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                                                                      EXHIBIT 10





                                 July 16, 1996



Mr. Timothy P. Cole
3274 SE River Vista Drive
Port St. Lucie, Florida  34952-5927

Dear Tim:

         The purpose of this letter is to set forth the terms and conditions of
your employment with Youth Services International, Inc. ("YSI").  In this
regard, we have agreed as follows:

         1.      YSI hereby employs you and you hereby accept employment and
agree to serve as the Chief Executive Officer of YSI.  You will perform all
duties and responsibilities and will have, subject to the limitations of
authority set forth on Exhibit A to this letter, all authority inherent in the
position of Chief Executive Officer, subject to the power of the Board of
Directors to modify, expand and limit such duties, responsibilities and
authorities.  You will be elected to the Board of Directors of YSI immediately
and will serve as Vice Chairman of the Board of Directors.  You understand that
W. James Hindman will simultaneously be elected as Chairman of the Board and
Chairman of the Executive Committee.

         2.      The period of your employment under this Agreement will be
three (3) years.  Following the first anniversary of this Agreement, the period
of employment under this Agreement will be extended by successive additional
one-year terms, unless terminated prior to any anniversary of this Agreement by
written notice by either party to the other no less than sixty (60) days prior
to the end of any anniversary.  In that case, the Agreement will terminate two
years from the anniversary of this Agreement immediately prior to which a
notice of termination was given pursuant to this numbered paragraph 2.
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Mr. Timothy P. Cole
July 16, 1996
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         3.      For all of the services rendered by you during the period of
employment, YSI will pay you a base salary at the rate of not less than
$300,000 per year, subject to such periodic increases, if any, as the
Organization and Compensation Committee of the Board of Directors may approve.
You will be eligible to receive an award under an incentive bonus program
beginning with YSI's fiscal year ending June 30, 1997.  This incentive bonus
program, which is outlined on Exhibit B to this letter, will enable you to earn
annual bonuses of up to 60% of your base salary.  Notwithstanding the
provisions of the incentive bonus arrangements set forth on Exhibit B to this
letter, your award for the year ended 1997 will not be less than $100,000.  You
will not be guaranteed any minimum bonus for subsequent years.  All bonuses
payable under the bonus plan will be paid promptly following the time that the
bonus criteria have been measured following the end of each fiscal year.

         4.      You will be granted an option to purchase 125,000 shares of
YSI common stock at 100% of the fair market value of the shares of YSI common
stock on the date that you execute this Agreement.  50,000 of the options which
are subject to this grant will vest on the date which is six months from the
date that the parties execute this Agreement.  An additional 50,000 will vest
on the date that is 18 months from the date of this Agreement, and the
remaining 25,000 will vest on the second anniversary of the date that you
execute this Agreement.  The options will have a five-year term and must be
exercised by the close of business on the fifth anniversary of the date of this
Agreement.

         5.      (a)      YSI understands that you are in the process of
completing the construction of a home in Stewart, Florida.  YSI has agreed that
it will advance up to $50,000 in construction costs you may incur following the
date of this letter if this amount is required in connection with completing
the construction of the home.  In addition, at such time as the construction is
completed, YSI will at your request discharge the construction loan you have
incurred in connection with the construction of the home and advance you the
equity you have in the home, to the extent that the principal and accrued
interest on the construction loan and your equity does not exceed $705,000 in
the aggregate.
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Mr. Timothy P. Cole
July 16, 1996
Page 3




                 (b)      Promptly after the home is constructed, you will take
appropriate steps to list the house for sale.  YSI will be entitled to receive
the costs it has advanced you for completing the construction of the home and
the amount of the construction loan and equity YSI has discharged or advanced
on your behalf, out of the net proceeds you realize from the sale of the home.
In the event that the net proceeds you realize from the sale of the home are
insufficient to reimburse YSI in full for the costs it advanced you for
completing construction and the amount of the construction loan and equity it
discharged and advanced on your behalf in accordance with paragraph (a) above,
YSI will forgive up to $100,000 in the aggregate of such costs and expenses,
and you will only be required to reimburse YSI the balance of the costs and
expenses YSI has advanced or discharged on your behalf.  You will execute a
promissory note, the terms of which shall be consistent with this paragraph,
and you will grant YSI a first priority security interest in the property to
secure YSI's rights with respect to the repayment of amounts it has advanced or
discharged on your behalf pursuant to paragraph (a) above.

         6.      YSI will provide you with employee relocation benefits which
will include (i) reimbursement of temporary living expenses, (ii) the move of
your office furnishings and equipment to YSI's offices, and (iii) reasonable
out-of-pocket moving expenses you and your family incur in connection with
relocating your principal residence to the State of Maryland.

         7.      YSI will provide you with a $30,000 car allowance every third
year which you will apply to the purchase of a new automobile.  YSI will be
responsible for the repair and maintenance of this automobile during the term
of this Agreement.

         8.      You will be entitled to four weeks of vacation during YSI's
fiscal year ending June 30, 1997.  You will be entitled to five weeks of
vacation during each fiscal year thereafter.  Unused vacation may not be
carried over from one fiscal year to the next.

         9.      You will have any additional benefits for which you, without
action by the Board of Directors of YSI or any committee thereof, may be or
become eligible under any group health, life
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Mr. Timothy P. Cole
July 16, 1996
Page 4




insurance, disability, or other form of employee benefit plan or program of YSI
now existing or that may be later adopted by YSI.  This includes the health,
dental and life insurance programs YSI provides currently to its executives.

         10.     YSI will provide you with a family membership, owned by YSI,
at a country club of your choice.  YSI shall not be responsible for paying more
than $15,000 in initiation fees with respect to such membership.

         11.     (a)      This Agreement may be terminated by YSI for cause by
written notice to you specifying the event relied upon for such termination
within 30 days of such event.  The term "cause" will mean:  (i) the failure
(after written notice and a reasonable opportunity to cure) by you to perform
such duties that are reasonably incidental to the position of Chief Executive
Officer and Vice Chairman of the Board of Directors; (ii) the repeated failure
(after written notice and a reasonable opportunity to cure) by you to observe
in all material respects YSI policies; (iii) any instance of gross negligence
or willful misconduct by you in the performance of your duties; (iv) the
commission by you of any act of fraud or financial dishonesty with respect to
YSI or any of its affiliates or the commission of any crime involving financial
dishonesty or moral turpitude; (v) chronic absenteeism (after written notice
and a reasonable opportunity to cure); (vi) substance abuse (after written
notice and a reasonable opportunity to cure); or (vii) your breach of the
representations and warranties contained in numbered paragraph 13 of this
Agreement.

                 (b)      The termination by YSI of your employment for any
reason other than those specified in paragraph (a) above will be deemed to be a
termination of your employment without cause.  Following any termination of
your employment without cause, YSI will pay you the base salary that would
otherwise become payable to you through the then remaining term of this
Agreement.  Amounts payable to you will be offset by any other income that you
may earn during such period, it being understood that you will use your
reasonable efforts to mitigate amounts YSI will be obligated to pay you
pursuant to this paragraph (b).
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Mr. Timothy P. Cole
July 16, 1996
Page 5




                 (c)      In the event that you resign, retire or otherwise
terminate this Agreement, your salary and benefits will be payable through your
date of termination.

                 (d)      Your employment will terminate immediately upon your
death and in that event your base salary will be paid to your estate or legally
appointed representative through the end of the month in which your death
occurs.  If you become physically or mentally disabled so as to become unable
for a period of more than four consecutive months or for shorter periods
aggregating at least four months during any twelve-month period to perform your
duties hereunder on a substantially full-time basis, your employment will
terminate with no further payments of base salary or incentive compensation as
of the end of such four-month or twelve-month period.  Such termination will
not affect your benefits under YSI' disability insurance program, if any, then
in effect.

                 (e)      YSI will provide you with a Change-In-Control
Agreement providing you with benefits on a change-in-control of YSI
substantially comparable to those provided to other YSI executives.

        12.      (a)      During the period of your employment with YSI, you
will not, directly or indirectly, on your own behalf or as a partner, officer,
director, trustee, employee, agent, consultant or member of any person, firm or
corporation, or otherwise, enter into the employ of, render any service to, or
engage in any business or activity which is the same as or competitive with any
business or activity conducted by YSI or any of its affiliates.  During the
two-year period following the termination of your employment, you will not
directly or indirectly, in any such manner, enter into the employ of, render
any service to, or engage in a business or activity which is the same as,
similar to, or competitive with any business or activity of YSI or any of its
affiliates.  During the period of your employment and until two years after the
termination of your employment, you will not, directly or indirectly, on your
own behalf or as a partner, shareholder, officer, employee, director, trustee,
agent, consultant or member of any person, firm or corporation or otherwise,
employ, seek to employ or otherwise obtain or seek the services of any employee
of YSI or any of its affiliates.
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Mr. Timothy P. Cole
July 16, 1996
Page 6





                 (b)      During and following the period of your employment
with YSI, you will not use for your own benefit or for the benefit of others,
or divulge to others, any information, trade secrets, knowledge or data of
secret or confidential nature and otherwise not available to members of the
general public that concerns the business or affairs of YSI or its affiliates
and which was acquired by you at any time prior to or during the term of your
employment with YSI, except with the specific prior written consent of YSI.

                 (c)      You agree that all programs, inventions, innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relate to the business of YSI and its affiliates,
actual or anticipated, or to any actual or anticipated research and development
conducted in connection with the business of YSI and its affiliates, and all
existing or future products or services, which are conceived, developed or made
by you (alone or with others) during the term of this Agreement ("Work
Product") belong to YSI.  You will cooperate fully in the establishment and
maintenance of all rights of YSI and its affiliates in such Work Product.  The
provisions of this Section 12(c) will survive termination of this Agreement
indefinitely to the extent necessary to require actions to be taken by you
after the termination of the Agreement with respect to Work Product created
during the Agreement.

                 (d)      If any covenant or agreement contained in this
paragraph 12 is found by a court having jurisdiction to be unreasonable in
duration, geographical scope or character of restriction, the covenant or
agreement will not be rendered unenforceable thereby but rather the duration,
geographical scope or character of restriction of such covenant or agreement
will be reduced or modified with retroactive effect to make such covenant or
agreement reasonable, and such covenant or agreement will be enforced as so
modified.

         13.     You hereby represent and warrant to YSI that (i) the
execution, delivery and full performance of this Agreement by you does not and
will not conflict with, breach, violate or cause a default under any agreement,
contract or instrument to which you are a party or any judgment, order or
decree to which you are
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Mr. Timothy P. Cole
July 16, 1996
Page 7




subject; (ii) you are not a party or bound by any employment agreement,
consulting agreement, agreement not to compete, confidentiality agreement or
similar agreement with any other person or entity; and (iii) upon the execution
and delivery of this Agreement by YSI, this Agreement will be your valid and
binding obligation, enforceable in accordance with its terms.

         14.     In the event of any dispute between YSI and you with respect
to this Agreement, either party may, in its sole discretion by notice to the
other, require such dispute to be submitted to arbitration.  The arbitrator
will be selected by agreement of the parties or, if they cannot agree on
arbitrator or arbitrators within 30 days after the giving of such notice, the
arbitrator will be selected by the American Arbitration Association.  The
determination reached in such arbitration will be final and binding on both
parties without any right of appeal.  Execution of the determination by such
arbitrator may be sought in any court having jurisdiction.  Unless otherwise
agreed by the parties, any such arbitration will take place in Baltimore
County, Maryland and will be conducted in accordance with the rules of the
American Arbitration Association.

         15.     You may not assign, transfer, convey, mortgage, hypothecate,
pledge or in any way encumber the compensation or other benefits payable to you
or any rights which you may have under this Agreement.  Neither you nor your
beneficiary or beneficiaries will have any right to receive any compensation or
other benefits under this Agreement, except at the time, in the amounts and in
the manner provided in this Agreement.  This Agreement will inure to the
benefit of and will be binding upon any successor to YSI.  As used in this
Agreement, the term "successor" means any person, firm, corporation or other
business entity which at any time, whether by merger, purchase or otherwise,
acquires all or substantially all of the capital stock or assets of YSI.  This
Agreement may not be otherwise assigned by YSI.

         16.     This Agreement constitutes the only agreement between YSI and
you regarding your employment by YSI.  This Agreement supersedes any and all
other agreements and understandings, written or oral, between YSI and you.  A
waiver by either party of any
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Mr. Timothy P. Cole
July 16, 1996
Page 8




provision of this Agreement of any breach of such provision in any instance
will not be deemed or construed to be a waiver of such provision for the
future, or of any subsequent breach of such provision.  This Agreement may be
amended, modified or changed only by further written agreement between YSI and
you, duly executed by both parties.

         17.     Any and all notices required or permitted to be given
hereunder will be in writing and will be deemed to have been given when
deposited in United States mail, certified or registered mail, postage prepaid.
Any notice to be given by you hereunder will be addressed to YSI to the
attention of its Chief Financial Officer and General Counsel at its main
offices, 2 Park Center Court, Suite 200, Owings Mills, Maryland  21117.  Any
notice to be given to you will be addressed to you at your residence address
last provided by you to YSI.  Either party may change the address to which
notices are to be addressed by notice in writing to the other party given in
accordance with the terms of this paragraph.

         18.     The effectiveness of this Agreement is conditioned upon your
completion of a physical examination, the results of which are reasonably
satisfactory to YSI.



                             *    *    *    *    *


         As we have discussed, we are extremely happy that you have agreed to
join YSI as Chief Executive Officer and Vice Chairman and we look forward to a
mutually rewarding relationship.  If the foregoing accurately sets forth our
understanding, kindly so indicate by signing one of the enclosed copies and
returning it to me.

                               Very truly yours,

                               YOUTH SERVICES INTERNATIONAL, INC.
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Mr. Timothy P. Cole
July 16, 1996
Page 9




                                              By: \s\ W. JAMES HINDMAN
                                                 --------------------------
                                                 W. James Hindman
                                                 Chairman


Accepted and agreed this
29th day of June, 1996.

\s\ TIMOTHY P. COLE
-------------------------------
Timothy P. Cole