Document:

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                                                                   EXHIBIT 10.27

                     SECOND AMENDED AND RESTATED TERM NOTE C

U.S. $179,797.68                                           Dated:  June 30, 2003

         FOR VALUE RECEIVED, the undersigned, PSYCHIATRIC SOLUTIONS, INC., a
Delaware corporation, PSYCHIATRIC SOLUTIONS OF ALABAMA, INC., a Tennessee
corporation, PSYCHIATRIC SOLUTIONS OF FLORIDA, INC., a Tennessee corporation,
PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC., a Tennessee corporation, SOLUTIONS
CENTER OF LITTLE ROCK, INC., a Tennessee corporation, PSYCHIATRIC SOLUTIONS OF
NORTH CAROLINA, INC., a Tennessee corporation, PSI COMMUNITY MENTAL HEALTH
AGENCY MANAGEMENT, INC., a Tennessee corporation, PSI-EAP, INC., a Delaware
corporation, SUNSTONE BEHAVIORAL HEALTH, INC., a Tennessee corporation, THE
COUNSELING CENTER OF MIDDLE TENNESSEE, INC., a Tennessee corporation, PSI
HOSPITALS, INC., a Delaware corporation, PSI TEXAS HOSPITALS, LLC, a Texas
limited liability company, PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC., a
Tennessee corporation, TEXAS CYPRESS CREEK HOSPITAL, L.P., a Texas limited
partnership, TEXAS WEST OAKS HOSPITAL, L.P., a Texas limited partnership, NEURO
INSTITUTE OF AUSTIN, L.P., a Texas limited partnership, AERIES HEALTHCARE
CORPORATION, a Delaware corporation, AERIES HEALTHCARE OF ILLINOIS, INC., an
Illinois corporation, INFOSCRIBER CORPORATION, a Delaware corporation,
COLLABORATIVE CARE CORPORATION, a Tennessee corporation, PSYCHIATRIC SOLUTIONS
HOSPITALS, INC., a Delaware corporation, PSYCHIATRIC MANAGEMENT RESOURCES, INC.,
a California corporation, PSI CEDAR SPRINGS HOSPITAL, INC., a Delaware
corporation, PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC., a Delaware corporation,
TEXAS LAUREL RIDGE HOSPITAL, L.P., a Texas limited partnership, TEXAS OAKS
PSYCHIATRIC HOSPITAL, L.P., a Texas limited partnership, TEXAS SAN MARCOS
TREATMENT CENTER, L.P., a Texas limited partnership, THERAPEUTIC SCHOOL
SERVICES, LLC, an Oklahoma limited liability company, PSYCHIATRIC SOLUTIONS OF
CORAL GABLES, INC., a Delaware corporation, BOUNTIFUL PSYCHIATRIC HOSPITAL,
INC., a Utah corporation, EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION, a
North Carolina corporation, GREAT PLAINS HOSPITAL, INC., a Missouri corporation,
GULF COAST TREATMENT CENTER, INC., a Florida corporation, HAVENWYCK HOSPITAL
INC., a Michigan corporation, H.C. CORPORATION, an Alabama corporation, H.C.
PARTNERSHIP, an Alabama general partnership, HSA HILL CREST CORPORATION, an
Alabama corporation, HSA OF OKLAHOMA, INC., an Oklahoma corporation, MICHIGAN
PSYCHIATRIC SERVICES, INC., a Michigan corporation, RAMSAY MANAGED CARE, INC., a
Delaware corporation, RAMSAY TREATMENT SERVICES, INC., a Delaware corporation,
RAMSAY YOUTH SERVICES OF ALABAMA, INC., a Delaware corporation, RAMSAY YOUTH
SERVICES OF FLORIDA, INC., a Delaware corporation, RAMSAY YOUTH SERVICES OF
GEORGIA, INC., a Delaware corporation, RAMSAY YOUTH SERVICES OF SOUTH CAROLINA,
INC., a Delaware corporation, RHCI SAN ANTONIO, INC., a Delaware corporation,
TRANSITIONAL CARE VENTURES, INC., a Delaware corporation, and TRANSITIONAL CARE
VENTURES (TEXAS), INC., a Delaware corporation (individually and collectively,
"Borrower"), hereby JOINTLY AND SEVERALLY promise to pay to

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CAPITALSOURCE FINANCE LLC ("Lender") the unpaid principal amount at any time
outstanding, which shall not exceed ONE HUNDRED SEVENTY-NINE THOUSAND SEVEN
HUNDRED NINTY-SEVEN AND 68/100 DOLLARS ($179,797.68) (the "Term Loan"), with
interest thereon and all other Obligations under the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated as of the date hereof, among
Borrower, Agent and Lenders (as those terms are defined therein) (as heretofore
and may hereafter be amended, supplemented or otherwise modified from time to
time, the "Loan Agreement"), on the Term Loan Maturity Date or otherwise at the
times and in the manner set forth in the Loan Agreement. Capitalized terms used
but not defined herein shall have the meanings given them in the Loan Agreement.

         1.       INTEREST PAYMENTS. (a) Borrower promises to pay interest on
the outstanding principal amount of the Term Loan from the date of funding of
the Term Loan until such principal amount is irrevocably paid in full in cash
pursuant to and as required by the Loan Agreement. Interest on the outstanding
principal amount of the Term Loan shall be due and payable at the rates and
times as set forth in the Loan Agreement.

                  (b)      Advances under the Revolving Facility shall be made
automatically for the payment of interest on the Term Loan and other Obligations
on the date when due to the extent available and as provided for in the Loan
Agreement. Any payments of principal or interest or other amounts on or payments
under this Second Amended and Restated Term Note C (this "Term Note") not paid
automatically through Advances under the Revolving Facility as provided in the
Loan Agreement shall be paid to Lender only by wire transfer on the date when
due, without offset or counterclaim, in dollars in immediately available funds
as required in the Loan Agreement. Notwithstanding and without limiting or being
limited by any other provision of this Term Note, any payments or prepayments
received upon termination or otherwise under this Term Note shall be credited
and applied in such manner and order as Lender shall decide in its sole
discretion.

         2.       PRINCIPAL PAYMENT AND MATURITY. Unless earlier due and payable
or accelerated under the Loan Agreement, this Term Note shall mature, and the
outstanding principal balance hereunder and other Obligations relating to the
Term Loan, shall become due and payable in full on the Term Loan Maturity Date.
Borrower shall make payments on the principal outstanding hereunder as required
pursuant to the Loan Agreement. Such payments are to be applied to the Term Loan
and Obligations in such manner and order as provided in the Loan Agreement.

         3.       LATE FEE; DEFAULT RATE. Notwithstanding any other provision of
this Term Note the default rate set forth in the Loan Agreement shall apply to
this Term Note.

         4.       LOAN AGREEMENT AND SECURITY AGREEMENT. (a) This Term Note is
referred to in, made pursuant to, and entitled to the benefits of, the Loan
Agreement. The Loan Agreement, among other things, (i) provides for the making
of the Term Loan by Lender to Borrower in the dollar amount first mentioned
above, (ii) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events upon the terms and conditions therein
specified, and (iii) contains provisions defining an Event of Default and the
rights and remedies of Lender upon the occurrence of an Event of Default.

                                       2
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                  (b)      This Term Note is a secured note, entitled to the
benefits of and security interests granted in, among other things, that certain
Second Amended and Restated Security Agreement dated as of even date herewith,
between Borrower and Agent, and the other Security Documents (as such Security
Agreement and other Security Documents have been heretofore and may hereafter be
amended, supplemented or otherwise modified from time to time).

         5.       PREPAYMENTS. This Term Note may be prepaid in whole or in part
upon notice to Lender and shall be prepaid in whole, in each case as provided or
required in the Loan Agreement and upon payment of all fees and other
Obligations set forth therein. No payment or prepayment of any amount shall
entitle any Person to be subrogated to the rights of Lender hereunder or under
the Loan Agreement unless and until the Obligations have been performed in full
and paid irrevocably in full in cash and the Loan Agreement has been terminated.

         6.       PAYMENTS DUE ON A DAY OTHER THAN A BUSINESS DAY. If any
payment to be made on or under this Term Note is stated to be due or becomes due
and payable on a day other than a Business Day, the due date thereof shall be
extended to, and such payment shall be made on, the next succeeding Business
Day, and such extension of time in such case shall be included in the
computation of payment of any interest (at the interest rate then in effect
during such extension) and/or fees, as the case may be.

         7.       WAIVERS. Borrower hereby waives set-off, counterclaim, demand,
presentment, protest, notice of dishonor or non-payment, as well as all defenses
with respect to this Term Note, the Loan Agreement and/or any Obligation, notice
of acceptance hereof, notice of loans or Advances made, credit extended,
collateral received or delivered, or any other action taken in reliance hereon,
and all other demands and notices of any description, except such as are
expressly provided for herein. The pleading of any statute of limitations as a
defense to any demand against Borrower hereunder is expressly waived by
Borrower. No cause of action or dealing, renewal or extension of this Term Note
or any Loan Document or any rights hereunder or thereunder, release of Borrower
or any Guarantor, or delay, failure or omission on Lender's part in enforcing
this Term Note or any other Loan Document or in exercising or enforcing any
right, remedy, option or power hereunder or under any other Loan Document shall
affect the liability of Borrower or any Guarantor or operate as a waiver of such
or any other right, remedy, power or option or of any default, nor shall any
single or partial exercise of any right, remedy, option or power hereunder or
under any other Loan Document affect the liability of Borrower or any Guarantor
or preclude any other or further exercise of such or any other right, remedy,
power or option. No waiver of any one or more defaults in the performance of any
of the provisions of this Term Note shall operate or be construed as a waiver of
any future default or defaults, whether of a like or different nature.

         8.       EXERCISE OF RIGHTS. (a) Lender shall have the right in its
sole discretion to determine which rights, powers, Liens, security interests or
remedies Lender may at any time pursue, relinquish, subordinate or modify or to
take any other action with respect thereto, and such determination will not in
any way modify or affect any of Lender's rights, powers, Liens, security
interests or remedies hereunder or under any of the Loan Documents, under
applicable law or at equity.

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                  (b)      The enumeration of the foregoing rights and remedies
is not intended to be exhaustive. The rights and remedies of Lender described
herein are cumulative and are not alternative to or exclusive of any other
rights or remedies which Lender otherwise may have by contract or at law or in
equity, and the partial or complete exercise of any right or remedy shall not
preclude any other further exercise of such or any other right or remedy.

         9.       LAWFUL LIMITS. This Term Note is expressly limited so that in
no contingency or event whatsoever, whether by reason of acceleration or
otherwise, shall the interest and other charges paid or agreed to be paid to
Lender for the use, forbearance or detention of money hereunder exceed the
maximum rate permissible under applicable law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. If, due to
any circumstance whatsoever, fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall exceed any such limit, then
the obligation to be so fulfilled shall be reduced to such lawful limit, and, if
Lender shall have received interest or any other charges of any kind which might
be deemed to be interest under applicable law in excess of the maximum lawful
rate, then such excess shall be applied first to any unpaid fees and charges
hereunder, then to unpaid principal balance owed by Borrower hereunder, and if
the then remaining excess interest is greater than the previously unpaid
principal balance hereunder, Lender shall promptly refund such excess amount to
Borrower and the provisions hereof shall be deemed amended to provide for such
permissible rate. The terms and provisions of this Section 9 shall control to
the extent any other provision of this Term Note or any Loan Document is
inconsistent herewith.

         10.      GOVERNING LAW. This Term Note shall be governed by and
construed in accordance with the internal laws of the State of Maryland without
giving effect to its choice of laws provisions.

         11.      AMENDMENT, RESTATEMENT, RENEWAL AND EXTENSION. THIS AMENDED
AND RESTATED TERM NOTE C IS GIVEN IN AMENDMENT, RESTATEMENT, RENEWAL AND
EXTENSION (BUT NOT IN NOVATION) OF THAT CERTAIN TERM NOTE F, DATED AS OF APRIL
1, 2003, BY BORROWER IN FAVOR OF LENDER, IN THE ORIGINAL PRINCIPAL AMOUNT OF
$20,000,000.00 (AS HERETOFORE AMENDED AND OTHERWISE MODIFIED FROM TIME TO TIME,
THE "ORIGINAL TERM NOTE"). BORROWER HEREBY AGREES THAT, WITH RESPECT TO MATTERS
RELATING TO THE PERIOD PRIOR TO THE DATE HEREOF, ALL PROVISIONS OF THE ORIGINAL
TERM NOTE ARE HEREBY RATIFIED AND CONFIRMED AND SHALL REMAIN IN FULL FORCE AND
EFFECT.

         [REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGES FOLLOW]

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Executed as of the date first written above.

PSYCHIATRIC SOLUTIONS, INC.
AERIES HEALTHCARE CORPORATION
AERIES HEALTHCARE OF ILLINOIS, INC.
BOUNTIFUL PSYCHIATRIC HOSPITAL, INC.
COLLABORATIVE CARE CORPORATION
EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION
GREAT PLAINS HOSPITAL, INC.
GULF COAST TREATMENT CENTER, INC.
HAVENWYCK HOSPITAL INC.
H.C. CORPORATION
HSA HILL CREST CORPORATION
HSA OF OKLAHOMA, INC.
INFOSCRIBER CORPORATION
MICHIGAN PSYCHIATRIC SERVICES, INC.
PSI CEDAR SPRINGS HOSPITAL, INC.
PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC.
PSI-EAP, INC.
PSI HOSPITALS, INC.
PSI TEXAS HOSPITALS, LLC
PSYCHIATRIC MANAGEMENT RESOURCES, INC.
PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC.
PSYCHIATRIC SOLUTIONS HOSPITALS, INC.
PSYCHIATRIC SOLUTIONS OF ALABAMA, INC.
PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC.
PSYCHIATRIC SOLUTIONS OF FLORIDA, INC.
PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC.
PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC.
PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC.
RAMSAY MANAGED CARE, INC.
RAMSAY TREATMENT SERVICES, INC.
RAMSAY YOUTH SERVICES OF ALABAMA, INC.
RAMSAY YOUTH SERVICES OF FLORIDA, INC.
RAMSAY YOUTH SERVICES OF GEORGIA, INC.
RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC.
RHCI SAN ANTONIO, INC.
SOLUTIONS CENTER OF LITTLE ROCK, INC.
SUNSTONE BEHAVIORAL HEALTH, INC.
THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC.
THERAPEUTIC SCHOOL SERVICES, LLC
TRANSITIONAL CARE VENTURES (TEXAS), INC.
TRANSITIONAL CARE VENTURES, INC.

By:     /s/ Steven T. Davidson
        ---------------------------------------------------------
         Steven T. Davidson
         Vice President

<PAGE>

H.C. PARTNERSHIP

By:      H.C. Corporation, its general partner
         HSA Hill Crest Corporation, its general partner

         By:   /s/ Steven T. Davidson
            ------------------------------------------------------
              Steven T. Davidson
              Vice President

NEURO INSTITUTE OF AUSTIN, L.P.
TEXAS CYPRESS CREEK HOSPITAL, L.P.
TEXAS LAUREL RIDGE HOSPITAL, L.P.
TEXAS OAKS PSYCHIATRIC HOSPITAL, L.P.
TEXAS SAN MARCOS TREATMENT CENTER, L.P.
TEXAS WEST OAKS HOSPITAL, L.P.

By:      PSI Texas Hospitals, LLC, its general partner

         By:  /s/ Steven T. Davidson
            --------------------------------------------------
              Steven T. Davidson
              Vice President

                  113 Seaboard Lane, Suite C-100
                  Franklin, Tennessee  37067
                  Attention:  President and Chief Executive Officer
                  Telephone:  (615) 312-5700
                  FAX:  (615) 312-5711<PAGE>
                                                                     Exhibit 4.2
                             STOCK OPTION AGREEMENT

      This agreement, dated as of the _____ day of ______________ by and between
DESWELL INDUSTRIES, INC., a British Virgin Island international business company
with its principal offices at Unit 516-517, Hong Leong Industrial Complex, No.4
Wang Kwong Road, Kowloon Bay, Kowloon, Hong Kong (hereinafter called the
"COMPANY"), party of the first part, and __________________ (hereinafter called
"OPTIONEE"), a party of the second part;

                                   WITNESSETH

      Whereas, the company has adopted on August 20, 2003 the "2003 Stock Option
Plan of Deswell Industries, Inc." (the "2003 plan") to permit options to be
granted to certain employees or directors of the company and its subsidiaries
(hereinafter called the "employer corporation") to purchase common shares of the
company; and

      Whereas, the optionee is employed by the employer corporation in a key
capacity, and the company desires him to remain in such employ, and to secure or
increase his stock ownership in the company in order to increase his incentive
and personal interest in the welfare of the employer corporation;

      Now, therefore, in consideration of the premises and of the covenants and
agreements herein set forth, the parties hereby mutually covenant and agree as
follows:

      1. Subject to the terms and conditions set forth herein, the company
grants to the optionee the option to purchase from the company all or any part
of an aggregate amount of ____________ common shares of the company authorized
and unissued or, at the option of the company, treasury stock if available
(hereinafter, the "optioned shares").

      2. The price per share (the "option price") to be paid for the optioned
shares shall be U.S.$______, which is the fair market value of the common shares
on the date of grant as determined by the committee of directors appointed to
administer the plan. The option price may be paid in U.S. dollars or its
equivalent in Hong Kong dollars on the date the option is exercised.

      3. Subject to the provisions of paragraphs four and six hereof, the
Option(s) shall be exercisable as to the specified number of optioned shares on
and after the "First" dates and on or before the "Last" dates set forth below:

<TABLE>
<CAPTION>
                                             Exercise Dates
                                             --------------
    Number of Shares                      First           Last
    ----------------                      -----           ----
<S>                                       <C>             <C>

</TABLE>

Optionee acknowledges that he understands he has no right whatsoever to exercise
the Option(s) granted hereunder with respect to any Optioned Shares covered by
any installment until such installment accrues as provided above. Optionee
further understands that the Option(s) granted hereunder shall expire and become
unexercisable as provided in Section (6) below.

      4. The option herein granted may be exercised only by written notice of
intent to exercise the option, served upon the secretary of the company at its
principal offices the number of shares in respect of which the option is being
exercised, accompanied by payment for such shares in cash or by certified check
or bank draft to the order of the company. Such shares, upon payment of the
purchase price, shall be fully paid and non-assessable.
<PAGE>
      5. The option herein granted shall not be transferable by the optionee
otherwise than by will or the laws of descent and distribution, and may be
exercised during the life of the optionee only by the optionee.

      6. The option granted hereunder shall expire and become unexercisable on
or before the earliest of the following dates, whichever is applicable: (i) the
date of the optionee's termination of employment from or as a director of the
employer corporation for any reason other than death or disability; or (ii) the
date that is one year following the optionee's termination of employment from
the employer corporation by reason of his and her death, or by reason of his or
her disability, whichever is applicable.

      7. If any of the events specified in paragraph 13 of the 2003 plan occur,
the adjustments in Optioned Shares and option price therein provided shall be
made.

      8. As to all Optioned Shares (or any stock issued as a stock dividend
thereon or any securities issued in lieu thereof or in substitution therefor),
purchased by the optionee or his personal representative upon the exercise of
any portion of the option herein granted, the Committee, in its sole discretion,
may require that the optionee or his personal representative, as the case may
be, agree to any of the following conditions:

            (a) That they sign an investment letter to the effect that they are
taking said shares for investment and not for resale.

            (b) That they will comply with such restrictions as may be necessary
to satisfy the requirements of the United States Securities Act of 1933.

      9. The optionee shall not be deemed for any purposes to be a shareholder
of the company with respect to any of the Optioned Shares except to the extent
that the option herein granted shall have been exercised with respect thereto
and a stock certificate issued therefor. Nothing in this agreement shall be
construed to confer upon the optionee any right to continued employment with the
employer corporation or to restrict in any way the right of the employer
corporation to terminate his or her employment. Optionee acknowledges that in
the absence of an express written employment agreement to the contrary,
optionee's employment with the employer corporation may be terminated by the
employer corporation at any time, with or without cause.

      10. The existence of the option herein granted shall not affect in any way
the right or power of the company or its shareholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
company's capital structure or its business, or any merger or consolidation of
the company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the common stock of the company or the rights
thereof, or dissolution or liquidation of the company, or any sale or transfer
of all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.

      11. As a condition of the granting of the option herein granted, the
optionee agrees, for himself and his personal representatives, that any dispute
or disagreement which may arise under or as a result of or pursuant to his
agreement shall be determined by the committee in its sole discretion, and that
any interpretation by the committee of the terms of this agreement shall be
final, binding and conclusive.

      12. If, at any time, the Committee shall determine, in its discretion,
that the listing, registration or qualification of the shares covered by the
option upon any securities exchange or under any law of the United States, state
thereof or any other jurisdiction, is necessary or desirable or as a condition
of or in connection with the purchase of shares thereunder, the option may not
be exercised, in whole or in part, unless and until such listing, registration
or qualification shall have been effected free of any conditions not acceptable
to the Committee.
<PAGE>
      IN WITNESS WHEREOF, the company has caused this instrument to be exercised
by its duly authorized officers, the optionee has hereunto affixed his or her
hand.

                                         DESWELL INDUSTRIES, INC.

                                         By:   _______________________
                                                  Lau Pui Hon
                                                  Chief Executive Officer

                                         ______________________________
                                                  Optionee

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