Document:

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                                                                   EXHIBIT 10.16

                                 PROMISSORY NOTE

THE PAYMENT OF THIS INSTRUMENT, BOTH PRINCIPAL AND INTEREST, AND ALL OTHER
INDEBTEDNESS EVIDENCED HEREBY, IS SUBORDINATE, SUBJECT AND MADE JUNIOR IN RIGHT
OF PAYMENT TO THE RIGHTS OF HEALTHCARE BUSINESS CREDIT CORPORATION, ITS
SUCCESSORS AND ASSIGNS PURSUANT TO THE TERMS OF THE SUBORDINATION AGREEMENT
("SENIOR SECURED LENDER").

                           PSYCHIATRIC SOLUTIONS, INC.

                                SUBORDINATED NOTE

$2,000,000                                                       AUGUST 31, 2001

         PSYCHIATRIC SOLUTIONS, INC., a Delaware corporation ("PSI"), promises
to pay to the order of BROWN SCHOOLS, INC. (together with each assignee, donee,
successor or transferee thereof, the "HOLDER") at the address listed on the
signature page hereto, or at such other address as the Holder of this Note may
designate in writing to PSI, or its assigns, the principal sum of Two Million
Dollars ($2,000,000) (the "PRINCIPAL AMOUNT"). Notwithstanding, the Principal
Amount is subject to adjustment as set forth in Section 3.1(b) of that certain
Asset Purchase Agreement dated July __, 2001 between, among others, Cypress
Creek Hospital, Inc., West Oaks Hospital, Inc., and PSI Hospitals, Inc. (the
"APA"). The Principal Amount, as adjusted, shall be paid together with interest
on the adjusted Principal Amount from the date of this Note until such Principal
Amount is paid in full, at the rate equal to nine percent (9%) per annum as
provided herein (the "NOTE"). Interest will be computed on the basis of a
360-day year of twelve 30-day months for the actual number of days elapsed, and
be payable as set forth below.

         The Note shall mature and all principal and accrued but unpaid interest
shall be and become immediately due and payable on August 31, 2005.
Notwithstanding, principal and interest on the Note shall be payable as follows:
(a) no payment of principal or interest shall be paid prior to September 30,
2002 (provided, however, that interest on the Note shall accrete on a quarterly
basis from the date hereof as additional principal of the Note in an aggregate
principal amount equal to the amount of interest accrued but unpaid with respect
to such quarter), (b) on September 30, 2002, and again on the final day of each
subsequent calendar quarter through the quarter ending June 30, 2003, PSI shall
pay the Holder an amount equal to the accrued but unpaid interest with respect
to such quarter on the Note, and (c) on September 30, 2003, and again on the
final day of each subsequent calendar quarter through the quarter ending June
30, 2005, PSI shall pay the Holder an amount equal to (i) the accrued but unpaid
interest with respect to such quarter on the Note, plus (ii) one-eighth of the
Principal Amount (as adjusted). This note is unsecured. This Note shall be
prepayable, in part or whole.
<PAGE>

1.       SUBORDINATION.

         1.1      The payment of this Note, both principal and interest, is
subordinate, subject to and made junior in right of payment to the rights of
Senior Secured Lender pursuant to the terms and conditions of that certain
Subordination Agreement dated as of even date herewith by and among Senior
Secured Lender, PSI, and Holder.

2.       DEFAULT.

         2.1      The entire unpaid balance of the Principal Amount (as
adjusted) and all interest accrued and unpaid on this Note shall, at the
election of the Holder, be and become immediately due and payable upon the
occurrence of any of the following events (each a "DEFAULT EVENT"):

                  2.1.1    The non-payment by PSI when due of principal or
interest as provided in this Note, unless such delinquent payment is cured
within five (5) days following delivery of written notice from the Holder.

                  2.1.2    Any breach by PSI of any representation, warranty, or
covenant contained in this Note (including but not limited to a breach of
Section 4 of this Note); unless such breach is cured within five (5) days
following delivery of written notice from Holder.

                  2.1.3    Default with respect to indebtedness of at least One
Million Dollars ($1,000,000) held by any creditor of PSI that results in the
holder accelerating such indebtedness.

                  2.1.4    A Change of Control of PSI or its successor if and
only if such Change of Control occurs after February 28, 2003. For purposes of
this Section 2.1.4, a "Change of Control" shall include (i) the merger or
consolidation with or into any person or entity in a transaction whereby (a) the
shareholders of PSI (or its successor) immediately prior to the transaction do
not continue to own at least fifty-one percent (51%) of the outstanding voting
securities of the surviving company following the transaction, or (b) the
shareholders of PSI (or its successor) immediately prior to the transaction do
not collectively have the ability to appoint at least a majority of the Board of
Directors of the surviving company following the transaction, or (ii) the sale,
lease or other disposition of all or substantially all the assets of PSI and its
subsidiaries to any person.

                  2.1.5    If PSI (i) applies for or consents to the appointment
of, or if there shall be a taking of possession by, a receiver, custodian,
trustee or liquidator for PSI or any of its property; (ii) adopts a plan of
liquidation; (iii) becomes generally unable to pay its debts as they become due;
(iv) makes a general assignment for the benefit of creditors or becomes
insolvent; (v) files or is served with any petition for relief under the
Bankruptcy Code or any similar federal or state statute; or (vi) has any
attachment or levy made to or against any of its property or assets, and such
judgment remains undischarged, unstayed or unreleased, as applicable for a
period of forty-five (45) days.

         2.2      Upon the occurrence of a Default Event, the indebtedness
evidenced by this Note shall bear interest at the lesser of two percentage
points (2%) in excess of the applicable interest rate

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<PAGE>

on the Note per annum or the Highest Lawful Rate (as defined below). The Holder
shall be entitled to collect all costs and expenses of collection and/or suit
including, but not limited to, reasonable attorneys' fees.

         2.3      Each right, power or remedy of the Holder upon the occurrence
of any Default Event as provided for in this Note or now or hereafter existing
at law or in equity or by statute shall be cumulative and concurrent and shall
be in addition to every other right, power or remedy provided for in this Note
or now or hereafter existing at law or in equity or by statute, and the exercise
or beginning of the exercise by the Holder or transferee hereof of any one or
more of such rights, powers or remedies shall not preclude the simultaneous or
later exercise by the Holder of any or all such other rights, powers or
remedies.

3.       CHANGE OF CONTROL. In the event of a merger, consolidation, sale/lease
of assets, or any other type of transaction such that a person or entity other
than PSI becomes the successor to all or substantially all of the assets of PSI,
PSI shall cause its successor to execute an Assumption Agreement (in form
reasonably satisfactory to Holder) whereby such successor will assume the
obligations of PSI under this Note.

4.       DIVIDENDS. Prior to September 30, 2002, PSI (or its successor) will not
declare or pay any dividends unless such declaration or payment is approved by
the Senior Secured Lender. During the term of this Note after such date, PSI (or
its successor) will not declare or pay any dividends unless PSI (or its
successor) is current in all payments of principal and interest required by this
Note.

5.       FAILURE TO ACT AND WAIVER. No failure or delay by the Holder to insist
upon the strict performance of any term of this Note or to exercise any right,
power or remedy consequent upon a default hereunder shall constitute a waiver of
any such term or of any such breach, or preclude the Holder from exercising any
such right, power or remedy at any later time or times. By accepting payment
after the due date of any amount payable under this Note, the Holder shall not
be deemed to waive the right to require payment when due of all other amounts
payable under this Note, or to declare a default for failure to effect such
payment of any such other amount. The failure of the Holder of this Note to give
notice of any failure or breach of PSI under this Note shall not constitute a
waiver of any right or remedy in respect of such continuing failure or breach or
any subsequent failure or breach.

6.       NOTICES. All notices and communications under this Note shall be in
writing and shall be either delivered via facsimile or in person or accompanied
by a signed receipt therefore or mailed first-class United States certified
mail, return receipt requested, postage prepaid, and addressed to PSI at its
principal executive office and to Holder at the address listed on the signature
page hereto or such other actual address of Holder known to PSI's Chief
Financial Officer. Any notice of communication shall be deemed given and
received as of the date of such delivery or mailing.

7.       USURY. Regardless of any provisions contained in this Note or in any
other documents and instruments referred to herein, Holder shall never be deemed
to have contracted for or be entitled to receive, collect, or apply as interest
on this Note any amount in excess of the Highest Lawful

                                        3
<PAGE>

Rate, and in the event Holder ever receives, collects or applies as interest any
such excess, such amount which would be excessive interest shall be applied to
the reduction of the unpaid principal balance of this Note, and, if the
principal balance of this Note is paid in full, any remaining excess shall
forthwith be paid to PSI. "HIGHEST LAWFUL RATE" shall mean the maximum
non-usurious interest rate, if any, at any time or from time to time may be
contracted for, taken, reserved, charged or received on the total indebtedness
due under this Note under the Laws of the United States and the State of Texas
applicable thereto which are presently in effect or, to the extent allowed by
such applicable laws of the United States or the state of Texas, which may
hereafter be in effect and which allow a higher maximum non-usurious interest
rate than applicable laws now allow. In determining whether or not interest paid
or payable, under any specific contingency, exceeds the Highest Lawful Rate, PSI
and Holder shall, to the maximum extent permitted under applicable law, (a)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (b) exclude voluntary prepayments and the effect thereof, and
(c) amortize, prorate, allocate and spread, in equal parts, the total amount of
interest throughout the entire contemplated term of this Note so that the
interest is uniform throughout the entire term hereof.

8.       AMENDMENT. No amendment, alteration or modification of this Note shall
be valid unless in each instance such amendment, alteration or modification is
expressed in a written instrument duly executed by each of the parties hereto.

9.       GOVERNING LAW; VENUE. This Note shall be governed by an construed and
enforced in accordance with the laws of the State of Texas. The parties
expressly agree that this Note is entered into in Austin, Texas, and that all
performance required hereunder is significantly connected therewith.
Accordingly, venue for any action at law or equity arising or related to this
Note shall be in a court of appropriate jurisdiction in Austin, Travis County,
Texas.

10.      WAIVER OF NOTICE. PSI hereby waives notice, presentment, demand,
protect and notice of dishonor.

         IN WITNESS WHEREOF, PSI has caused this Note to be duly executed.

                            PSYCHIATRIC SOLUTIONS, INC.

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

                            Its:  Vice President
                                ------------------------------------------------

                                        4<PAGE>

                                                                   EXHIBIT 10.17

NEITHER THIS SUBORDINATED CONVERTIBLE NOTE NOR THE SERIES B PREFERRED STOCK INTO
WHICH IT IS CONVERTIBLE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), AND MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR
NOT FOR CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE MAKER OF A
FAVORABLE OPINION OF ITS COUNSEL, OR SUBMISSION TO THE MAKER OF SUCH OTHER
EVIDENCE AS MAY BE REASONABLY SATISFACTORY TO COUNSEL FOR THE MAKER, TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE
ACTS. THE PAYMENT OF THIS INSTRUMENT, BOTH PRINCIPAL AND INTEREST, AND ALL OTHER
INDEBTEDNESS EVIDENCED HEREBY, IS SUBORDINATE, SUBJECT AND MADE JUNIOR IN RIGHT
OF PAYMENT TO THE RIGHTS OF OTHER LENDERS TO THE MAKER, INCLUDING
COPELCO/AMERICAN HEALTHFUND, INC., ITS SUCCESSORS AND ASSIGNS ("COPELCO"), IN
THE MANNER AND TO THE EXTENT PROVIDED FOR IN THE RELATED SUBORDINATION AGREEMENT
EXECUTED ON OR ABOUT THE DATE HEREOF BETWEEN THE HOLDER AND COPELCO (THE
"SUBORDINATION AGREEMENT").

                           PSYCHIATRIC SOLUTIONS, INC.

                          CONVERTIBLE SUBORDINATED NOTE

$____________                                                        May 5, 2000

         Psychiatric Solutions, Inc., a Delaware corporation ("PSI"), promises
to pay to the order of Sunrise Holdings, Inc., a corporation (together with each
assignee, donee, successor or transferee thereof, the "HOLDER") at the address
listed on the signature page hereto, or at such other address as the Holder of
this Note may designate in writing to PSI, or its assigns, the principal sum of
___________________ and __/100 Dollars ($_________) (the "PRINCIPAL AMOUNT")
together with interest on the outstanding Principal Amount at the rate of nine
percent (9%) per annum as provided herein (the "NOTE").

         Unless sooner redeemed or converted, all principal and accrued interest
shall be paid on May 1, 2005 (the "DUE DATE"). Interest will be computed on the
basis of a 360-day year of twelve 30-day months. In the event of any conversions
of this Note, as specified herein, accrued interest will be converted or paid in
cash at the discretion of PSI.

         Notwithstanding the stated Due Date and subject to the Subordination
Agreement with the holders of the Senior Indebtedness; at the option of the
Holder, the Note shall mature and all principal and accrued interest shall be
and become immediately due and payable upon the happening of any of the
following events: (a) the sale, exchange, lease, or other disposition of all or
substantially all of the assets or stock of PSI in one transaction or a series
of related transactions;
<PAGE>

(b) any "change of control," or (c) an initial public offering by PSI of its
securities. A "change of control" shall be deemed to have occurred upon the
acquisition of at least fifty percent (50%) of the equity interest in PSI by a
person or entity and its respective affiliates other than a presently existing
officer and/or his affiliates of PSI or a presently existing director and/or his
affiliates of PSI.

         This Note shall not be prepayable, in part or whole, to the extent
provided for in the Subordination Agreement.

1.       CONVERSION.

         1.1      The Holder of this Note shall have the right, at such Holder's
option, at any time until April 30, 2004, to convert, in whole or in part, the
unpaid principal balance of this Note, in increments of $1,000 Principal Amount,
into that number of fully paid and nonassessable shares of Series B Preferred
Stock of PSI based on the following conversion prices:

<TABLE>
<CAPTION>
                           Conversion Date               "Conversion Price"
                           ---------------               ------------------
                  <S>                                    <C>
                  May 1, 2000 - April 30, 2001           $2.00 per share
                  May 1, 2001 - April 30, 2002           $2.33 per share
                  May 1, 2002 - April 30, 2003           $2.67 per share
                  May 1, 2003 - April 30, 2004           $3.00 per share
</TABLE>

         1.2      The Holder of this Note may exercise the conversion right
provided in this Section by giving written notice ten (10) days prior to
conversion (the "CONVERSION NOTICE") to PSI of the exercise of such right and
stating the Principal Amount being converted and the name or names in which the
stock to be issued and the address to which such stock shall be delivered.

         1.3      Conversion shall be deemed to have been effected on the tenth
(10th) day following the date the Conversion Notice is given (the "CONVERSION
DATE").

         1.4      In the event of the issuance by PSI of any Series B Preferred
Stock with proceeds to PSI of less than One and 50/100 Dollars ($1.50) per
share, or any recapitalization, stock split or stock dividend of PSI, at such
time as this Note, or any portion hereof, remains convertible, appropriate
adjustment shall be made in the Conversion Price per share to be paid so as to
maintain the proportionate interest represented herein.

         1.5      In case of any capital reorganization, or reclassification of
the capital stock of PSI (other than a change in par value or from par value to
no par value or from no par value to par value or as a result of a stock
distribution or split, or the consolidation or merger of PSI with or into
another person or entity (other than a consolidation or merger in which PSI is
the continuing entity)) or of the sale, exchange, lease, transfer or other
disposition of all or substantially all of the properties and assets of PSI,
this Note shall (effective on the opening of business on the date after the
effective date of such reorganization, reclassification, consolidation, merger,
sale or exchange, lease, transfer or other disposition or share exchange) be
convertible into the kind and number of shares of stock

                                        2
<PAGE>

or other securities or property of PSI or of the entity resulting from such
consolidation or surviving such merger or to which such properties and assets
shall have been sold, exchanged, leased, transferred or otherwise disposed or
which was the entity whose securities were exchanged for those of PSI to which
the Holder of the number of shares of stock deliverable (at the close of
business on the date immediately preceding the effective date of such
reorganization, reclassification, consolidation, merger, sale, exchange, lease,
transfer or other disposition or share exchange) upon conversion of this Note
would have been entitled upon such reorganization, reclassification,
consolidation, merger, sale, exchange, lease transfer or other disposition or
share exchange. The provisions of this Section 1.5 shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
exchanges, leases, transfers or other dispositions.

         1.6      Whenever the Conversion Price shall be adjusted as provided
herein, PSI shall prepare and send to the Holder of this Note a statement,
signed by the chief financial officer of PSI, certifying the facts requiring
such adjustment and the Conversion Price that shall be in effect after such
adjustment.

         1.7      In the event PSI shall propose to take any action of the types
described in Section 1.5 hereof, PSI shall give notice to the Holder of this
Note, which notice shall specify the record date, if any, with respect to any
such action and the date on which such action is to take place. Such notice
shall be given on or prior to the earlier of ten (10) days prior to the record
date or the date which such action shall be taken. Such notice shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Conversion Price and the number, kind or class
of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon conversion of
this Note.

         1.8      PSI shall pay all documentary, stamp or other transactional
taxes (excluding any federal, state or local income tax) and charges
attributable to the issuance or delivery of PSI stock upon conversion; provided,
however, that PSI shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such stock in a name other than the record Holder of this Note.

         1.9      PSI shall at all times authorize the issuance of PSI stock and
the admission, with full voting rights, or the Holder as a shareholder of PSI
upon any conversion of this Note.

2.       SUBORDINATION; RESTRICTION ON SERIES B PREFERRED STOCK DIVIDENDS AND
         DISTRIBUTIONS.

         2.1      The payment of this Note, both principal and interest, is
subordinate, subject to and made junior in right of payment to the rights of
Copelco in the manner and to the extent provided for in the Subordination
Agreement.

         2.2      PSI shall make no distributions or dividends of cash or
property to holders of its Series A or B Preferred Stock, common stock, or any
other class of equity, so long as any amount of principal or interest remains
due and payable to Holder pursuant to the terms of this Note;

                                        3
<PAGE>

provided that this Section 2.2 is not intended and shall not be construed to
preclude any events described in, and in conformance with, Sections 1.4 or 1.5
above.

3.       DEFAULT.

         3.1      The entire unpaid balance of the Principal Amount and all
interest accrued and unpaid on this Note shall, at the election of the Holder,
be and become immediately due and payable upon the occurrence of any of the
following events (each a "DEFAULT EVENT"):

                  3.1.1    The non-payment by PSI when due of principal and
interest or of any other payment as provided in this Note, unless such
delinquent payment is cured within ten (10) days following delivery of notice
from the Holder.

                  3.1.2    Default with respect to Copelco or any other secured
creditor of PSI unless any such monetary default is cured within thirty (30)
days or any nonmonetary default is cured within forty-five (45) days. Provided,
however, PSI shall have the right to dispute in good faith any such claims of
default but such dispute will not affect the Default Event hereunder.

                  3.1.3    If PSI (i) applies for or consents to the appointment
of, or if there shall be a taking of possession by, a receiver, custodian,
trustee or liquidator for PSI or any of its property; (ii) becomes generally
unable to pay its debts as they become due; (iii) makes a general assignment for
the benefit of creditors or becomes insolvent; (iv) files or is served with any
petition for relief under the Bankruptcy Code or any similar federal or state
statute; (v) has any judgment entered against it in excess of One Hundred
Thousand Dollars ($100,000) in any one instance or in the aggregate during any
consecutive twelve (12) month period or has any attachment or levy made to or
against any of its property or assets, and such judgment is final and all
appeals have been exhausted; or (vi) has assessed or imposed against it, or if
there shall exist any general or specific lien for any federal, state or local
taxes or charges against any of its property or assets.

                  3.1.4    Any failure by PSI to issue and deliver shares of its
Series B Preferred Stock as provided herein upon conversion of this Note.

         3.2      Upon the occurrence of a Default Event, the indebtedness
evidenced by this Note shall bear interest at the lesser of three percentage
points (3%) in excess of the applicable interest rate on the Note per annum or
the highest lawful rate. The Holder shall be entitled to collect all costs and
expenses of collection and/or suit, including, but not limited to reasonable
attorneys' fees.

         3.3      Each right, power or remedy of the Holder hereof upon the
occurrence of any Default Event as provided for in this Note or now or hereafter
existing at law or in equity or by statute shall be cumulative and concurrent
and shall be in addition to every other right, power or remedy provided for in
this Note or now or hereafter existing at law or in equity or by statute, and
the exercise or beginning of the exercise by the Holder or transferee hereof of
any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by the Holder hereof of any or all such other
rights, powers or remedies. Notwithstanding the foregoing, in the event PSI

                                        4
<PAGE>

and/or its affiliates have or pursue a claim against Holder, PSI shall not be
entitled to set off the amount of such claim against any amounts due and owing
Holder hereunder absent Holder's prior consent or the entry of a final judgment,
decree or order of a court of competent jurisdiction over such matter.

4.       FAILURE TO ACT AND WAIVER. No failure or delay by the Holder hereof to
insist upon the strict performance of any term of this Note or to exercise any
right, power or remedy consequent upon a default hereunder shall constitute a
waiver of any such term or of any such breach, or preclude the Holder hereof
from exercising any such right, power or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Note, the
Holder hereof shall not be deemed to waive the right either to require payment
when due of all other amounts payable under this Note, or to declare a default
for failure to effect such payment of any such other amount. The failure of the
Holder of this Note to give notice of any failure or breach of PSI under this
Note shall not constitute a waiver of any right or remedy in respect of such
continuing failure or breach or any subsequent failure or breach.

5.       TRANSFER. This Note may be transferred by the Holder without the
consent of PSI, but subject to the restrictive legend contained herein. In the
event of any said transfer, the Note shall be transferred on the books of PSI
only by the registered Holder hereof or by its attorney duly authorized in
writing or by delivery to PSI of a duly executed assignment. PSI shall be
entitled to treat any Holder of record of the Note as the Holder in fact thereof
and shall not be bound to recognize any equitable or other claim to or interest
in this Note in the name of any other person, whether or not it shall have
express or other notice thereof, save as expressly provided by the laws of
Texas. No transfer shall be made, however, unless the transferee expressly
acknowledges to the holders of the Senior Indebtedness, in writing, that it
agrees to be bound by all of the terms hereof.

6.       NOTICES. All notices and communications under this Note shall be in
writing and shall be either delivered via facsimile or in person or accompanied
by a signed receipt therefore or mailed first-class United States certified
mail, return receipt requested, postage prepaid, and addressed to PSI at its
principal executive office and to Holder at the address listed on the signature
page hereto or such other actual address of Holder known to PSI's Chief
Financial Officer. Any notice of communication shall be deemed given and
received as of the date of such delivery or mailing.

7.       USURY. Regardless of any provisions contained in this Note or in any
other documents and instruments referred to herein, Holder shall never be deemed
to have contracted for or be entitled to receive, collect, or apply as interest
on this Note any amount in excess of the Highest Lawful Rate, and in the event
Holder ever receives, collects or applies as interest any such excess, such
amount which would be excessive interest shall be applied to the reduction of
the unpaid principal balance of this Note, and, if the principal balance of this
Note is paid in full, any remaining excess shall forthwith be paid to PSI.
"HIGHEST LAWFUL RATE" shall mean the maximum non-usurious interest rate, if any,
at any time or from time to time may be contracted for, taken, reserved, charged
or received on the total indebtedness due under this Note under the Laws of the
United States and the State of Tennessee applicable thereto which are presently
in effect or, to the extent allowed by such applicable laws of the United States
or the state of Tennessee, which may hereafter be in effect

                                        5
<PAGE>

and which allow a higher maximum non-usurious interest rate than applicable laws
now allow. In determining whether or not interest paid or payable, under any
specific contingency, exceeds the Highest Lawful Rate, PSI and Holder shall, to
the maximum extent permitted under applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) amortize,
prorate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of this Note so that the interest is
uniform throughout the entire term hereof.

8.       HOLDER'S REPRESENTATIVE.

         8.1      In order to administer efficiently the implementation of this
Note by the Holder, the Holder hereby designates Hunt Capital Group, LLC as its
representative (the "HOLDER'S REPRESENTATIVE").

         8.2      The Holder hereby authorizes the Holder's Representative (i)
to take all action necessary in connection with the implementation of this Note
on behalf of Holder or the settlement of any dispute, (ii) to give and receive
all notices required to be given under this Note, and (iii) to take any and all
additional action as is contemplated to be taken by or on behalf of the Holder
by the terms of this Note.

         8.3      By its execution of this Note, the Holder agrees that:

                  8.3.1    PSI shall be able to rely conclusively on the
instructions and decisions of the Holder's Representative as to any actions
required or permitted to be taken by the Holder or the Holder's Representative
under this Note, and no party hereunder shall have any cause of action against
PSI for any action taken by PSI in reliance upon such instructions or decisions
of the Holder's Representative; and

                  8.3.2    all actions, decisions and instructions of the
Holder's Representative shall be conclusive and binding upon Holder and Holder
shall have no cause of action against Holder's Representative for any action
taken, decision made or instruction given by the Holder's Representative under
this Note except for fraud or willful breach of this Note by the Holder's
Representative.

9.       GOVERNING LAW; VENUE. This Note shall be governed by an construed and
enforced in accordance with the laws of the State of Tennessee. Further, as a
specifically bargained inducement for the holders of the Senior Indebtedness to
extend credit to PSI, and after having the opportunity to consult counsel, the
parties agree that the courts located in Davidson County, Tennessee shall have
subject matter and personal jurisdiction to enforce the terms of this Note and
venue to enforce the terms of this Note shall be proper in Nashville, Davidson
County, Tennessee.

                                        6
<PAGE>

         IN WITNESS WHEREOF, PSI has caused this Note to be duly executed.

                                     PSYCHIATRIC SOLUTIONS, INC.

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

TERMS OF SUBORDINATION
ACKNOWLEDGED AND AGREED:

SUNRISE HOLDINGS, INC.

By:
    --------------------------------

Holder's Address:

------------------------------------

------------------------------------

------------------------------------

                                        7

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