<PAGE>
                                                               EXHIBIT 10.16


                SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

         This SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement")
made effective as of August 6, 2002 by and between PSYCHIATRIC SOLUTIONS, INC.,
a Delaware corporation (the "Company") (f/k/a PMR Corporation), and JOEY JACOBS
(the "Executive").

         WHEREAS, the Company's subsidiary, Psychiatric Solutions Hospitals,
Inc. (f/k/a Psychiatric Solutions, Inc.) and the Executive are parties to that
certain Amended and Restated Employment Agreement dated January 1, 2002 (the
"Prior Agreement"); and

         WHEREAS, the Company and the Executive now intend to amend certain
terms of the Prior Agreement and to restate all other terms contained in the
Prior Agreement, confirming the Executive's employment by the Company.

         In consideration of the mutual covenants contained in this Agreement,
the parties hereby agree as follows:

                                    SECTION I
                                   EMPLOYMENT

         The Company agrees to employ the Executive and the Executive agrees to
be employed by the Company for the Period of Employment as provided in Section
III.A. below upon the terms and conditions provided in the Agreement.

                                   SECTION II
                          POSITION AND RESPONSIBILITIES

         During the Period of Employment, the Executive agrees to serve as
President and Chief Executive Officer of the Company and to be responsible for
the typical management responsibilities expected of an officer holding such
positions and such other responsibilities as may be assigned to Executive from
time to time by the Board of Directors of the Company.

                                   SECTION III
                                TERMS AND DUTIES

         A.       Period of Employment.

         The period of Executive's employment under this Agreement will commence
as of August 6, 2002, and shall continue through December 31, 2003, subject to
extension or termination as provided in this Agreement ("Period of Employment").
At the end of the Period of Employment, the period of Executive's employment
shall be extended for additional one (1) year periods, unless either party gives
notice thirty (30) days in advance of the expiration of the then current period
of employment of such party's intent not to extend the Period of Employment.




<PAGE>

         B.       Duties.

                  During the Period of Employment, the Executive shall devote
all of his business time, attention and skill to the business and affairs of the
Company and its subsidiaries. The Executive will perform faithfully the duties
which may be assigned to him from time to time by the Board of Directors.

                                   SECTION IV
                            COMPENSATION AND BENEFITS

         A.       Compensation.

         For all services rendered by the Executive in any capacity during the
Period of Employment, the Executive shall be compensated as follows:

                  1.       Base Salary.

         The Company shall pay the Executive an annual base salary ("Base
Salary") of Three Hundred Twenty-Five Thousand Dollars ($325,000).

         Base Salary shall be payable according to the customary payroll
practices of the Company but in no event less frequently than once each month.
The base salary shall be reviewed each fiscal period and shall be subject to
adjustment according to the policies and practices adopted by the Company from
time to time.

         B.       Annual Incentive Award.

         The Executive shall be eligible for annual cash incentive compensation
awards tied to objective criteria as previously established by the Board of
Directors and set forth on Exhibit "A" ("Bonus").

         C.       Additional Benefits.

         The Executive will be eligible to participate in all compensation or
employee benefit plans or programs and receive all benefits and perquisites for
which any salaried employees are eligible under any existing or future plan or
program established by the Company for salaried employees. The Executive will
participate to the extent permissible under the terms and provisions of such
plans or programs in accordance with program provisions. These may include group
hospitalization, health, dental care, life or other insurance, tax qualified
pension, savings, thrift and profit sharing plans, termination pay programs,
sick leave plans, travel or accident insurance, disability insurance, and
contingent compensation plans including capital accumulation programs,
Restricted Stock programs, stock purchase programs and stock option plans.
Nothing in this Agreement will preclude the Company from amending or terminating
any of the plans or programs applicable to salaried or senior executives as long
as such amendment




                                        2
<PAGE>

or termination is applicable to all salaried employees or senior executives. The
Executive will be entitled to an annual paid vacation of four (4) weeks.

                                    SECTION V
                                BUSINESS EXPENSES

         The Company will reimburse the Executive for all reasonable travel and
other expenses incurred by the Executive in connection with the performance of
his duties and obligations under this Agreement.

                                   SECTION VI
                                   DISABILITY

         A. In the event of disability of the Executive during the Period of
Employment, the Company will continue to pay the Executive according to the
compensation provisions of this Agreement during the period of his disability,
until such time as Executive's long-term disability insurance benefits are
available. However, in the event the Executive is disabled for a continuous
period of six (6) months after the Executive first becomes disabled, the Company
may terminate the employment of the Executive. In this case, normal compensation
will cease, except for earned but unpaid Base Salary and Incentive Compensation
Awards which would be payable on a pro-rated basis for the year in which the
disability occurred. In the event of, and upon such termination, (i) all then
unvested stock options that otherwise would vest during the immediately
succeeding eighteen (18) month period shall vest immediately, and (ii) stock
held by Executive then subject to the Repurchase Option (as defined in the Stock
Restriction Agreement between the Company's subsidiary, Psychiatric Solutions
Hospitals, Inc. (f/k/a Psychiatric Solutions, Inc.) and Executive dated April
11, 1997) shall vest immediately according to the vesting schedules set forth in
such Stock Restriction Agreement.

         B. During the period the Executive is receiving payments of either
regular compensation or disability insurance described in this Agreement and as
long as he is physically and mentally able to do so, the Executive will furnish
information and assistance to the Company and from time to time will make
himself available to the Company to undertake assignments consistent with his
prior position with the Company and his physical and mental health. If the
Company fails to make a payment or provide a benefit required as part of the
Agreement, the Executive's obligation to fulfill information and assistance will
end.

         C. The term "disability" will have the same meaning as under any
disability insurance provided pursuant to this Agreement or otherwise.

                                   SECTION VII
                                      DEATH

         In the event of the death of the Executive during the Period of
Employment, the Company's obligation to make payments under this Agreement shall
cease as of the date of death, except for earned but unpaid Base Salary and
Incentive Compensation Awards which will be paid on a prorated basis for that
year. The Executive's designated beneficiary will be entitled




                                        3
<PAGE>

to receive the proceeds of any life or other insurance or other death benefit
programs provided in this Agreement.

                                  SECTION VIII
                       EFFECT OF TERMINATION OF EMPLOYMENT

         A. The Board may at any time upon thirty (30) days prior notice
terminate Executive's employment Without Cause (as "Without Cause" is defined
below) by giving Executive notice of the effective date of termination. In the
event Executive's employment is terminated Without Cause, the Company's sole
obligation to Executive shall be to pay Executive in a lump sum a severance
payment of 2 times his previous 12 months Compensation, plus any earned but
unpaid Base Salary and Incentive Compensation Awards which will be calculated on
a prorated basis for that year of termination and shall be paid as an immediate
lump sum payment. "Compensation" shall be defined as all base salary and bonuses
earned for the immediately previous 12-month period. If the Executive's
employment terminates due to either a Without Cause termination or a
Constructive Discharge, or pursuant to Section XI, (i) all then unvested stock
options that otherwise would vest during the immediate succeeding twenty-four
(24) month period shall vest immediately, and (ii) stock held by Executive then
subject to the Repurchase Option (as defined in the Stock Restriction Agreement
between the Company and Executive dated April 11, 1997) shall vest immediately
according to the vesting schedules set forth in such Stock Restriction
Agreement. The Company shall cause any options so vested to remain exercisable
for twelve (12) months from the date of termination, subject to the terms and
provisions of the Company's stock option plan as to the permissible exercise
period for incentive stock options. In addition, upon such termination, Company
shall provide Executive with the standard medical and dental COBRA benefits
provided to other executives of the Company upon departure from the Company for
an eighteen (18) month period.

         B. If the Executive's employment terminates due to a Termination for
Cause (as "Termination for Cause" is defined below), earned but unpaid Base
Salary and earned but unused vacation will be paid on a pro-rated basis for the
year in which the termination occurs. No other payments will be made or benefits
provided by the Company.

         C. If the Executive's employment terminates as a result of a
Constructive Discharge (as "Constructive Discharge" is defined below) then
Executive shall have the right to the payments and benefits set forth in Section
VIII A hereinabove.

         D. Upon termination of the Executive's employment, other than for
reasons due to death, disability, pursuant to Paragraph A of this Section,
pursuant to Paragraph C of this Section, or pursuant to Section XI, the
Company's obligation to make payments or provide benefits under this Agreement
will cease as of the date of such termination except as expressly defined in
this Agreement.

         E. For this Agreement, the following terms have the following meanings:

            1. "Termination for Cause." The Company shall have the right to
immediately terminate this Agreement by providing the Executive with written
notice of



                                        4
<PAGE>

termination, specifying therein the reason for and the date of termination.
Termination of this Agreement by the Company shall be deemed a "Termination for
Cause" if the reason for such termination is any of the following:

                  A. the Executive (i) willfully and materially breaches any
         provision of this Agreement, which breach remains uncured for fourteen
         (14) days after written notice from the Company regarding such breach,
         which notice shall state with reasonable specificity a description of
         the breach, or (ii) misrepresents or conceals a material fact for the
         purpose of securing or maintaining employment under this Agreement; or

                  B. the Executive usurps for himself or his affiliates, a
         business opportunity belonging to and pursued by the Company during the
         course of his employment hereunder; or

                  C. the Executive engages in conduct (i) involving willful
         destruction or dishonesty against the Company; or (ii) constituting
         negligence or willful misconduct in carrying out his duties under this
         Agreement; or (iii) adversely affecting the reputation, goodwill and
         prospects of the Company; or (iv) violating the policies of the Company
         with respect to non-discrimination, sexual harassment, or similar
         policies affecting workers and the workplace; or (v) resulting in a
         conviction of or plea of no contest to any crime involving a felony,
         fraud, embezzlement or the like, habitual insobriety, habitual use of
         an illegal controlled substance, or misappropriation of the Company's
         funds; or (vii) breaching the Executive's fiduciary duty or loyalty to
         the Company.

         2. "Constructive Discharge" means termination of the Executive's
employment by the Executive due to a failure of the Company to fulfill its
obligations under this Agreement in any material respect including any reduction
of the Executive's Base Salary or other compensation other than reductions
applicable to all senior executives of the Company or failure to appoint or
reappoint the Executive to the position specified in Section II hereof, or other
material change by the Company in the functions, duties or responsibilities of
the position which would reduce the ranking or level, responsibility, importance
or scope of the position. The Executive will provide the Company a written
notice which describes the circumstances being relied on for the termination
with respect to the Agreement within thirty (30) days after the event giving
rise to the notice. The Company will have thirty (30) days to remedy the
situation prior to the termination for Constructive Discharge.

         3. "Without Cause" means termination of the Executive's employment by
the Company other than due to death, disability, Termination for Cause,
Constructive Discharge, or pursuant to Section XI.






                                        5
<PAGE>

                                   SECTION IX
                      OTHER DUTIES OF THE EXECUTIVE DURING
                       AND AFTER THE PERIOD OF EMPLOYMENT

         A. The Executive will, with reasonable notice during or after the
Period of Employment, furnish information as may be in his possession and
cooperate with the Company as may reasonably be requested in connection with any
claims or legal actions in which the Company is or may become a party.

         B. The Executive recognizes and acknowledges that all information
pertaining to the affairs, business, clients, customers or other relationships
of the Company, as hereinafter defined, is confidential and is a unique and
valuable asset of the Company. Access to and knowledge of this information are
essential to the performance of the Executive's duties under this Agreement. The
Executive will not during the Period of Employment or after except to the extent
reasonably necessary in performance of the duties under this Agreement, give to
any person, firm, association, corporation or governmental agency any
information concerning the affairs, business, clients, customers or other
relationships of the Company, except as required by law. The Executive will not
make use of this type of information for his own purposes or for the benefit of
any person or organization other than the Company. The Executive will also use
his best efforts to prevent the disclosure of this information by others. All
records, memoranda, etc. relating to the business of the Company, whether made
by the Executive or otherwise coming into his possession, are confidential and
will remain the property of the Company.

         C. During the Period of Employment and for a twelve (12) month period
thereafter, the Executive will not use his status with the Company to obtain
loans, goods or services from another organization on terms that would not be
available to him in the absence of his relationship to the Company. During the
Period of Employment and for a twelve (12) month period following termination of
the Period of Employment, other than termination due to a Without Cause
Termination, the Executive will not make any statements or perform any acts
intended to advance the interest of any existing or prospective competitors of
the Company in any way that will injure the interest of the Company; the
Executive, without prior express written approval by the Board of Directors of
the Company, will not directly or indirectly own or hold any proprietary
interest in or be employed by or receive compensation from any party engaged in
the behavioral health business in the same geographic areas the Company does
business; and the Executive, without express prior written approval from the
Board of Directors, will not solicit any members of the then current clients of
the Company or discuss with any employee of the Company information or operation
of any business intended to compete with the Company. For the purposes of the
Agreement, proprietary interest means legal or equitable ownership, whether
through stock holdings or otherwise, of a debt or equity interest (including
options, warrants, rights and convertible interests) in a business firm or
entity, or ownership of more than 1% of any class of equity interest in a
publicly-held company. The Executive acknowledges that the covenants contained
herein are reasonable as to geographic and temporal scope. For a twelve (12)
month period after termination of the Period of Employment for any reason, the
Executive will not directly or indirectly hire any employee of the Company or
solicit or encourage any such employee to leave the employ of the Company.



                                        6
<PAGE>

         D. The Executive acknowledges that his breach or threatened or
attempted breach of any provision of Section IX would cause irreparable harm to
the Company not compensable in monetary damages and that the Company shall be
entitled, in addition to all other applicable remedies, to a temporary and
permanent injunction and a decree for specific performance of the terms of
Section IX without being required to prove damages or furnish any bond or other
security.

         E. The Executive shall not be bound by the provisions of Section IX in
the event of the default by the Company in its obligations under this Agreement
which are to be performed upon or after termination of this Agreement.

                                    SECTION X
                           INDEMNIFICATION, LITIGATION

         If the Executive is made a party, or threatened to be made a party, to
any lawsuit or proceeding solely as a result or on account of his services under
this Agreement, the Company shall indemnify and defend the Executive and hold
him harmless against all expenses (including, without limitation, reasonable
legal fees and costs), liabilities and losses incurred or suffered by him in
connection with or on account of such lawsuit or proceeding, (i) to the fullest
extent permitted under the Delaware Corporation Law ("DCL"), as the same now
exists or may hereafter be amended (but, in the case of any such amendment, if
permissible by the DCL, only to the extent that such amendment permits the
Company to provide broader indemnification rights than the DCL permitted the
Company to provide prior to such amendment) and (ii) in the same manner, and
subject to the same procedures, as is applicable to any members of the Board of
Directors of the Company; except that in order to have a right to this
indemnification, the Executive shall (i) provide the Company with prompt written
notice of any such lawsuit or proceeding (whether pending or threatened); (ii)
not settle any pending or threatened lawsuit or proceeding without the prior
written consent of the Company; and (iii) execute an undertaking agreement upon
mutually satisfactory terms. In addition, the Executive agrees that the Company
shall have the right, but not the obligation, to assume and direct the
Executive's defense in any action with counsel reasonably satisfactory to
Executive.

                                   SECTION XI
                                CHANGE IN CONTROL

         In the event there is a Change in Control of the ownership of the
Company and the Executive is terminated within eighteen (18) months after the
Change in Control, as a result of such Change in Control (but not as a result of
disability, death, Constructive Discharge, Termination for Cause, or Executive
resignation), the Company shall pay to the Executive upon such termination an
amount equal to 2 times his previous 12 month Compensation paid out over a
period of twenty-four (24) monthly installments. "Compensation" shall be defined
consistent with the definition in Section XIIIA. The medical and dental benefits
set forth in Section XIIIA shall continue for eighteen (18) months from the
effective date of the termination resulting from a Change of Control.





                                        7
<PAGE>

         For purposes of this Agreement, a "Change in Control" shall occur on
the first date on which either (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act")) becomes the beneficial owner, directly or indirectly, of
securities of Company or representing at least fifty percent (50%) of the
combined voting power of Company's then outstanding securities if such person is
not at the date of this Agreement a beneficial owner of the Company, or (ii)
Company is combined (by merger, share exchange, consolidation or otherwise) with
another corporation and as a result of such combination, less than fifty percent
(50%) of the outstanding securities of the surviving or resulting corporation
are owned in the aggregate by the former shareholders of Company, or (iii)
Company sells, leases or otherwise transfers all or substantially all of its
properties or assets to another person or entity. Notwithstanding anything
herein to the contrary, for purposes of this Agreement, any transaction or
combination whatsoever with PMR Corporation shall not be deemed to be a Change
in Control.

                                   SECTION XII
                                WITHHOLDING TAXES

         The Company may directly or indirectly withhold from any payments under
this Agreement all federal, state, city or other taxes that shall be required
pursuant to any law or governmental regulation.

                                  SECTION XIII
                           EFFECTIVE PRIOR AGREEMENTS

         This Agreement contains the entire understanding between the Company
and the Executive with respect to the subject matter and supersedes the Prior
Agreement and any other prior employment or severance agreements between the
Company and its affiliates, and the Executive.

                                   SECTION XIV
                     CONSOLIDATION, MERGER OR SALE OF ASSETS

         Nothing in this Agreement shall preclude the Company from consolidating
or merging into or with, or transferring all or substantially all of its assets
to, another corporation which assumes this Agreement and all obligations and
undertakings of the Company hereunder. Upon such a Consolidation, Merger or Sale
of Assets, the term "the Company" as used will mean the other corporation and
this Agreement shall continue in full force and effect. This Section XIV is not
intended to modify or limit the rights of the Executive hereunder, including
without limitation, the rights of Executive under Section XI.

                                   SECTION XV
                                  MODIFICATION

         This Agreement may not be modified or amended except in writing signed
by the parties. No term or condition of this Agreement will be deemed to have
been waived, except in writing by the party charged with waiver. A waiver shall
operate only as to the specific term or




                                        8
<PAGE>

condition waived and will not constitute a waiver for the future or act on
anything other than that which is specifically waived.

                                   SECTION XVI
                           GOVERNING LAW; ARBITRATION

         This Agreement has been executed and delivered in the State of
Tennessee and its validity, interpretation, performance and enforcement shall be
governed by the laws of that state.

         Any dispute among the parties hereto shall be settled by arbitration in
Nashville, Tennessee, in accordance with the then applicable rules of the
American Arbitration Association and judgment upon the award rendered may be
entered in any court having jurisdiction thereof.

                                  SECTION XVII
                                     NOTICES

         All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid by registered mail, return receipt requested,
or when delivered if by hand, overnight delivery service or confirmed facsimile
transmission, to the following:

                  (a) If to the Company, at 113 Seaboard Lane, Suite C-100,
Franklin, Tennessee 37067, Attention: Chairman, or at such other address as may
have been furnished to the Executive by the Company in writing, copy to Mark
Manner, Harwell, Howard, Hyne, Gabbert & Manner, P.C., 315 Deaderick Street,
Suite 1800, Nashville, Tennessee 37238; or

                  (b) If to the Executive, at 9229 Hunterboro Drive, Brentwood,
Tennessee 37027, or such other address as may have been furnished to the Company
by the Executive in writing.

                                  SECTION XVIII
                                BINDING AGREEMENT

         This Agreement shall be binding on the parties' successors, heirs and
assigns.



                [THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK.]





                                        9
<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.

                                    COMPANY:

                                    PSYCHIATRIC SOLUTIONS, INC.

                                    By:    /s/ David Heer
                                           ------------------------------------
                                           David Heer, Chair
                                           Compensation Committee


                                    EXECUTIVE:

                                    /s/ Joey Jacobs
                                    ------------------------------------------
                                    JOEY JACOBS









                                       10
<PAGE>


                                   EXHIBIT "A"

                          BONUS FORMULA FOR JOEY JACOBS
               (as approved by Board of Directors February, 2002)

<TABLE>
<CAPTION>
Target                  Bonus                Bonus Payable at Target Intervals*
 Base                 Potential              90%            100%            130%
-------               ---------              ---            ----            ----
<S>                   <C>                    <C>            <C>             <C>
Budgeted              0-50% of               0%              25%            50%
EBITDA                Base Salary
</TABLE>

*Bonus to be prorated between intervals based on percentage of budgeted EBITDA
actually achieved.











                                       11