AMENDMENT TO EMPLOYMENT AGREEMENT

Exhibit 10.4

AMENDMENT TO
EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is made and entered into as of January 26, 2006, by and between Hythiam, Inc., a Delaware corporation (“Employer”), and Anthony M. LaMacchia, an individual (“Employee”).

RECITALS

     A. WHEREAS, Employer and Employee previously made and entered into an Employment Agreement (“Agreement”) as of September 29, 2003, which is incorporated herein by reference.

     B. WHEREAS, Section 10.14 of the Agreement provides that it may be amended, modified or supplemented by a writing executed by each of the parties.

     C. WHEREAS, Employer and Employee desire to amend the Agreement as set forth herein.

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

AMENDMENT

     1. Employee’s Base Salary as set forth in Section 3.2 of the Agreement shall be $278,800.00 annually, effective as of January 1, 2006.

     2. The phrase “but in any event shall not be less than $50,000 for any year of this Agreement” is hereby stricken from the end of the second sentence of Section 3.3 of the Agreement.

     3. The phrase “and remain exercisable for a period of three (3) years thereafter” is hereby added to the end of Section 5.2(a) of the Agreement.

     4. Except as expressly amended by this Amendment, the Agreement shall remain in full force and effect, and is hereby ratified and reaffirmed in all respects.

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

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of September 29, 2003, by and between Hythiam, Inc., a Delaware corporation (“Employer”), and Anthony M. LaMacchia, an individual (“Employee”).

RECITALS

     A. WHEREAS, Employee has experience and expertise applicable to employment with Employer to perform as the Chief Operating 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 September 29, 2003 (“Commencement Date”) and shall continue until the earlier of: (a) the date on which it is terminated pursuant to Section 5; or (b) 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 Executive Vice President & Chief Operating Officer of Employer, reporting to Employer’s Chief Executive Officer (“CEO”) 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 CEO and 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 require or render advisable.

          2.4 Exclusive Service. Except as set forth in Attachment A, (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 (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 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 $200,000 annually in equal semi-monthly 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, 2005 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).

          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 50% of Employee’s base salary, based on Employee achieving designated individual goals and milestones, and the overall performance and profitability of the Company, but in any event shall not be less than $50,000 for any year of this Agreement. The goals and milestones will be established and reevaluated on an annual basis by mutual agreement of Employee and the CEO, subject to review and approval by the Board or its compensation Committee. In the first year of this Agreement, the goals and objectives related to the 2003 target bonus shall be established by November 30, 2003. Any bonus under this Section 3.3 will be based on a calendar year and shall be paid no later than April 30^th of the following

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year. The first annual bonus, to the extent granted at the sole discretion of the Company, shall be prorated based on the Commencement Date.

          3.4 Relocation Expenses. The Employee is eligible to receive reimbursement of his reasonable and customary expenses incurred pertaining to his relocation to Los Angeles which shall include transportation of household contents and vehicles, commissions and fees associated with the sale of his current home, and normal fees associated with the purchase of a new home. Reimbursement of relocations expenses shall not exceed $60,000. Failure to remain at the Company, other than termination by the Company without Cause, for a period of one year from receipt of a relocation or temporary housing reimbursement shall result in the Employee refunding the amount paid to the Employer within 30 days.

          3.5 Equity Incentive Plan.

               (a) Employee shall be granted options to purchase 400,000 shares of Employer’s common stock, at fair market value, under the provisions of Employer’s 2003 Stock Incentive Plan, upon approval by the Board. The options will vest as follows: 20% on July 14, 2004, and 20% on the second, third, fourth and fifth anniversaries thereof.

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

          3.6 Fringe Benefits. Subject to Section 3.7 and upon satisfaction of the applicable eligibility requirements, Employee and Employee’s family shall be provided with group medical and dental insurance and group dental coverage through Employer’s plans. Medical and dental benefits will commence on the first day of the month following the Commencement Date. In the event that no benefit plans are in place at that time, the Company will reimburse Employee for COBRA coverage until such time as Employee is covered under the Company’s group medical and dental plans. Employer will pay for $300,000 of term life insurance for the benefit of Employee, subject to the standard physical examination that is required by the issuing insurance company. In addition, Employee will be provided with accidental death and disability and long-term disability insurance. Employee is also eligible to participate in Employer’s 401K plan beginning on the first day of the month following the Commencement Date.

          3.7 Paid Time Off. Employee shall accrue, on a daily basis, a total