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                                                               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.

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         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

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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

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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

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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.

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                                   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.

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         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.

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         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

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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.

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         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

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                                   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.

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                                                             EXHIBIT 10.17

                            INDEMNIFICATION AGREEMENT

                  THIS AGREEMENT is entered into as of August 20, 2002 between
PSYCHIATRIC SOLUTIONS, INC., a Delaware corporation (the "CORPORATION"), and
MARK P. CLEIN ("INDEMNITEE").

                                    RECITALS

                  A. The Corporation believes that it is essential to its best
interests to attract and retain highly capable persons to serve as directors,
officers, and agents.

                  B. Indemnitee is or has been selected to be a director,
officer, or agent of the Corporation.

                  C. The Corporation and Indemnitee recognize the increased risk
of litigation and other claims being asserted against directors, officers, and
other agents of the Corporation.

                  D. In recognition of Indemnitee's need for substantial
protection against personal liability in order to enhance Indemnitee's service
to the Corporation, and in order to induce Indemnitee to provide or continue to
provide services to the Corporation as a director, officer, or agent, the
Corporation wishes to provide in this Agreement for the indemnification and the
advancing of expenses to Indemnitee to the fullest extent permitted by law and
as set forth in this Agreement and, to the extent applicable, insurance is
maintained for the coverage of Indemnitee under the Corporation's policies of
directors' and officers' liability insurance.

                  IN CONSIDERATION of the foregoing and of Indemnitee's
providing services to the Corporation directly or, at its request, with another
enterprise, the parties agree as follows:

         1.   DEFINITIONS.

              1.1  Board: The board of directors of the Corporation.

              1.2  Change in Control: A state of affairs that shall be deemed to
have occurred if:

                   (a) Any person becomes the "beneficial owner" (as that term
is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT")), directly or indirectly, of securities representing fifty
percent (50%) or more of the total voting power of the Corporation's
then-outstanding voting securities;

                   (b) During any period of two (2) consecutive years,
individuals who, at the beginning of such period constitute the board, together
with any new director whose election by the board or nomination for election by
the Corporation's shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then in office either who were directors at the beginning
of the two-year period, or whose election or nomination was previously so
approved, cease for any reason to constitute a majority of the board;

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                 (c) The shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other Corporation, other than a merger
or consolidation that would result in the voting securities of the Corporation
outstanding immediately before such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty-one percent (51%) of the
total voting power represented by the voting securities of the Corporation or
such surviving entity outstanding immediately after such merger or
consolidation; or

                 (d) The shareholders of the Corporation approve a plan of
complete liquidation of the Corporation, or an agreement for the sale or
disposition by the Corporation (whether in one transaction or a series of
transactions) of all or substantially all of the Corporation's assets.

             1.3 Expenses:

                 (a) Any expense, liability, or loss, including attorneys' fees,
judgments, fines, ERISA excise taxes and penalties, or amounts paid or to be
paid in settlement;

                 (b) Any interest, assessments, or other charges imposed on any
of the items in subparagraph (a) above; and

                 (c) Any federal, state, local, or foreign taxes imposed as a
result of the actual or deemed receipt of any payments under this Agreement paid
or incurred in connection with investigating, defending, being a witness in,
participating in (including on appeal), or preparing for any of the foregoing
in, any proceeding relating to any Indemnifiable Event.

             1.4 Indemnifiable Event: Any event or occurrence that takes place
either before or after the execution of this Agreement, related to the fact that
Indemnitee is or was a director or an officer of the Corporation; or while a
director or officer is or was serving at the request of the Corporation as a
director, officer, employee, trustee, agent, or fiduciary of another foreign or
domestic corporation, partnership, joint venture, employee benefit plan, trust,
or other enterprise; or was a director, officer, employee, or agent of a foreign
or domestic corporation that was a predecessor corporation of the Corporation or
another enterprise at the request of such predecessor corporation; or related to
anything done or not done by Indemnitee in any such capacity, whether the basis
of the proceeding is an alleged action in an official capacity as a director,
officer, employee, or agent, or in any other capacity while serving as a
director, officer, employee, or agent of the Corporation, as described in this
paragraph.

             1.5 Independent Counsel: The person or body appointed in connection
with Section 3.

             1.6 Person: "person" (as that term is used in ss.ss.13(d) and 14(d)
of the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation acting in such capacity or a
Corporation owned, directly or indirectly, by the shareholders of the
Corporation in substantially the same proportions as their ownership of shares
of the Corporation at the date of this Agreement.

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             1.7 Participant: A person who is a party to, or witness or
participant (including on appeal) in, a Proceeding.

             1.8 Potential Change in Control: A state of affairs that shall be
deemed to exist if:

                 (a) The Corporation enters into an agreement or arrangement,
the consummation of which would result in the occurrence of a Change in Control;

                 (b) Any Person (including the Corporation) announces publicly
an intention to take or to consider taking actions that, if consummated, would
constitute a Change in Control;

                 (c) Any Person who is or becomes the beneficial owner, directly
or indirectly, of securities of the Corporation representing ten percent (10%)
or more of the combined voting power of the Corporation's then-outstanding
voting securities, increases his or her beneficial ownership of such securities
by five percent (5%) or more over the percentage owned by such person on the
date of this Agreement (provided, however, that the issuance and exercise of any
warrants, options or convertible securities held by the Corporation's senior
lender or The 1818 Mezzanine Fund II, L.P., or their successors, assigns or
affiliates shall not be deemed a Potential Change of Control); or

                 (d) The Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.

             1.9 Proceeding: Any threatened, pending, or completed action, suit,
or proceeding, or any inquiry, hearing or investigation, whether conducted by
the Corporation or any other party, that Indemnitee in good faith believes might
lead to the institution of any such action, suit, or proceeding, whether civil,
criminal, administrative, investigative, or other.

             1.10 Reviewing Party: The person or body appointed in accordance
with Section 3.

             1.11 Voting Securities: Any securities of the Corporation that have
the right to vote generally in the election of directors.

          2. AGREEMENT TO INDEMNIFY.

             2.1 General Agreement. In the event Indemnitee was, is, or
becomes a participant in, or is threatened to be made a participant in, a
Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the
Corporation shall indemnify the Indemnitee from and against any and all Expenses
to the fullest extent permitted by law, as the same exists or may hereafter be
amended or interpreted (but in the case of any such amendment or interpretation,
only to the extent that such amendment or interpretation permits the Corporation
to provide broader indemnification rights than were permitted before this
Agreement). The parties to this Agreement intend indemnification in excess of
that expressly permitted by statute, including, without limitation, any
indemnification provided by the Corporation's articles of incorporation, its
bylaws, a vote of its shareholders or disinterested directors, or applicable
law.

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<PAGE>

             2.2 Initiation of Proceeding. Notwithstanding anything in this
Agreement to the contrary, Indemnitee shall not be entitled to indemnification
under this Agreement in connection with any Proceeding initiated by Indemnitee
against the Corporation or any director or officer of the Corporation unless (i)
the Corporation has joined in or the Board has consented to the initiation of
such Proceeding; (ii) the Proceeding is one to enforce indemnification rights
under Section 5; or (iii) the Proceeding is instituted after a Change in Control
and Independent Counsel has approved its initiation.

             2.3 Expense Advances. If so requested by Indemnitee, the
Corporation shall within ten (10) business days of such request, advance all
Expenses to Indemnitee (an "EXPENSE ADVANCE"). Notwithstanding the foregoing, to
the extent that the Reviewing Party determines that Indemnitee would not be
permitted to be so indemnified under applicable law, the Corporation shall be
entitled to be reimbursed by Indemnitee for all such amounts, and Indemnitee
hereby agrees to reimburse the Corporation promptly for the same. If Indemnitee
has commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law as
provided in Section 4, any determination made by the Reviewing Party that
Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding, and Indemnitee shall not be required to reimburse the
Corporation for any Expense Advance until a final judicial determination is made
(as to which all rights of appeal have been exhausted or have lapsed).
Indemnitee's obligation to reimburse the Corporation for Expense Advances shall
be unsecured and no interest shall be charged thereon.

             2.4 Mandatory Indemnification. Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee has been successful on the
merits in defense of any Proceeding relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter in such Proceeding,
Indemnitee shall be indemnified against all Expenses incurred in connection with
such issue, matter, or event.

             2.5 Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Corporation for a portion
of Expenses, but not for the total amount of Expenses, the Corporation shall
indemnify the Indemnitee for the portion to which Indemnitee is entitled.

             2.6 Prohibited Indemnification. No indemnification under this
Agreement shall be paid by the Corporation on account of any Proceeding in which
judgment is rendered against Indemnitee for an accounting of profits made from
the purchase or sale by Indemnitee of securities of the Corporation under the
provisions of Section 16(b) of the Exchange Act or similar provisions of any
federal, state, or local laws.

          3. REVIEWING PARTY. Before any Change in Control, the Reviewing Party
shall be any appropriate person or body consisting of a member or members of the
Board or any other person or body appointed by the Board who is not a party to
the Proceeding with respect to which Indemnitee is seeking indemnification;
after a Change in Control, the reviewing party shall be the Independent Counsel.
With respect to all matters arising after a Change in Control concerning the
rights of Indemnitee to indemnity payments and Expense Advances under this
Agreement or any other agreement or under applicable law or the Corporation's
articles of

                                       4
<PAGE>

incorporation or bylaws now or hereafter in effect relating to indemnification
for Indemnifiable Events, the Corporation shall seek legal advice only from
Independent Counsel selected by Indemnitee and approved by the Corporation, the
approval of whom shall not be unreasonably withheld, and who has not otherwise
performed services for the Corporation or Indemnitee (other than in connection
with indemnification matters) within the last five (5) years. The Independent
Counsel shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Corporation or Indemnitee in an action to determine
Indemnitee's rights under this Agreement. The counsel, among other things, shall
render a written opinion to the Corporation and Indemnitee as to whether and to
what extent Indemnitee should be permitted to be indemnified under applicable
law. The Corporation agrees to pay the reasonable fees of the Independent
Counsel and to indemnify fully such counsel against any and all expenses,
including attorneys' fees, claims, liabilities, loss, and damages arising out of
or relating to this Agreement or the engagement of Independent Counsel under
this Agreement.

          4. INDEMNIFICATION PROCESS AND APPEAL.

             4.1 Indemnification Payment. Indemnitee shall receive
indemnification of Expenses from the Corporation in accordance with this
Agreement as soon as practicable after Indemnitee has made written demand on the
Corporation for indemnification, unless the Reviewing Party has given a written
opinion to the Corporation that Indemnitee is not entitled to indemnification
under this Agreement or applicable law.

             4.2 Suit To Enforce Rights. Regardless of any action by the
Reviewing Party, if Indemnitee has not received full indemnification within
thirty (30) days after making a demand in accordance with Section 4.1 above,
Indemnitee shall have the right to enforce its indemnification rights under this
Agreement by commencing litigation in any court in which the Corporation has an
office seeking an initial determination by the court or challenging any
determination by the Reviewing Party or any aspect of the Agreement. The
Corporation hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party not challenged by
Indemnitee shall be binding on the Corporation and Indemnitee. The remedy
provided in this Section 4.2 shall be in addition to any other remedies
available to Indemnitee in law or equity.

             4.3 Defense to Indemnification, Burden of Proof, and Presumptions.
It shall be a defense to any action brought by Indemnitee against the
Corporation to enforce this Agreement (other than an action brought to enforce a
claim for Expenses incurred in defending a proceeding in advance of its final
disposition when the required undertaking has been tendered to the Corporation)
that it is not permissible under this Agreement or applicable law for the
Corporation to indemnify the Indemnitee for the amount claimed. In connection
with any such action or any determination by the Reviewing Party or otherwise as
to whether Indemnitee is entitled to be indemnified under this Agreement, the
burden of proving such a defense or determination shall be on the Corporation.
Neither the failure of the Reviewing Party or the Corporation (including its
Board, Independent Counsel, or its shareholders) to have made a determination
prior to the commencement of such action by Indemnitee that indemnification is
proper under the circumstances because Indemnitee has met the standard of
conduct set forth in applicable law, nor an actual determination by the
Reviewing Party or Corporation (including its

                                       5
<PAGE>

Board, Independent Counsel, or its shareholders) that Indemnitee had not met
such applicable standard of conduct shall be a defense to the action or create a
presumption that Indemnitee has not met the applicable standard of conduct. For
purposes of this Agreement, the termination of any claim, action, suit, or
proceeding, by judgment, order, settlement (whether with or without court
approval), conviction, or on a plea of nolo contendere, or its equivalent, shall
not create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief, or that a court has determined that
indemnification is not permitted by applicable law.

          5. INDEMNIFICATION FOR EXPENSES INCURRED IN ENFORCING RIGHTS. The
Corporation shall indemnify the Indemnitee against, and if requested by
Indemnitee, the Corporation shall, within ten (10) business days of such
request, advance to Indemnitee, all Expenses as are incurred by Indemnitee in
connection with any claim asserted against or action brought by Indemnitee for:

             5.1 (a) Indemnification of Expenses or an Expense Advance by the
Corporation under this Agreement or any other agreement or under applicable law
or the Corporation's articles of incorporation or bylaws now or hereafter in
effect relating to indemnification for Indemnifiable Events, or

             5.2 (b) Recovery under directors' and officers' liability insurance
policies maintained by the Corporation for amounts paid in settlement if the
Independent Counsel has approved the settlement.

The Corporation shall not settle any Proceeding in any manner that would impose
any penalty or limitation on Indemnitee without Indemnitee's written consent.
Neither the Corporation nor Indemnitee will unreasonably withhold its consent to
any proposed settlement. The Corporation shall not be liable to indemnify the
Indemnitee under this Agreement with regard to any judicial award if the
Corporation was not given a reasonable and timely opportunity, at its expense,
to participate in the defense of such action; however, the Corporation's
liability under this Agreement shall not be excused if its participation in the
Proceeding was barred by this Agreement.

          6. ESTABLISHMENT OF TRUST. In the event of a Change in Control or a
Potential Change in Control, the Corporation shall, upon written request by
Indemnitee, create a trust for the benefit of the Indemnitee ("the Trust") and
from time to time, upon written request of Indemnitee, shall fund the Trust in
an amount sufficient to satisfy any and all Expenses reasonably anticipated at
the time of each such request to be incurred in connection with investigating,
preparing for, participating in, and/or defending any Proceeding relating to an
Indemnifiable Event. The amount or amounts to be deposited in the Trust under
the foregoing funding obligation shall be determined by the Reviewing Party. The
terms of the Trust shall provide that on a Change in Control, (i) the Trust
shall not be revoked or the principal invaded without the written consent of the
Indemnitee, (ii) the Trustee shall advance, within ten (10) business days of a
request by the Indemnitee, all Expenses to the Indemnitee (provided that the
Indemnitee hereby agrees to reimburse the Trust under the same circumstances for
which the Indemnitee would be required to reimburse the Corporation under
Section 2.3 above), (iii) the Trust shall continue to be funded by the
Corporation in accordance with the funding obligation

                                       6
<PAGE>

set forth in this Section 6, (iv) the Trustee shall promptly pay to the
Indemnitee all amounts for which the Indemnitee shall be entitled to
indemnification under this Agreement or otherwise, and (v) all unexpended funds
in the Trust shall revert to the Corporation on a final determination by the
Reviewing Party or a court of competent jurisdiction, as the case may be, that
the Indemnitee has been fully indemnified under the terms of this Agreement. The
Trustee shall be chosen by the Indemnitee. Nothing in this Section 6 shall
relieve the Corporation of any of its obligations under this Agreement. All
income earned on the assets held in the Trust shall be reported as income by the
Corporation for federal, state, local, and foreign tax purposes. The Corporation
shall pay all costs of establishing and maintaining the Trust, and shall
indemnify the Trustee against any and all expenses (including attorneys' fees),
claims, liabilities, loss, and damages arising out of or relating to this
Agreement or the establishment and maintenance of the Trust.

          7. NONEXCLUSIVITY. The rights of Indemnitee under this Agreement
shall be in addition to any other rights Indemnitee may have under the
Corporation's articles of incorporation, bylaws, applicable law, or otherwise.
To the extent that a change in applicable law (whether by statute or judicial
decision) permits greater indemnification by agreement than would be afforded
currently under the Corporation's articles of incorporation, bylaws, applicable
law, or this Agreement, it is the intent of the parties that Indemnitee enjoy by
this Agreement the greater benefits afforded by such change.

          8. LIABILITY INSURANCE. To the extent the Corporation maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or policies, in accordance
with its or their terms, to the maximum extent of the coverage available for any
corporation director or officer.

          9. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or on behalf of the Corporation or any
affiliate of the Corporation against Indemnitee, Indemnitee's spouse, heirs,
executors, or personal or legal representatives after the expiration of two (2)
years from the date of accrual of such cause of action, or such longer period as
may be required by state law under the circumstances. Any claim or cause of
action of the Corporation or its affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, the shorter period shall
govern.

          10. AMENDMENT OF THIS AGREEMENT. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties to this Agreement. No waiver of any of the provisions of this
Agreement shall operate as a waiver of any other provisions (whether or not
similar), nor shall such waiver constitute a continuing waiver. Except as
specifically provided in this Agreement, no failure to exercise or any delay in
exercising any right or remedy shall constitute a waiver.

          11. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.

                                       7
<PAGE>

          12. NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable
under this Agreement to make any payment in connection with any claim made
against Indemnitee to the extent Indemnitee has otherwise received payment
(under any insurance policy, bylaw, or otherwise) of the amounts otherwise
indemnifiable under this Agreement.

          13. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors (including any direct or indirect successor by purchase, merger,
consolidation, or otherwise to all or substantially all of the business and/or
assets of the Corporation), assigns, spouses, heirs, and personal and legal
representatives. The Corporation shall require and cause any successor (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to all,
substantially all, or a substantial part, of the business or assets of the
Corporation or both, by written agreement, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform if no such succession had taken place.
The indemnification provided under this Agreement shall continue as to
Indemnitee for any action taken or not taken while serving in an indemnified
capacity pertaining to an Indemnifiable Event even though Indemnitee may have
ceased to serve in such capacity at the time of any proceeding.

          14. SEVERABILITY. If any portion of this Agreement shall be held by a
court of competent jurisdiction to be invalid, void, or otherwise unenforceable,
the remaining provisions shall remain enforceable to the fullest extent
permitted by law. Furthermore, to the fullest extent possible, the provisions of
this Agreement (including, without limitation, each portion of this Agreement
containing any provision held to be invalid, void, or otherwise unenforceable,
that is not itself invalid, void, or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, void, or
unenforceable.

          15. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws.

          16. NOTICES. All notices, demands, and other communications required
or permitted under this Agreement shall be made in writing and shall be deemed
to have been duly given if delivered by hand, against receipt, or mailed,
postage prepaid, certified or registered mail, return receipt requested, and
addressed to the Corporation at:

                     Psychiatric Solutions, Inc.
                     113 Seaboard Lane, Suite C-100
                     Franklin, Tennessee 37067
                     Attn: President

and to Indemnitee at:

                     Mark P. Clein
                     2001 K Street NW
                     Washington, DC 20006

                                       8
<PAGE>

         Notice of change of address shall be effective only when given in
accordance with this agreement. All notices complying with this paragraph shall
be deemed to have been received on the date of delivery or on the third business
day after mailing.

         IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day specified above.

                                            PSYCHIATRIC SOLUTIONS, INC.

                                            By: /s/ Joey Jacobs
                                               ---------------------------------
                                            Its: Chairman, CEO and President
                                                --------------------------------

                                             /s/ Mark P. Clein
                                            ------------------------------------
                                            Mark P. Clein

                                       9

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