if
      Chairman shall willfully:

     

    (1) Commit
      fraud or embezzlement in connection with Chairman’s duties;

     

    (2) Materially
      violate the Company’s written Codes of Ethics as adopted by the Board under the
      Sarbanes-Oxley Act;

     

    (3) Refuse
      to
      comply with a relevant and material obligation assumable and chargeable to
      an
      executive of Chairman’s corporate rank and responsibilities under the
      Sarbanes-Oxley Act and the regulations of the Securities and Exchange Commission
      promulgated thereunder; or

     

    
      
        
        

      

      
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    (4) Be
      convicted of, or enter a plea of guilty to, a felony under state or federal
      law,
      other than a vehicle related offense or an offense not involving dishonesty
      or
      moral turpitude.

     

    (d) Good
      Reason.
      For
      purposes of this Agreement, a resignation shall be with “Good
      Reason”
      following:

     

    (1) The
      assignment to Chairman of duties materially inconsistent with Chairman’s status
      and title, or the removal of Chairman as a director or as Chairman of the
      Board;

     

    (2) Company’s
      failure to cause any acquiring or successor entity following a Change in Control
      to assume Company’s obligations under this Agreement, unless such assumption
      occurs by operation of law; or

     

    (3) Material
      breach of this Agreement by Company, which continues after written notice and
      reasonable opportunity to cure (not to exceed 10 days after the date of notice),
      or failure to timely pay to Chairman any amount due under Section
      3.

     

    (e) Effects
      of Change in Control.
      Immediately upon a Change in Control (as defined below) all of Chairman’s
      unvested options shall vest immediately, and remain exercisable for a period
      of
      three years thereafter.

     

    (f) Change
      in Control.
      For
      purposes of this Agreement, a “Change
      in Control”
      means:

     

    (1) any
      “person” (as used in Sections 13(d) and 14(d) of the Securities Exchange Act of
      1934, as amended (the “Exchange
      Act”)),
      other than a trustee or other fiduciary holding under an employee benefit plan,
      becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
      Act) of securities representing at least 50% of (i) the outstanding
      shares of common stock of the Company or (ii) the combined voting power of
      the
      Company’s then outstanding securities; 

     

    (2)
       the
      Company is party to a merger or consolidation which results in the voting
      securities of the Company outstanding immediately prior thereto failing to
      continue to represent (either by remaining outstanding or by being converted
      into voting securities of the surviving or another entity) more than 50% of
      the combined voting power of the voting securities of the Company or such
      surviving or other entity outstanding immediately after such merger or
      consolidation; 

     

    (3)
       the
      sale
      or disposition of all or substantially all of the Company’s assets (or
      consummation of any transaction having similar effect); 

     

    (4)
       the
      dissolution or liquidation of the Company; or 

     

    (5) the
      composition of the Board changes during any period of 36 months such that
      individuals who at the beginning of the period were members of the Board (the
      “Continuing
      Directors”)
      cease
      for any reason to constitute a majority thereof; unless a majority of the
      Continuing Directors has either (i) approved the election of the new directors,
      or (ii) if the election of the new directors is voted on by shareholders,
      recommended that the shareholders vote for approval.

     

    
      
        
        

      

      
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    (g) No
      Change in Control.
      Notwithstanding the provisions of Section
      4(f),
      the
      following shall not constitute a Change in Control:

     

    (1) If
      the
      sole purpose of the transaction is to change the state of the Company’s
      incorporation or to create or eliminate a holding company that will be owned
      in
      substantially the same proportions by the same beneficial owners as before
      the
      transaction;

     

    (2) If
      Company’s stockholders of record as constituted immediately prior to the
      transaction will, immediately after the transaction (by virtue of securities
      issued as a consideration for Company’s capital stock or assets or otherwise),
      hold more than 50% of the combined voting power of the surviving or acquiring
      entity’s outstanding securities;

     

    (3) An
      underwritten public offering of Company’s common stock, if Company’s
      stockholders of record as constituted immediately prior to the offering will,
      immediately after the offering, continue to hold more than 50% of the combined
      voting power of Company’s outstanding securities;

     

    (4) The
      private placement of preferred or common stock, or the issuance of debt
      instruments convertible into preferred or common stock, for fair market value
      as
      determined by the Board, provided the acquiring person does not as a result
      of
      the transaction own at least 50% of the outstanding capital stock of Company,
      have the right to vote at least 50% of the outstanding voting stock of Company,
      or have the right to elect a majority of the Board; or

     

    (5) If
      Chairman is a member of a group that acquires control of Company in an event
      that would otherwise be a Change in Control, such event shall not be deemed
      a
      Change in Control and Chairman shall have no right to benefits hereunder as
      a
      result of such event; provided, however, that Chairman shall not be deemed
      a
      member of any acquiring group solely by virtue of Chairman’s continued
      employment or ownership of stock or stock options following a Change in
      Control.

     

    (h) Gross-Up
      Payment.

     

    (1) Notwithstanding
      the above, if any of the compensation payable upon termination of Chairman’s
      services as provided for above (the “Payments”)
      triggers the application of Internal Revenue Code Section 280G, or makes
      Chairman liable for payment of the excise tax (the “Excise
      Tax”)
      provided for under Section 4999 of the Code, or any other statute or regulation
      under which Chairman may be penalized as a result of the nature or amount of
      such compensation, then Company or the acquiring or successor entity of Company
      shall pay to Chairman an additional amount (the “Gross-Up”)
      such
      that the net after-tax amount retained by the Chairman, after deduction of
      (A)
      any Excise Tax on the Payments, and (B) any federal, state, local or foreign
      income, employment or other tax and Excise Tax upon any payment provided for
      by
      this section, shall be equal to the Payments, reduced by the amount of any
      United States federal, state and local income or employment tax liability of
      the
      Chairman calculated as if the Payments were not subject to the Excise Tax.
      The
      determination of whether any of the Payments will be subject to the Excise
      Tax
      and the amount of such Excise Tax will be made by Company’s regular independent
      public accounting firm.

     

    
      
        
        

      

      
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    (2) In
      the
      event that the Excise Tax is subsequently determined to be less than the amount
      taken into account under this section, Chairman shall repay to Company at the
      time that the amount of such reduction of Excise Tax is finally determined,
      an
      amount equal to the sum of the following: (i) the amount of the reduction of
      the
      Excise Tax, (ii) the amount of the reduction in all other taxes generated by
      the
      reduction in the Excise Tax, and (iii) interest on the amount of the sum of
      (i)
      and (ii) at the rate provided in Section 1274(b)(2)(B) of the
      Code.


     

    (3) In
      the
      event that the Excise Tax is determined to exceed the amount previously taken
      into account under this section (including by reason of any payment the
      existence or amount of which cannot be determined at the time of the Gross-Up),
      Company shall make an additional Gross-Up payment in respect to such excess
      (plus any interest payable with respect to such excess) at the time that the
      amount of such excess is finally determined in accordance with the principles
      set forth above.

     

    (i) Death
      or Disability.
      To the
      extent consistent with federal and state law, Chairman’s services and cash
      compensation shall terminate on Chairman’s death or Disability. “Disability”
means
      any physical or mental health condition beyond Chairman’s control that
      completely prevents Chairman from performing Chairman’s duties, even after all
      reasonable accommodations are made by Company, for a period of more than 180
      consecutive days within an annual period of the Term. In the event of
      termination due to death or Disability, Company shall pay Chairman (or
      Chairman’s legal representative) Chairman’s cash compensation prorated through
      the date of termination, at the rate in effect at the time of termination and
      continue to provide insurance and other fringe benefits to Chairman and
      Chairman’s spouse and dependent children for a period of one year from
      Chairman’s termination date. In the event of a termination due to death or
      Disability, in addition to all options already vested, 100% of the options
      set
      to vest in the year that death or disability occurs shall vest and Chairman
      shall have until the end of the option term to exercise all options. Company
      shall have no further obligations to Chairman under this Agreement, except
      for
      those created under any stock option agreements executed prior to the effective
      date of termination, and any other vested rights under the employee benefit
      plans and programs and the right to receive reimbursement for business expenses
      as provided for in Section
      3(h).


     

    (j) Return
      of Company Property.
      Within
      30 days after the Termination Date, Chairman shall return to Company all
      products, books, records, forms, specifications, formulae, data processes,
      designs, papers and writings relating to the business of Company including
      without limitation proprietary or licensed computer programs, customer lists
      and
      customer data, and/or copies or duplicates thereof in Chairman’s possession or
      under Chairman’s control. Chairman shall not retain any copies or duplicates of
      such property and all licenses granted to him by Company to use computer
      programs or software shall be revoked on the Termination Date.


     

    5. Duty
      Of Loyalty.
      During
      the term of this Agreement, Chairman shall not, without the prior written
      consent of Company, engage in any activity directly competitive with the
      business or welfare of Company, whether alone, as a partner, or as an officer,
      director, employee, consultant, or holder of more than 10% of the capital stock
      of any other corporation. Otherwise, Chairman may make personal investments
      in
      any other business. The parties agree that the activities provided for in
Section
      2(c)
      are not
      directly competitive with the business or welfare of Company.

     

    
      
        
        

      

      
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    6. Cure
      Period


     

    In
      the
      event that Chairman or Company breaches this Agreement, the breaching party
      shall have 30 days within which to cure such breach, after receiving written
      notice from the other party specifying in reasonable detail the basis for the
      claimed breach (“Cure
      Period”).
      No
      breach of the Agreement shall be actionable if the breaching party is able
      to
      cure the breach within the Cure Period.

     

    7. Other
      Provisions.


     

    (a) Compliance
      With Other Agreements.
      Company
      acknowledges that Chairman is subject to an Employment Agreement and
      Confidentiality agreement with Hythiam. Chairman represents to Company that,
      to
      the best of Chairman’s knowledge and belief, the execution, delivery and
      performance of this Agreement will not conflict with or result in the violation
      or breach of any term or provision of any other agreement, order, judgment
      or
      injunction to which Chairman is a party or by which Chairman is bound. Should
      claims, demands, causes of action, costs or expenses (including attorneys’ fees)
      arise from any alleged breach of contract as a result of accepting a position
      with Company, Company will indemnify Chairman for all reasonable legal fees,
      costs and expenses arising out of or relating thereto. 

     

    (b) Nondelegable
      Duties.
      This is
      a contract for Chairman’s personal services. The duties of Chairman under this
      Agreement are personal and may not be delegated or transferred in any manner
      whatsoever, and shall not be subject to involuntary alienation, assignment
      or
      transfer by Chairman during Chairman’s life.

     

    (c) Governing
      Law.
      The
      validity, construction and performance of this Agreement shall be governed
      by
      the laws, without regard to the laws as to choice or conflict of laws, of the
      State of California.

     

    (d) Venue.
      If any
      dispute arises regarding the application, interpretation or enforcement of
      any
      provision of this Agreement, such dispute shall be resolved in Los Angeles
      County, California.

     

    (e) Severability.
      The
      invalidity or unenforceability of any particular provision of this Agreement
      shall not affect the other provisions, and this Agreement shall be construed
      in
      all respects as if any invalid or unenforceable provision were
      omitted.

     

    (f) Binding
      Effect.
      The
      provisions of this Agreement shall bind and inure to the benefit of the parties
      and their respective successors and permitted assigns.

     

    (g) Notice.
      Any
      notices or communications required or permitted by this Agreement shall be
      deemed sufficiently given if in writing and when delivered personally or four
      (4) business days after deposit with the United States Postal Service as
      registered or certified mail, postage prepaid and addressed as follows: (1)
      If
      to Company, to the principal office of Company in the State of California,
      marked “Attention: Compensation Committee,” with a copy to the Company’s general
      outside counsel; or (2) If to Chairman, to the most recent address for Chairman
      appearing in Company’s records.

     

    
      
        
        

      

      
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    (h) Arbitration.
      Any
      disputes, controversies or claims arising out of or relating to this Agreement,
      including without limitation any failure to reach mutual agreement pursuant
      to
Sections
      3(b) or (e),
      shall
      be resolved by binding arbitration before a retired judge at JAMS in Santa
      Monica, California, in accordance with its Employment Arbitration Rules and
      Procedures. To the extent permitted by the rules and applicable law, the
      prevailing party shall be awarded its reasonable attorney’s fees, costs and
      expenses.


     

    (i) Headings.
      The
      Section and other headings contained in this Agreement are for reference
      purposes only and shall not affect in any way the meaning or interpretation
      of
      this Agreement.

     

    (j) No
      Third Party Beneficiaries. This
      Agreement shall inure to the benefit of the parties and their permitted
      successors and assigns only. There are no intended third party beneficiaries
      under this Agreement.

     

    (k) No
      Disparagement. During
      the Term, and at all times thereafter, the parties agree that they will not
      disparage each other in any fashion.

     

    (l) Amendment
      and Waiver.
      This
      Agreement may be amended, modified or supplemented only by a writing executed
      by
      each of the parties. Either party may in writing waive any provision of this
      Agreement to the extent such provision is for the benefit of the waiving party.
      No waiver by either party of a breach of any provision of this Agreement shall
      be construed as a waiver of any subsequent or different breach, and no
      forbearance by a party to seek a remedy for noncompliance or breach by the
      other
      party shall be construed as a waiver of any right or remedy with respect to
      such
      noncompliance or breach.

     

    
      
        
        

      

      
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    (m) Entire
      Agreement.
      This
      Agreement contains the entire agreement and understanding between the parties,
      and supersedes all prior and contemporaneous agreements, negotiations,
      understandings, promises, representations and warranties, whether oral or
      written.

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
      day
      and year first above written.

     

    
      	
              COMPANY:

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            
	
              XCORPOREAL,
                INC.

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            
	
              By:

            	
               

            	
               

            	
               

            	
               

            
	
               

            	
              Director

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            
	
              By:

            	
               

            	
               

            	
               

            	
               

            
	
               

            	
              Director

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
              CHAIRMAN:

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
              Terren
                S. Peizer

            	
               

            


    

     

    
      
        
        

      

      
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