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                                                                EXHIBIT 10.12



                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT ("Agreement") made effective as of May 1,
2000 by and between PSYCHIATRIC SOLUTIONS, INC., a Delaware corporation (the
"Company"), and JACK SALBERG (the "Executive").

         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 Chief
Operating Officer of the Company and President of the Company's subsidiary, PSI
Hospital Management Services, Inc., 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 President/CEO 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 May 1, 2000, and shall continue through April 30, 2001, subject
to extension or termination as provided in this Agreement ("Period of
Employment"). On each anniversary of the commencement 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.

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         B.   Duties.

              During the Period of Employment, the Executive shall devote most
of his business time, attention and skill to the business and affairs of the
Company and its subsidiaries. The Company agrees to grant the Executive some
time away from his business duties for reasonable outside activities typically
consistent with this type position. In addition Mr. Salberg may support Seller
in collecting its accounts receivable outstanding as of Closing. The Executive
will perform faithfully the duties which may be assigned to him from time to
time by the Company.

                                   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") as follows: $216,000.00.

                   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 incentive compensation
awards ("Incentive Compensation Awards") tied to objective criteria to be
established from time to time by the Compensation Committee. The initial
incentive award shall be determined as set forth in Exhibit A hereto.

         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



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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 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. The Executive's Stock Option Grant shall be as set forth in Exhibit B
hereto. Executive's Stock Option Grant will be subject to the Company's stock
option plan, as amended from time to time, a current copy of which is attached
as Exhibit C. As an additional benefit, the Company will provide Executive a
term life insurance policy in the amount of twice Executive's Base Salary.

                                    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, all then
unvested stock options that otherwise would vest during the immediately
succeeding eighteen (18) month period shall vest immediately.

         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 in the absence
thereof or otherwise in force as to Executive.




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<PAGE>



                                   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 to receive the
proceeds of any life or other insurance or other death benefit programs provided
in this Agreement, in accordance with the terms of such policies and/or
programs.

                                  SECTION VIII
                       EFFECT OF TERMINATION OF EMPLOYMENT

         A. The Board may at any time upon sixty (60) days prior notice
terminate Executive's employment without cause (as "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 (i) to pay Executive a severance payment of 1.5
times his previous 12 months compensation, paid out over a period of eighteen
(18) months plus any earned but unpaid bonus, which shall be paid as an
immediate lump sum. "Compensation" shall be defined as all salary and bonuses
earned for the 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, all then unvested stock options that
otherwise would vest during the immediate succeeding eighteen (18) month period
shall vest immediately. 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. Additional benefits as described in
Section IV-C shall continue for the eighteen (18) month period.

         B. If the Executive's employment terminates due to a Termination for
Cause, 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. Upon termination of the Executive's employment other than for
reasons due to death, disability, or pursuant to Paragraph A of this Section or
Section XI, the Period of Employment and the Company's obligation to make
payments under this Agreement will cease as of the date of the termination
except as expressly defined in this Agreement; provided, however, that Executive
shall have the right to resign within eight (8) months of the effective date of
this Agreement and, in such event, to receive the sum of Four Hundred Fifty
Thousand ($450,000) Dollars, payable in eighteen (18) equal monthly installments
beginning the month after his resignation is effective. Additional benefits as
described in Section IV-C shall be continued for an eighteen (18) month period.

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





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            1. "Termination for Cause" means termination of the Executive's
employment by the Company's Board of Directors acting in good faith by the
Company by written notice to the Executive specifying the event relied upon for
such termination, due to the Executive's serious, willful misconduct with
respect to his duties under this Agreement, including but not limited to
conviction for a felony, misdemeanor involving moral turpitude or perpetration
of a common law fraud, in each case which has resulted or is likely to result in
material economic damage 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 employees 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 ninety (90) 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 Dismissal.

            3. "Without Cause Termination" means termination of the Executive's
employment by the Company (a) other than due to death, disability, Termination
for Cause or pursuant to Section XI; or (b) upon expiration of the Period of
Employment as a result of the giving of notice by the Company of its intent not
to extend the Period of Employment as provided in Section III.A.

                                   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





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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 eighteen (18) 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 eighteen (18) 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.

         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.

         F. Any reference in this Section IX shall expressly be deemed also to
refer to the Company's subsidiaries.


                                    SECTION X
                           INDEMNIFICATION, LITIGATION

         The Company will indemnify the Executive to the fullest extent
permitted by the laws of the state of incorporation in effect at that time, or
certificate of incorporation and by-laws of the Company whichever affords the
greater protection to the Executive. The Executive will be entitled to any
insurance proceeds related to any award, or any fees or expenses incurred in
connection with





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any action, suit or proceeding to which he may be made a party by reason of
being a director or officer of the Company.

                                   SECTION XI
                                CHANGE IN CONTROL

         In the event there is a Change in Control of the ownership of the
Company, the Executive may within eighteen (18) months after the Change in
Control immediately resign upon written notice to the Company. In this event,
the Company shall pay to the Executive upon such resignation an amount equal to
1.5 times his previous 12 month compensation paid out over a period of eighteen
(18) monthly installments. "Compensation" shall be defined consistent with the
definition in Section XIII-A. The benefits and perquisites (but not the salary
or other compensation) described in this Agreement as in effect at the date of
termination of employment will also be continued for eighteen (18) months from
the effective date of termination pursuant to Change of Control.

         A "Change in Control" shall be deemed to have occurred if (i) a tender
offer shall be made and consummated for the ownership of more than 50% of the
outstanding voting securities of the Company, (ii) the Company shall be merged
or consolidated with another corporation and as a result of such merger or
consolidation less than 75% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Company, as the same shall have existed immediately prior to
such merger or consolidation, (iii) the Company shall sell all or substantially
all of its assets to another corporation which is not a wholly-owned subsidiary,
or (iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3)
(as in effect on the date hereof) of the Securities and Exchange Act of 1934
("Exchange Act"), shall acquire more than 50% of the outstanding voting
securities of the Company (whether directly, indirectly, beneficially or of
record). For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Exchange
Act.

                                   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 any prior
employment or severance agreements between the Company and its affiliates, and
the Executive. Executive agrees that he is not entitled to any further
compensation, bonus, severance payments, options, or anything of value from
Sunrise




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Behavioral Healthcare, Ltd. or any affiliate or other employer as a result of
any employment or severance agreement or otherwise.

                                   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 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. The arbitrator shall award all
costs, legal expenses and fees to the successful party.

                                  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:




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                (a) If to the Company, at 310 25th Avenue North, Suite 209,
Nashville, Tennessee 37203, Attention: Chairman, or at such other address as may
have been furnished to the Executive by the Company in writing, copy to Lee
Dilworth, Harwell Howard Hyne Gabbert & Manner, P.C., 1800 First American
Center, 315 Deaderick Street, Nashville, Tennessee 37238; or

                (b) If to the Executive, at _____________________________, 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. In the event any payment called for herein is not paid when due it
shall not be deemed a default so long as it is cured within thirty (30) days. If
not cured, then all remaining obligations shall be accelerated and immediately
due and payable.

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


                                         COMPANY:

                                         PSYCHIATRIC SOLUTIONS, INC.


                                         By: /s/ Joey A. Jacobs
                                             -----------------------------------
                                             Joey A. Jacobs,
                                             President & Chief Executive Officer


                                         EXECUTIVE:

                                         /s/ Jack Salberg
                                         ---------------------------------------
                                         JACK SALBERG





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                                    EXHIBIT A

                      INCENTIVE COMPENSATION AWARD CRITERIA











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<PAGE>



                                    EXHIBIT B

                               STOCK OPTION GRANT













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                                    EXHIBIT C

                                STOCK OPTION PLAN













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                                    EXHIBIT D

                           STOCK RESTRICTION AGREEMENT













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