Document:

exhibit_10-1.htm

    
Exhibit 10.1

     

    
 

    EMPLOYMENT
AGREEMENT

     

    THIS
EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of November 12,
2008, by and between Hythiam, Inc., a Delaware corporation (“Employer”), and
Maurice Hebert, an individual (“Employee”).

     

    RECITALS

     

    A.           WHEREAS,
Employee has experience and expertise applicable to employment with Employer to
perform as the Chief Financial Officer of Employer, Employer has agreed to
employ Employee and Employee has agreed to enter into such employment, on the
terms set forth in this Agreement.

     

    B.           WHEREAS,
Employee acknowledges that this Agreement is necessary for the protection of
Employer’s investment in its business, good will, products, methods of
operation, information, and relationships with its customers and other
employees.

     

    C.           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:

     

    AGREEMENT

     

    1. TERM OF
AGREEMENT

     

    1.1 Initial
Term.  The initial term of this Agreement shall begin on
November 12, 2008 (“Commencement Date”) and shall continue until the earlier
of:  (a) the date on which it is terminated pursuant to Section 5 of
this Agreement; or (b) four (4) years following the Commencement Date (“Initial
Term”).  After the expiration of the Initial Term, Employee shall be
employed on an at-will basis, with either party able to terminate the
employment, with or without cause and with or without notice.

     

    2. EMPLOYMENT

     

    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 the Chief Financial Officer of
Employer, reporting to Employer’s President, and shall have the general powers,
duties and responsibilities of management usually vested in that office in a
corporation and such other powers and duties as may be prescribed from time to
time by the President or Employer’s Board of Directors (“Board”).

     

    2.3 Standard of
Performance.  Employee agrees that he will at all times
faithfully and industriously and to the best of his ability, experience and
talents perform all of the duties that may be required of and from him pursuant
to the terms of this Agreement.  Such duties shall be performed at
such place or places as the interests, needs, business and opportunities of
Employer shall reasonably require or render advisable.

     

    2.4 Exclusive
Service.

     

                                               (a)
Employee shall devote all of his business energies and abilities and all of his
productive time to the performance of his duties under this Agreement
(reasonable absences during holidays and vacations excepted), and shall not,
without the prior written consent of Employer, render to others any service of
any kind (whether or not for compensation) that, in the opinion of Employer,
would materially interfere with the performance of his duties under this
Agreement, and

     

     

    
      
         

      

      
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                                     (b)
Employee shall not, without the prior written consent of Employer, maintain any
affiliation with, whether as an agent, consultant, employee, officer, director,
trustee or otherwise, nor shall he directly or indirectly render any services of
an advisory nature or otherwise to, or participate or engage in, any other
business activity.  Employee and Employer agree that those items set
forth in Attachment A, attached hereto, are subject to periodic review by
Employer and in the event that Employer determines, in its sole discretion, that
such obligations negatively impact Employer, Employer shall have the right to
direct Employee to terminate such relationships.

     

    3. COMPENSATION

     

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

     

    3.2 Base
Salary.  Employer shall pay to Employee a base salary of two
hundred forty thousand dollars ($240,000) annually in equal bi-weekly
installments, less applicable taxes.  At Employer’s sole discretion,
Employee’s base salary may be increased, but not decreased,
annually.  Notwithstanding the foregoing, commencing on January 1,
2010 and annually thereafter, the Base Salary shall be increased by at least the
Consumer Price Index for Los Angeles, CA (or a reasonable proxy
thereof).  The annual base salary of $240,000 shall be retroactive to
October 1, 2008.

     

    3.3 Discretionary
Bonus.  Except as described in Section 5.1 below, Employee is
eligible to receive an annual bonus in the sole discretion of
Employer.  This discretionary bonus will be targeted at forty percent
(40%) of Employee’s base salary, and will be based on Employee achieving
designated individual goals and milestones, and the overall performance and
profitability of the Company.  The goals and milestones will be
established and reevaluated on an annual basis by mutual agreement of Employee
and the President, subject to review and approval by the Board or its
Compensation Committee.  To the extent that a discretionary bonus is
granted, it will be based on a calendar year and shall be paid no later than
March 14th of the following year.

     

    3.4 Equity Incentive
Plan.

     

    (a) In
connection with this Agreement, Employee shall receive a new grant of options to
purchase one hundred thousand (100,000) shares of Employer’s common stock, at
fair market value, under the provisions of Employer’s 2007 Stock Incentive Plan,
upon approval by the Board.  The options will vest in equal monthly
amounts over a three (3) year period from the Commencement date.

     

    (b) Except as
otherwise set forth herein, vesting of options will cease upon the termination
of Employee’s employment with Employer.

     

    3.5 Fringe
Benefits.  Subject to Section 3.7 below, Employee will be
entitled:

     

    (a) to
participate, on the same basis as other employees of the Company, in any
medical, dental, vision, life, short-term and long-term disability insurance and
flexible spending accounts (subject to certain co-payments by
Employee).  Employee’s participation in such plans shall be subject to
all terms and conditions of such plans, including Employee’s ability to satisfy
any medical or health requirements imposed by the underwriters of any insurance
policies paid to fund the plans; and

     

    (b) to
participate, on the same basis as other employees of the Company, in the
Company’s 401(k) plan, with said participation subject to all terms and
conditions of such plans.

     

    3.6 Paid Time
Off.  Employee shall accrue, on a daily basis, a total of four
(4) work weeks of vacation per year following the date of this Agreement,
provided, however, that Employee’s accrued and unused vacation time may not
exceed a total of seven (7) work weeks.  This vacation time shall be
in addition to normal Company holidays, which shall be determined at the
discretion of the Company from time to time.  Thereafter, Employee
will not continue to accrue vacation benefits until he has used enough vacation
time to fall

     

    
      
         

      

      
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    below
this maximum amount. Any accrued but unused vacation time will be paid to
Employee, on a pro rata basis, at the time that his employment is
terminated.  In addition to vacation time, the Employee shall be
entitled to normal Company holidays, floating holidays and sick
leave.

     

    3.7 Deduction from
Compensation.  Employer shall deduct and withhold from all
compensation payable to Employee 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.

     

    4. REIMBURSEMENT OF
EXPENSES

     

    4.1 Travel and Other
Expenses.  Employer shall pay to or reimburse Employee for
those travel, promotional, professional continuing education and licensing costs
(to the extent required), professional society membership fees, seminars and
similar expenditures incurred by Employee which Employer determines are
reasonably necessary for the proper discharge of Employee’s duties under this
Agreement and for which Employee submits appropriate receipts and indicates the
amount, date, location and business character in a timely manner.

     

    4.2 Liability
Insurance.  Employer shall provide Employee with officers and
directors’ insurance, or other liability insurance, consistent with its usual
business practices, to cover Employee against all insurable events related to
his employment with Employer.

     

    4.3 Indemnification.  Promptly
upon written request from Employee, Employer shall indemnify Employee, to the
fullest extent under applicable law, for all judgements, fines, settlements,
losses, costs or expenses (including attorney’s fees), arising out of Employee’s
activities as an agent, employee, officer or director of Employer, or in any
other capacity on behalf of or at the request of Employer.  Such
agreement by Employer shall not be deemed to impair any other obligation of
Employer respecting indemnification of Employee otherwise arising out of this or
any other agreement or promise of Employer or under any statute.

     

    5. TERMINATION

     

    5.1 Termination With Good Cause;
Resignation Without Good Reason.  Employer may terminate
Employee’s employment at any time, with or without notice or Good Cause (as
defined below).  If Employer terminates Employee’s employment with
Good Cause, or if Employee resigns without Good Reason (as defined below),
Employer shall pay Employee his salary 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.  Employer shall
have no further obligations to Employee under this Agreement or any other
agreement, and all unvested options will terminate.

     

    5.2 Termination Without Good
Cause; Resignation with Good Reason.  Employer shall have the
right to terminate Employee’s employment without Good Cause. Employee shall have
the right to terminate his employment for Good Reason, provided Employee first
gives Employer written notice of his intention to terminate his employment
within thirty (30) days following the act or omission giving rise to Good Reason
and Employer fails to cure such act or omission within thirty (30) days of
receiving Employee’s notice.  If Employer terminates Employee’s
employment without Good Cause, or Employee resigns for Good Reason:

     

    (a) Employer
shall pay Employee his salary 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;

     

    (b) All of
Employee’s unvested stock options will vest immediately and remain exercisable
for a period of three (3) years thereafter;

     

    (c) In
addition to any rights under COBRA, Employee and his dependants shall continue
to participate in the Employer’s group medical plan for a period of one (1) year
from the date the Employee’s termination becomes effective, provided that
medical insurance coverage will terminate sooner if Employee becomes eligible
for coverage under another employer’s plan.

     

    
      
         

      

      
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    In
addition, on the six (6) month anniversary of the date Employee’s termination
becomes effective, Employer shall pay Employee in a lump sum an amount equal to
one (1) year’s salary (at the rate in effect at the time of termination) plus a
bonus equal to one hundred percent (100%) of one (1) year’s targeted
bonus.

     

    To be
eligible for the compensation provided for in this Section 5.2 (other than in
Section 5.2(a)), Employee must execute a full and complete release of any and
all claims against Employer in the standard form then used by Employer
(“Release”), at which time Employer shall have no further obligations to
Employee under this Agreement or any other agreement.

     

    5.3 Good Cause. For
purposes of this Agreement, a termination shall be for “Good Cause” if Employee,
in the subjective, good faith opinion of Employer, shall:

     

    (a) Commit an
act of fraud, moral turpitude, misappropriation of funds or embezzlement in
connection with his duties;

     

    (b) Breach
Employee’s fiduciary duty to Employer, including, but not limited to, acts of
self-dealing (whether or not for personal profit);

     

    (c) Materially
breach this Agreement, the Confidentiality Agreement (defined below), or
Employer’s written Codes of Ethics as adopted by the Board;

     

    (d) Willfully,
recklessly or negligently violate any material provision of Employer’s written
Employee Handbook, or any applicable state or federal law or
regulation;

     

    (e) Fail or
refuse (whether willfully, recklessly or negligently) to comply with all
relevant and material obligations, assumable and chargeable to an executive of
his corporate rank and responsibilities, under the Sarbanes-Oxley Act and the
regulations of the Securities and Exchange Commission promulgated
thereunder;

     

    (f) Fail or
refuse or lack sufficient expertise (whether willfully, recklessly or
negligently) to perform the responsibilities and duties specified herein (other
than a failure caused by temporary disability); provided, however, that no
termination shall occur on that basis unless the Employer first provides the
Employee with written notice to cure; the notice to cure shall reasonably
specify the acts or omissions that constitute the Employee’s failure, refusal or
lack of sufficient expertise to perform his duties, and the Employee shall have
a reasonable opportunity (not to exceed ten (10) business days after the date of
notice to cure) to cure; termination shall be effective as of the date of
written notice of failure to cure; or

     

    (g) Be
convicted of, or enter a plea of guilty or no contest to, a felony or
misdemeanor under state or federal law, other than a traffic violation or
misdemeanor not involving dishonesty or moral turpitude.

     

    5.4 Good Reason. For
purposes of this Agreement, a resignation shall be for “Good Reason” as
described in Section 5.2 if tendered within thirty (30) days of any of the
following actions by Employer:

     

    (a) A
substantial reduction in the nature or status of Employee’s
responsibilities;

     

    (b) Relocation
of Employee’s site of employment outside a thirty (30) mile radius of Los
Angeles (unless closer to Employee’s residence) without Employee’s consent,
except for reasonably required travel on Employer’s business;

     

    (c) Failure
to cause any acquiring or successor entity following a Change in Control to
assume Employer’s obligations under this Agreement (unless such assumption
occurs by operation of

     

    
      
         

      

      
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    law in
which case the acquiring or successor entity automatically assumes Employer’s
obligations under this Agreement); or

     

    (d) Material
breach of this Agreement by Employer, or failure to timely pay to Employee any
amount due under Section 3 above.

     

    5.5 [Intentionally
Deleted.]

     

    5.6 Change in
Control.  For purposes of this Agreement, a “Change in Control”
shall be defined as:

     

    (a) The
acquisition of Employer by another entity by means of a transaction or series of
related transactions (including, without limitation, any reorganization, merger,
stock purchase or consolidation); or

     

    (b) The sale,
transfer or other disposition of all or substantially all of the Employer’s
assets.

     

    5.7 No Change in
Control.  Notwithstanding the provisions of Section 5.6 above,
the following shall not constitute a Change in Control:

     

    (a) If the
sole purpose of the transaction is to change the state of the Employer’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;

     

    (b) If
Employer’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 Employer’s capital stock or assets or otherwise),
hold more than fifty percent (50%) of the combined voting power of the surviving
or acquiring entity’s outstanding securities;

     

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

     

    (d) 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 more than fifty percent (50%) of the outstanding capital
stock of Employer, have the right to vote more than fifty percent (50%) of the
outstanding voting stock of Employer, or have the right to elect a majority of
the Board; or

     

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

     

    5.8 Death or
Disability.  To the extent consistent with federal and state
law, Employee’s employment, salary, and accrual of commissions shall terminate
on his death or disability.  “Disability” means (i) Employee’s
inability to engage in any substantial, gainful activity by reason of any
medically determinable physical of mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve (12) months, or (ii) Employee is, by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve
(12) months, receiving income replacement benefits for a period of not less than
three (3) months under an accident or health plan covering Employer’s
employees.  In the event of termination due to

     

    
      
         

      

      
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    death or
Disability, Employer shall pay Employee (or his legal representative) his salary
prorated through the date of termination, at the rate in effect at the time of
termination, together with any benefits accrued through the date of termination.
Employer shall have no further obligations to Employee (or his legal
representative) under this Agreement.

     

    5.9 Return of Employer
Property.  Within five (5) days after the Termination Date,
Employee shall return to Employer all products, books, records, forms,
specifications, formulae, data processes, designs, papers and writings relating
to the business of Employer including without limitation proprietary or licensed
computer programs, customer lists and customer data, and/or copies or duplicates
thereof in Employee’s possession or under Employee’s
control.  Employee shall not retain any copies or duplicates of such
property and all licenses granted to him by Employer to use computer programs or
software shall be revoked on the Termination Date.

     

    6. DUTY OF
LOYALTY

     

    6.1 During
the term of this Agreement, Employee shall not, without the prior written
consent of Employer, directly or indirectly render services of a business,
professional, or commercial nature to any person or firm, whether for
compensation or otherwise, or engage in any activity directly or indirectly
competitive with or adverse to the business or welfare of Employer, whether
alone, as a partner, or as an officer, director, employee, consultant, or holder
of more than one percent (1%) of the capital stock of any other
corporation.  Otherwise, Employee may make personal investments in any
other business so long as these investments do not require him to participate in
the operation of the companies in which he invests.

     

    7. CONFIDENTIAL
INFORMATION

     

    7.1 Trade Secrets of
Employer.  Employee, during the term of this Agreement, will
develop, have access to and become acquainted with various trade secrets which
are owned by Employer and/or its affiliates and which are regularly used in the
operation of the businesses of such entities.  Employee shall not
disclose such trade secrets, directly or indirectly, or use them in any way,
either during the term of this Agreement or at any time thereafter, except as
required in the course of his employment by Employer.  All files,
contracts, manuals, reports, letters, forms, documents, notes, notebooks, lists,
records, documents, customer lists, vendor lists, purchase information, designs,
computer programs and similar items and information, relating to the businesses
of such entities, whether prepared by Employee or otherwise and whether now
existing or prepared at a future time, coming into his possession shall remain
the exclusive property of such entities, and shall not be removed for purposes
other than work-related from the premises where the work of Employer is
conducted, except with the prior written authorization by Employer.

     

    7.2 Confidential Data of
Customers of Employer.  Employee, in the course of his duties,
will have access to and become acquainted with financial, accounting,
statistical and personal data of customers of Employer and of their
affiliates.  All such data is confidential and shall not be disclosed,
directly or indirectly, or used by Employee in any way, either during the term
of this Agreement (except as required in the course of employment by Employer)
or at any time thereafter.

     

    7.3 Inevitable
Disclosure.  After Employee’s employment has terminated,
Employee shall not accept employment with any competitor of Employer, where the
new employment is likely to result in the inevitable disclosure of Employer’s
trade secrets or confidential information, or it would be impossible for
Employee to perform his new job without using or disclosing trade secrets or
confidential information.

     

    7.4 Continuing
Effect.  The provisions of this Section 7 shall remain in
effect after the Termination Date.

     

    
      
         

      

      
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      8. NO
SOLICITATION

       
8.1 No Solicitation of
Employees.  Employee agrees that he will not, during his
employment with Employer, and for two (2) years thereafter, encourage or solicit
any other employee of Employer to terminate his or her employment for any
reason, nor will he assist others to do so.

     

    8.2 No Solicitation of
Customer.  Employee agrees that he will not, during his
employment with Employer, and for two (2) years thereafter, directly or
indirectly call on, or otherwise solicit, business from any actual customer or
potential customer known by Employee to be targeted by Employer, nor will he
assist others in doing so.

     

    9. INTELLECTUAL
PROPERTIES.

     

    To the
extent permissible under applicable law, all intellectual properties made or
conceived by Employee during the term of this employment by Employer shall be
the right and property solely of Employer, whether developed independently by
Employee or jointly with others. The Employee will sign the Employer’s standard
Employee Innovation, Proprietary Information and Confidentiality Agreement
(“Confidentiality Agreement”).

     

    10. OTHER
PROVISIONS

     

    10.1 Compliance With Other
Agreements.  Employee represents and warrants to Employer that
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 order,
judgment, injunction, contract, agreement, commitment or other arrangement to
which Employee is a party or by which he is bound.

     

    10.2 Injunctive
Relief.  Employee acknowledges that the services to be rendered
under this Agreement and the items described in Sections 6, 7, 8 and 9 of this
Agreement are of a special, unique and extraordinary character, that it would be
difficult or impossible to replace such services or to compensate Employer in
money damages for a breach of this Agreement.  Accordingly, Employee
agrees and consents that if he violates any of the provisions of this Agreement,
Employer, in addition to any other rights and remedies available under this
Agreement or otherwise, shall be entitled to temporary and permanent injunctive
relief, without the necessity of proving actual damages and without the
necessity of posting any bond or other undertaking in connection
therewith.

     

    10.3 Attorneys’
Fees.  The prevailing party in any suit or other proceeding
brought to enforce, interpret or apply any provisions of this Agreement, shall
be entitled to recover all costs and expenses of the proceeding and
investigation (not limited to court costs), including all attorneys’
fees.

     

    10.4 Counsel. The parties
acknowledge and represent that, prior to the execution of this Agreement, they
have had an opportunity to consult with their respective counsel concerning the
terms and conditions set forth herein.  Additionally, Employee
represents that he has had an opportunity to receive independent legal advice
concerning the taxability of any consideration received under this
Agreement.  Employee has not relied upon any advice from Employer
and/or its attorneys with respect to the taxability of any consideration
received under this Agreement.  Employee further acknowledges that
Employer has not made any representations to him with respect to tax
issues.

     

    10.5 Nondelegable
Duties.  This is a contract for Employee’s personal
services.  The duties of Employee 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 Employee during
his life.

     

    10.6 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.

     

    10.7 Venue.  If
any dispute arises regarding the application, interpretation or enforcement
of  any provision of this Agreement, including fraud in the
inducement, such dispute shall be resolved either in federal or state court in
Los Angeles, California.

     

    
      
         

      

      
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    10.8 No Jury. If any
dispute arises regarding the application, interpretation or enforcement
of  any provision of this Agreement, including fraud in the
inducement, the parties hereby waive their right to a jury trial.

     

    10.9 No Punitive Damages.
If any dispute arises regarding the application, interpretation or enforcement
of  any provision of this Agreement, including fraud in the
inducement, the parties hereby waive their right to seek punitive damages in
connection with said dispute.

     

    10.10 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.

     

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

     

    10.12 Notice.  Any
notices or communications required or permitted by this Agreement shall be
deemed sufficiently given if in writing and when delivered personally or
forty-eight (48) hours after deposit with the United States Postal Service as
registered or certified mail, postage prepaid and addressed as
follows:

     

    (a) If to
Employer, to the principal office of Employer in the State of California, marked
“Attention: Chief Executive Officer”; or

     

    (b) If to
Employee, to the most recent address for Employee appearing in Employer’s
records.

     

    10.13 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.

     

    10.14 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.

     

    10.15 Entire
Agreement.  This Agreement is the only agreement and
understanding between the parties pertaining to the subject matter of this
Agreement, and supersedes all prior agreements, summaries of agreements,
descriptions of compensation packages, discussions, negotiations,
understandings, representations or warranties, whether verbal or written,
between the parties pertaining to such subject matter.

     

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

     

    
      
        	 EMPLOYEE:	 	 	 EMPLOYER:	 
	 	 	 	 HYTHIAM,
      INC.	 
	 	 	 	 	 
	
                /s/
      MAURICE HEBERT

              	 	
                 

              	
                By:
      /s/ RICHARD A. ANDERSON

              	 
	
                Maurice
      Hebert

              	 	 	
                Richard
      A. Anderson

              	 
	
                 

              	 	 	
                Its
      President & COO

              	 

      

    

     

     

    - 8
-exhibit_10-2.htm

    
Exhibit 10.2

    
 

    Consulting
Services Agreement

    

    This
Agreement (“Agreement”)
is made effective as of November 12, 2008 (“Effective Date”), by and
between Hythiam, Inc. 11150 Santa Monica Blvd., Suite 1500, Los Angeles, CA
90025 (“Hythiam” or
“Company”) and Chuck
Timpe (“Consultant”)
(each a “Party” and
collectively “the
Parties”).

    

    Hythiam
desires to have certain consulting services with respect to accounting, SEC
reporting, financial and administrative matters.

    

    Consultant
represents to possess the required background for providing and is willing to
provide any or all of these services to Hythiam as more fully set forth in this
Agreement.

    

    Therefore,
the Parties agree as follows:

    

    1. DESCRIPTION
OF SERVICES.

    Beginning
on the Effective Date, Consultant will no longer serve as Chief Financial
Officer of Company, and will serve only in the capacity of a consultant to
perform the following professional services for Hythiam (collectively, the
"Services"):

    

    
      	
              a.  

            	
              Assist
      Hythiam with accounting, financial reporting and administrative matters as
      requested by Hythiam;

            

    

    
      	
              b.  

            	
              Transition
      of Consultant’s projects and duties of the Chief Financial Officer
      position as necessary to assist in an orderly transition of
      responsibilities of the position;
and

            

    

    
      	
              c.  

            	
              Other
      related consulting services as requested by
  Hythiam

            

    

    

    Throughout
the term of this agreement, Consultant will be available at reasonable times to
meet with Hythiam representatives.

    

    2. PERFORMANCE OF THE
SERVICES.  Consultant
understands that Company’s protection of its reputation and its intellectual
property are of utmost importance to Company.  Consultant will perform
the Services diligently, competently, professionally, in a timely manner, and in
full compliance with all applicable laws, regulations, and industry ethical
standards, and in full compliance with the terms of this
Agreement.  Consultant warrants and represents that execution and
performance of this Agreement by Consultant does not and will not result in any
violation of any laws, rules or regulations.

    

    3. COMPENSATION.  During
the Term (as defined in Section 6) in return
for the Services, Hythiam shall compensate Consultant as follows:

    

    
      	
              a.  

            	
              At
      no fee or additional cost to Hythiam, Consultant shall be reasonably
      available by phone or email throughout the Term to answer questions and to
      otherwise provide assistance to Hythiam for brief durations on an
      as-needed basis, up to periods of one half hour at a time, not to exceed
      two hours per day and ten hours per
month.

            

    

    

    
      	
              b.  

            	
              For
      Services in excess of the Services provided in Section 3a,
      Consultant shall be compensated at the following
  rates:

            

    

    

    
      	
              1.  

            	
              hourly
      rate of $225, up to a maximum of $1,800 per diem for a full
      day

            

    

    
      	
              2.  

            	
              per
      diem rate of $1,000 for travel days if Consultant is requested to travel
      out of town for a minimum of two days to perform
  Services.

            

    

    

    At the election of Hythiam, the
above compensation may be paid in shares of common stock of the Corporation in
lieu of cash as set forth in Section
5.

    

    
      	
              c.  

            	
              Hythiam
      will pay the full cost of COBRA for Consultant and his dependents for the
      period December 1, 2008 through December 31, 2008, after which date
      Consultant shall be responsible for the full cost of COBRA
      coverage.

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              d.  

            	
              Hythiam
      stock options granted to Consultant as an employee of Hythiam will
      continue to vest during the Term, but all incentive stock options (ISOs)
      vested as of the Effective date will convert to non-qualified stock
      options 90 days following termination as an
  employee.

            

    

    

    
      	
              e.  

            	
              Hythiam
      shall extend Consultant’s right to exercise vested options for two years
      following the termination date of this
  Agreement.

            

    

    

    In
addition, in order for Consultant to perform his duties under this Agreement,
Hythiam shall make available to Consultant and continue to service the
blackberry and computer equipment (or equivalent) that Consultant utilized
during his employment with the Company.  Upon termination of this
Agreement, Consultant shall return all Company-owned equipment to Hythiam if so
requested.

    

    4.  EXPENSE
REIMBURSEMENT.  Consultant shall be entitled to reimbursement
from Hythiam for reasonable "out-of-pocket" expenses for travel and other costs
incurred in performance of the Services if approved in advance by Hythiam and
based on valid receipts and other documentation provided by Consultant
sufficient to satisfy IRS standards.  Reasonable travel expenses shall
consist of coach class airfare, business class lodging, and reasonable meals and
ground transportation expenses.  Hythiam must approve in writing
expenses greater than $2,500, in the aggregate.

    

    5.   INVOICE AND
PAYMENT OF COMPENSATION AND EXPENSES.  On or before the 10th day of
each month during the Term, Consultant shall provide to Hythiam an invoice and
required documentation to support any compensation or expense reimbursement due
Consultant for performance of the Services during the prior month. Hythiam will
pay any undisputed invoice received by Hythiam on a timely basis.

    

    Stock-based
compensation.  At Hythiam’s election each billing month during
the Term, Hythiam may, in lieu of the cash compensation payable to Consultant as
set forth in Section
3b, compensate Consultant entirely with shares of common stock of
Hythiam, the number of shares to be determined by dividing the dollar amount due
to Consultant for the preceding month by the average closing share price of
Hythiam’s common stock across all of the trading days of such preceding
month.  Such shares shall be issued from Hythiam’s 2007 Stock
Incentive Plan or an equivalent plan or as otherwise registered with the SEC and
is effective as of the date that such shares are issued to Consultant. If such
shares are not issued within 20 days of the end of such preceding month, such
stock-based compensation election shall no longer be available to Hythiam for
such billing month, and the related compensation for such Services shall be paid
in cash.

    

    6.  TERM/TERMINATION.
This Agreement will commence on the Effective Date and continue until
September 30, 2009. Upon termination of this Agreement, Consultant shall perform
no more Services and shall not imply or represent that he has a relationship
with Hythiam in any way whatsoever.

    

    7.  RELATIONSHIP OF
PARTIES.  It is understood and agreed that during the Term
Consultant and Hythiam are and shall remain independent contractors with respect
to performance of this Agreement.  Nothing in this Agreement shall be
construed to constitute Hythiam and Consultant as employer/employee, partners,
joint venturers, agents or anything other than independent
contractors.  Hythiam will not pay or withhold, and Consultant is not
entitled to, any wages, fees, payroll taxes, or employee benefits, including
health insurance benefits, paid vacation, or any other employee benefit, for the
benefit of Consultant or its employees.

    

    8.  CONFIDENTIALITY
INFORMATION AND INVENTION ASSIGNMENT.  Performance of the
Services is subject to the Confidentiality Information and Invention Assignment
Agreement dated October 2, 2008 and attached as Exhibit A (“Confidentiality
Agreement”).

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    9.  NOTICES.  All
notices required or permitted under this Agreement shall be in writing and shall
be deemed delivered when delivered in person or deposited in the United States
mail, postage prepaid, or sent by a nationally-recognized overnight courier
service, addressed as follows:

    

    Hythiam,
Inc.

    Attn:
Chief Financial Officer

    11150
Santa Monica Blvd. Suite 1500

    Los
Angeles, CA  90025

    310-444-4300

    310-444-5300
fax

    

    Chuck
Timpe

    9652
Claire Avenue

    Northridge,
CA 91324

    818-772-8400

    818-772-8300
fax

    

    Such
address may be changed from time to time by either Party by providing written
notice to the other Party in the manner set forth in this Section
9.

    

    10.           LIMITATION OF LIABILITY.
EXCEPT FOR A BREACH OF THE CONFIDENTIALITY AGREEMENT OR WILLFUL MISCONDUCT, IN
NO EVENT SHALL EITHER BE LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE, OR SPECIAL DAMAGES, WHETHER BY COMMON LAW OR STATUTE,
ARISING HEREFROM OR RELATED HERETO IN ANY CAUSES OF ACTION OF ANY KIND, EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR A BREACH OF THE
CONFIDENTIALITY AGREEMENT, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, CONSULTANT’S
TOTAL LIABILITY TO HYTHIAM FOR EVERY REASON SHALL BE LIMITED TO THE AGGREGATE
AMOUNT OF FEES ACTUALLY PAID BY HYTHIAM TO CONSULTANT PURSUANT
HERETO.

    

    11.  INDEMNITY.
Hythiam shall defend, indemnify, and hold Consultant harmless from all
liabilities, damages, losses, and expenses (including without limitation
reasonable attorney’s fees and court costs) owed to any third party arising from
claims (collectively, “Claims”) against the
other as a result of Consultant’s performance under this Agreement, irrespective
of Consultant’s contributory negligent acts or omissions, except for Claims
arising out of a breach of the Confidentiality Agreement or Consultant’s gross
negligence or willful misconduct.

    

    12.           ENTIRE
AGREEMENT.  This Agreement, including the terms of all
exhibits, which are hereby incorporated fully into this Agreement, contains the
entire agreement of the parties with respect to the Services and there are no
other promises or conditions in any other agreement whether oral or written with
respect to the Services.

    

    13.  AMENDMENT/ASSIGNMENT.  This
Agreement may be modified or amended if, and only if the amendment is made in
writing and is signed by both Parties.  Neither this Agreement nor any
right under this Agreement may be transferred or assigned in whole or in part by
either Party without the prior written consent of the other Party, and any
attempted assignment without such consent shall be null and
void.  Notwithstanding the foregoing, Hythiam may assign this
Agreement in whole or in part to an affiliate or successor entity without
Consultant’s consent.

    

    14.  SEVERABILITY.  If
any provision of this Agreement shall be held to be invalid or unenforceable for
any reason, the remaining provisions shall continue to be valid and
enforceable.  If a court or judicial authority finds that any
provision of this Agreement is invalid or unenforceable, but that by limiting
such provision it would become valid and enforceable, then such provision shall
be deemed to be written, construed, and enforced as so limited but only to the
minimal extent required to make the provision valid and
enforceable.

    

    15.  WAIVER OF CONTRACTUAL
RIGHT.  The failure of either party to enforce any provision of
this Agreement shall not be construed as a waiver or limitation of that Party's
right to subsequently enforce and compel strict compliance with every provision
of this Agreement.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    16.  APPLICABLE
LAW.  This Agreement shall be governed by the laws of the State
of California (without regard to that body of law known as “Conflicts of
Law”).

    

    17.  BENEFITS, BINDING
EFFECT.  This Agreement shall be binding upon and inure to the
benefit of the respective Parties and their permitted assigns and successors in
interest.

    

    18.  SURVIVABILITY.  Notwithstanding
anything to the contrary set forth in this Agreement, Sections 2, 3, 6, 8, 10
through 18, and Exhibit A shall
survive termination of this Agreement for any reason.

    

    In
witness to these terms, each Party has caused this Agreement to be executed
below in its name and on its behalf.

    

    

    Hythiam,
Inc.

    

    /s/ RICHARD A.
ANDERSON_________________     

    Richard
A. Anderson, President and COO 

    

    

    Consultant

    

    /s/ CHUCK
TIMPE__________________________      

    Chuck
Timpe 

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    Hythiam,
Inc.

    

    CONFIDENTIALITY
INFORMATION AND INVENTION ASSIGNMENT AGREEMENT FOR CONSULTANT

    

    This
CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT (the “Agreement”) is
made between Hythiam, Inc. and its subsidiaries, a Delaware Corporation (“The
Company”), having a principal place of business at 11150 Santa Monica Blvd.,
Suite 1500, Los Angeles, California 90025 and the undersigned consultant, Chuck
Timpe.

    In
consideration of my relationship with the Company (which for purposes of this
Agreement shall be deemed to include any subsidiaries or Affiliates٭
of the Company, the receipt of confidential information while associated with
the Company, and other good and valuable consideration, receipt of which is
hereby acknowledged, I, the undersigned individual, agree that:

    

    1.  Term of
Agreement.  This Agreement shall continue in full force and
effect for the duration of my relationship with the Company and shall continue
thereafter until terminated through a written instrument signed by both
parties.

    

    2.  Confidentiality.

    

    (a)  Definitions.  “Proprietary
Information” is all information and any idea whatever form, tangible or
intangible, pertaining in any manner to the business of the Company, or any of
its Affiliates, or its employees, clients, consultants, or business associates,
which was produced by any employee or consultant of the Company in the course of
his or her employment or consulting relationship or otherwise produced or
acquired by or on behalf of the Company.  All Proprietary Information
not generally known outside of the Company’s organization, and all Proprietary
Information so known only through improper means, shall be deemed “Confidential
Information.”  By example and without limiting the foregoing
definition, Proprietary and Confidential Information shall include, but not be
limited to:

    

    (1)  formulas,
research and development techniques, processes, trade secrets, computer
programs, software, electronic codes, mask works, inventions, innovations,
patents, patent applications, discoveries, improvements, data, know-how,
formats, test results and research projects;

    

    (2)  information
about costs, profits, markets, sales, contracts and lists of customers, and
distributors;

    

    (3)  business,
marketing, and strategic plans;

    

    (4)  forecasts,
unpublished financial information, budgets, projections, and customer
identities, characteristics and agreements; and

    

    (5)  employee
personnel files and compensation information.

    

    (b)  Existence of Confidential
Information.  The Company owns and has developed and compiled,
and will develop and compile, certain trade secrets, proprietary techniques and
other Confidential Information which have great value to its
business.  This Confidential Information includes not only information
disclosed by the Company to me, but also information developed or learned by me
during the course of my relationship with the Company.

    

    (c)  Protection of Confidential
Information.  I will not, directly or indirectly, use, make
available, sell, disclose or otherwise communicate to any third party, other
than in my assigned duties and for the benefit of the Company, any of the
Company’s Confidential Information, either during or after my relationship with
the Company.

    

      

    

      
      ٭  For
purposes of this Agreement, “Affiliate” shall mean any person or entity that
shall directly or indirectly controls, is controlled by, or is under common
control with the Company.

       

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    In the
event I desire to publish the results of my work for the Company through
literature or speeches, I will submit such literature or speeches to an
Executive Officer of the company at least 10 days before dissemination of such
information for a determination of whether such disclosure may alter trade
secret status, may be prejudicial to the interests of the Company, or may
constitute an invasion of its privacy.  I agree not to publish,
disclose or otherwise disseminate such information without prior written
approval of an Executive Officer of the Company.  I acknowledge that I
am aware that the unauthorized disclosure of Confidential Information of the
Company may be highly prejudicial to its interests, an invasion of privacy, and
an improper disclosure of trade secrets.

    

    (d)  Delivery of Confidential
Information.  Upon request or when my relationship with the
Company terminates, I will immediately deliver to the Company all copies of any
and all materials and writings received from, created for, or belonging to the
Company including, but not limited to, those which related to or contain
Confidential Information.

    

    (e)  Location and
Reproduction.  I shall maintain at my workplace only such
Confidential Information as I have a current “need to know.”  I shall
return to the appropriate person or location or otherwise properly dispose of
Confidential Information once that need to know no longer exists.  I
shall not make copies of or otherwise reproduce Confidential Information unless
there is a legitimate business need of the Company for
reproduction.

    

    (f)  Prior Actions and
Knowledge.  I represent and warrant that from the time of my
first contact with the Company I held in strict confident all Confidential
Information and have not disclosed any Confidential Information, directly or
indirectly, to anyone outside the Company, or used, copied, published, or
summarized any Confidential Information, except as to the extent otherwise
permitted in this Agreement.

    

    (g)  Third-Party
Information.  I acknowledge that the Company has received and
in the future will receive from third parties their confidential information
subject to a duty on the Company’s part to maintain the confidentiality of such
information and to use it only for certain limited purposes.  I agree
that I will at all times hold all such confidential information in the strictest
confidence and not to disclose or use it, except as necessary to perform my
obligations hereunder and as is consistent with the Company’s agreement with
such third parties.

    

    (h)  Third
Parties.  I represent that my relationship with the Company
does not and will not breach any agreements with or duties to a former employer
or any other third party.  I will not disclose to the Company or use
on its behalf any confidential information belonging to others and I will not
bring onto the premises of the Company any confidential information belonging to
any such party unless consented to in writing by such party.

    

    3.  Proprietary Rights,
Inventions and New Ideas.

    

    (a)  Definition.  The
term “Subject Ideas or Inventions” includes any and all ideas, processes,
trademarks, service marks, inventions, designs, technologies, computer hardware
or software, original works of authorship, formulas, discoveries, patents,
copyrights, copyrightable work products, trade secrets and innovations,
marketing and business ideas, and all improvements, know-how, data, rights, and
claims related to the forgoing that, whether or not patentable, which are
conceived, developed or created which: (1) relate to the Company’s current
or contemplated businesses; (2) related to the Company’s actual or
demonstrably anticipated research or development; (3) result from any work
performed by me for the Company; (4) involve the use of the Company’s
equipment, supplies, facilities or trade secrets; (5) result from or are
suggested by any work done by the Company or at the Company’s request, or any
projects specifically assigned to me; or (6) result from my access to any
of the Company’s memoranda, notes, records, drawings, sketches, models, maps,
customer lists, research results, data, formulae, specifications, inventions,
processes, equipment or other materials (collectively, “Company
Materials”).

    

    (b)  Company
Ownership.  All right, title and interest in an to all Subject
Ideas and Inventions, including but not limited to all registrable and patent
rights which may subsist therein, shall be held and owned solely by the Company,
and where applicable, all Subject Ideas and Inventions shall be considered works
made for hire, I shall mark all Subject Ideas and Inventions with the Company’s
copyright or other proprietary notice as directed by the Company and shall take
all actions deemed necessary by the Company to protect the Company’s rights
therein.  In the event that the Subject Ideas and Inventions shall be
deemed not to constitute works made for hire, or in the event that I should
otherwise, by operation of law, be deemed to retain any rights (whether moral
rights or otherwise) to any Subject Ideas and Inventions, I agree to and hereby
do assign to the Company, without

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    further
consideration, my entire right, title and interest in and to each and every such
Subject Idea and Invention.  I further agree to execute any documents
necessary to facilitate such a transfer.

    

    (c)  Disclosure.  I
agree to disclose promptly to the Company full details of any and all Subject
Ideas and Inventions.

    

    (d)  Maintenance of
Records.  I agree to keep and maintain adequate and current
written records of all Subject Ideas and Inventions and their development made
by me (solely or jointly with others) during the term of my relationship with
the Company.  These records will be in the form of notes, sketches,
drawings, and any other format that may be specified by the
Company.  These records will be available to and remain the sole
property of the Company at all times.

    

    (e)  Determination of Subject
Ideas and Inventions.  I further agree that all information and
records pertaining to any idea, process, trademark, service mark, invention,
technology, computer hardware or software, original work of authorship, design,
formula, discovery, patent, copyright, trade secret, innovation, product, and
all improvements, know-how, rights, and claims related to the foregoing
(“Intellectual Property”), that I do not believe to be a Subject Idea or
Invention, but that is conceived, developed, or reduced to practice by the
Company (alone by me or with others) during my relationship with the Company and
for one (1) year thereafter, shall be disclosed promptly by me to the
Company.  The Company shall examine such information to determine if
in fact the Intellectual Property is a Subject Idea or Invention subject to this
Agreement.

    

    (f)  Access.  Because
of the difficulty of establishing when any Subject Ideas or Inventions are first
conceived by me, or whether it results from my access to Confidential
Information or Company Materials, I agree that any Subject Idea and Invention
shall, among other circumstances, be deemed to have resulted from my access to
Company Materials if: (1) it grew out of or resulted from my work with the
Company or is related to the business of the Company, and (2) it is made,
used, sold, exploited or reduced to practice, or an application for patent,
trademark, copyright or other proprietary protection is filed thereon, by me or
with my significant aid, within one year after termination of my relationship
with the Company.

    

    (g)  Assistance.  I
further agree to assist the Company in every proper way (but at the Company’s
expense) to obtain and from time to time enforce patents, copyrights and other
rights or registrations on said Subject Ideas and Inventions in any and all
countries, and to that end will execute all documents necessary:

    

    (1)  to
apply for, obtain and vest in the name of the Company alone (unless the Company
otherwise directs) letters patent, copyrights or other analogues protection in
any country throughout the world and when so obtained or vested to renew and
restore the same; and

    

    (2)  to
defend any opposition proceedings in respect of such applications and any
opposition proceedings or petitions or applications for revocation of such
letters patent, copyright or other analogous protection, and

    

    (3)  to
cooperate with the Company (but at the Company’s expense) in any enforcement or
infringement proceeding on such letters patent, copyright or other analogues
protection.

    

    (h)  Authorization to
Company.  In the event the Company is unable, after reasonable
effort, to secure my signature on any patent, copyright or other analogous
protection relating to a Subject Idea and Invention, whether because of my
physical or mental incapacity or for any other reason whatsoever, I hereby
irrevocably designate and appoint the Company and its duly authorized officers
and agents as my agent and attorney-in-fact, to act for and on my behalf and
stead to execute and file any such application, applications or other documents
and to do all other lawfully permitted acts to further the prosecution,
issuance, and enforcement of letters patent, copyright or other analogous rights
or protections thereon with the same legal force and effect as if executed by
me.  My obligation to assist the Company in obtaining and enforcing
patents and copyrights for Subject Ideas and Inventions in any and all countries
shall continue beyond the termination of my relationship with the Company, but
the Company shall compensate me at a reasonable rate after such termination for
time actually spent by me at the Company’s request on such
assistance.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (i)  Acknowledgement.  I
acknowledge that there are not currently existing ideas, processes, inventions,
discoveries, marketing or business ideas or improvements which I desire to
exclude from the operation of this Agreement.  To the best of my
knowledge, there is no other contract to assign inventions, trademarks,
copyrights, ideas, processes, discoveries or other intellectual property that is
now in existence between me and any other person (including any business or
governmental entity).

    

    (j)  No Use of
Name.  I shall not at any time use the Company’s name or any
Company trademark(s) or trade name(s) in any advertising or publicity without
the prior written consent of the Company.

    

    4.  Competitive
Activity.

    

    (a)  Acknowledgement.  I
acknowledge that the pursuit of the activities forbidden by Section 4(b)
below would necessarily involve the use, disclosure or misappropriation of
Confidential Information.

    

    (b)  Prohibited
Activity.  To prevent the above-described disclosure,
misappropriation and breach, I agree that during my relationship and for a
period of one (1) year thereafter, without the Company’s express written
consent, I shall not, directly or indirectly, (i) employ, solicit for
employment, or recommend for employment any person employed by the Company (or
any Affiliate); and (ii) engage in any present or contemplated business
activity that is or may be competitive with the Company (or any Affiliate)in any
state where the Company conducts its business, unless I can prove that any
action taken in contravention of this subsection (ii) was done without use in
any way of Confidential Information.

    

    5.  Representatives and
Warranties.  I represent and warrant (i) that I have no
obligations, legal or otherwise, inconsistent with the terms of this Agreement
or with my undertaking a relationship with the Company; (ii) that the
performance of the services called for by this Agreement do not and will not
violate any applicable law, rule or regulation or any proprietary or other right
of any third party; (iii) that I will not use in the performance of my
responsibilities for the Company any confidential information or trade secrets
of any other person or entity; and (iv) that I have not entered into or
will not enter into any agreement (whether oral or written) in conflict with
this Agreement.

    

    6.  Termination of
Obligations.

    

    (a)  Upon the termination
of my relationship with the Company or promptly upon the Company’s request, I
shall surrender to the Company all equipment, tangible Proprietary Information,
documents, books, notebooks, records, reports, notes, memoranda, drawings,
sketches, models, maps, contracts, lists, computer disks (and other
computer-generated files and data), and any other data and records of any kind,
and copies thereof, created on any medium and furnished to, obtained by, or
prepared by myself in the course of or incident to my relationship with the
Company, that are in my possession or under my control.

    

    (b)  My representations,
warranties, and obligations contained in this Agreement shall survive the
termination of my relationship with the Company.

    

    (c)  Following any
termination of my relationship with the Company, I will fully cooperate with the
Company in all matters relating to my continuing obligations under this
Agreement.

    

    (d)  I hereby grant
consent to notification by the Company to any of my future employers or
companies I consult with about my rights and obligations under this
Agreement.

    

    (e)  Upon termination of
my relationship with the Company, I will execute a Certificate acknowledging
compliance with this Agreement in the form reasonably requested by the
Company.

    

    7.  Injunctive
Relief.  I acknowledge that my failure to carry out any
obligation under this Agreement, or a breach by me of any provision herein, will
constitute immediate and irreparable damage to the Company, which cannot be
fully and adequately compensated in money damages and which will warrant
preliminary and other injunctive relief, an order for specific performance, and
other equitable relief.  I further agree that no bond or other
security shall be

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    required
in obtaining such equitable relief and I hereby consent to the issuance of such
injunction and to the ordering of specific performance.  I also
understand that other action may be taken and remedies enforce against
me.

    

    8.  Modification.  No
modification of this Agreement shall be valid unless made in writing and signed
by both parties.

    

    9.  Binding
Effect.  This Agreement shall be binding upon me, my heirs,
executors, assigns and administrators and is for the benefit of the Company and
its successors and assigns.

    

    10.  Governing
Law.  This Agreement shall be construed in accordance with, and
all actions arising under or in connection therewith shall be governed by, the
internal laws of the State of California (without reference to conflict of law
principles).

    

    11.  Integration.  This
Agreement sets forth the parties’ mutual rights and obligations with respect to
proprietary information, prohibited competition, and intellectual
property.  It is intended to be the final, complete, and executive
statement of the terms of the parties’ agreements regarding these
subjects.  This Agreement supercedes all other prior and
contemporaneous agreements and statements on these subjects, and it may not be
contradicted by evidence of any prior or contemporaneous statements or
agreements.  To the extent that the practices, policies, or procedures
of the Company, now or in the future, apply to myself and are inconsistent with
the terms of this Agreement, the provisions of this Agreement shall control
unless changed in writing.

    

    12.  Not
Employment.  This Agreement is not an employment agreement as I
am an independent consultant.  I understand that the Company may
terminate my association with it at any time, with or without cause, subject to
the terms of any separate written consulting agreement executed by a duly
authorized officer of the Company.

    

    13.  Construction.  This
Agreement shall be construed as a whole, according to its fair meaning, and not
in favor of or against any party.  By way of example and not
limitation, this Agreement shall not be construed against the party responsible
for any language in this Agreement.  The headings of the paragraphs
hereof are inserted for convenience only, and do not constitute part of and
shall not be used to interpret this Agreement.

    

    14.  Attorneys’
Fees.  Should either I or the Company, or any heir, personal
representative, successor or permitted assign of either party, resort to legal
proceedings to enforce this Agreement, the prevailing party (as defined in
California statutory law) in such legal proceeding shall be awarded, in addition
to such other relief as may be granted, attorneys’ fees and costs incurred in
connection with such proceeding.

    

    15.  Severabilty.  If
any term, provision, covenant or condition of this Agreement, or the application
thereof to any person, place or circumstance, shall be held to be invalid,
unenforceable or void, the remainder of this Agreement and such term, provision,
covenant or condition as applied to other persons, places and circumstances
shall remain in full force and effect.

    

    16.  Rights
Cumulative.  The rights and remedies provided by this Agreement
are cumulative, and the exercise of any right or remedy by either the Company or
me (or by that party’s successor), whether pursuant hereto, to any other
agreement, or to law, shall not preclude or waive that party’s right to exercise
any or all other rights and remedies.  This Agreement will inure to
the benefit of the Company and its successors and assigns.

    

    17.  Nonwaiver.  The
failure of either the Company or me, whether purposeful or otherwise, to
exercise in any instance any right, power or privilege under this Agreement or
under law shall not constitute a waiver of any other right, power or privilege,
nor of the same right, power or privilege in any other instance.  Any
waiver by the Company or by me must be in writing and signed by either myself,
if I am seeking to waive any of my rights under this Agreement, or by an officer
of the Company (other than me) or some other person duly authorized by the
Company.

    

    18.  Notices.  Any
notice, request, consent or approval required or permitted to be given under
this Agreement or pursuant to law shall be sufficient if it is in writing, and
if and when it is hand delivered, faxed, or sent by regular mail with postage
prepaid to my residence (as noted in the Company’s records) or to the Company’s
principal office, as the case may be.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    19.  Agreement to Perform
Necessary Acts.  I agree to perform any further acts and
execute and deliver any documents that may be reasonably necessary to carry out
the provisions of this Agreement.

    

    20.  Assignment.  This
Agreement may not be assigned without the Company’s prior written
consent.

    

    21.  Compliance with
Law.  I agree to abide by all federal, state, and local laws,
ordinances and regulations.

    

    22. Counterparts.  This
Agreement may be executed in one or more counterparts.  It shall not
be necessary that the signature of or on behalf of each party appears on each
counterpart, but shall be sufficient that the signature of or on behalf of each
party appears on one or more of the counterparts. All counterparts shall
collectively constitute one agreement.  A facsimile copy or other
reliable reproduction of this Agreement shall be deemed an
original.

    

    23.  Acknowledgement.  I
acknowledge that I have had the opportunity to consult legal counsel in regard
to this Agreement, that I have read and understand this Agreement, that I am
fully aware of its legal effect, and that I have entered into it freely and
voluntarily and based on my own judgment and not on any representations or
promises other than those contained in this Agreement.

    

    I WITNESS
WHEREOF, the undersigned have executed this Agreement as of the dates set forth
below.

    

    CAUTION:
THIS AGREEMENT CREATES IMPORTANT OBLIGATIONS OF TRUST AND AFFECTS THE
CONSULTANTS RIGHTS TO INVENTIONS AND OTHER INTELLECTUAL PROPERTY THE CONSULTANT
MAY DEVELOP.

    

    Dated:  November
12, 2008

    

    Signed:

    

    /s/ CHUCK
TIMPE____________________

    Chuck
Timpe 

    9652
Claire Avenue

    Northridge,
CA  91324

    818-772-8400

    818-772-8300
fax

    

    

    

    /s/ RICHARD A.
ANDERSON___________

    Richard
A. Anderson 

    President
and Chief Operating Officer

    Hythiam,
Inc.

    310-444-4300

    310-444-5300
fax

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