S-8

Registration No. 333-_________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

PSYCHIATRIC SOLUTIONS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	23-2491707
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

113 Seaboard Lane, Suite C-100
Franklin, Tennessee 37027
(615) 463-9338

(Address, including zip code, and telephone number, including
area code, of Registrants Principal Executive Offices)

Psychiatric Solutions, Inc. 1997 Incentive and Nonqualified Stock Option Plan for Key Personnel

(Full Name of Plan)

Joey A. Jacobs
President and Chief Executive Officer
Psychiatric Solutions, Inc.
113 Seaboard Lane, Suite C-100
Franklin, Tennessee 37027
(615) 463-9338

(Name, address, including zip code, and telephone number,
including area code, of Agent for Service)

CALCULATION OF REGISTRATION FEE

		Proposed
Title of Securities	Amount to be	Maximum Offering		Proposed Maximum		Amount of
to be Registered	Registered(3)	Price per Share(4)		Aggregate Offering Price		Registration Fee
Common Stock, $0.01 par value(1)	331,712 Shares	$	5.60	$	1,857,587	$	171
Common Stock, $0.01 par value(2)	56,641 Shares	$	5.60	$	317,190	$	29

(1)	The number of shares of Common Stock authorized for issuance under the 1997 Incentive and Nonqualified Stock Option Plan for Key Personnel.
(2)	Shares of Common Stock that have been issued pursuant to non-qualified stock option agreements.
(3)	In addition, pursuant to Rule 416(c) under the Securities Act of 1933, as amended, this registration statement also covers an indeterminate number of additional shares that may become exercisable pursuant to the antidilution provisions of the Plans to which this Registration Statement relates.
(4)	This estimation is solely for the purpose of calculating the registration fee pursuant to Rules 457(c) and (h), based on the average of the high and low prices for the Common Stock as reported by the NASDAQ Stock Market on October 15, 2002.

The Index to Exhibits appears on sequentially numbered page 6

TABLE OF CONTENTS

1997 Incentive & Nonqualified Stock Option Plan

Opinion of Harwell Howard Hyne Gabbert & Manner PC

Consent of Ernst & Young LLP

CONSENT OF ERNST & YOUNG LLP

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

     The documents listed below are incorporated by reference in this Registration Statement. In addition, all documents subsequently filed by Psychiatric Solutions, Inc. (the “Company,” the “Registrant” or “ Psychiatric Solutions”) pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part thereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.

(1)	Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2002;
(2)	Current Report on Form 8-K/A filed with the SEC on October 7, 2002;
(3)	Current Report on Form 8-K filed with the SEC on August 6, 2002;
(4)	Current Report on Form 8-K filed with the SEC on August 5, 2002;
(5)	Annual Report on Form 10-K for the fiscal year ended April 30, 2002; and
(6)	The audited financial statements of Psychiatric Solutions, Inc. for the year ended December 31, 2001 and the description of the Company’s shares of Common Stock, $0.01 par value (the “Common Stock”), contained in Registration Statement on Form S-4 filed with the SEC on June 12, 2002, as amended July 11, 2002.

Item 4. Description of Securities

     Not applicable.

Item 5. Interests of Named Experts and Counsel

     Not applicable.

Item 6. Indemnification.

     Under Section 145 of the Delaware Corporation Law, the Company is empowered to indemnify its directors and officers in circumstances therein provided.

     The Company’s Restated Certificate of Incorporation, as amended, provides that no director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director, except (i) for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit.

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     Under the Company’s Amended and Restated Bylaws, the Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

     The Company shall also indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorney’s fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

     The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise, against any such expense, liability or loss, to the fullest extent permitted by the Delaware General Corporation Law. The Corporation has also entered into separate indemnification agreements with each of its directors.

Item 7. Exemption From Registration Claimed

     Not applicable.

Item 8. Exhibits.

     The Exhibits to this Registration Statement are listed in the Index to Exhibits on Page 6 of this Registration Statement, which Index is incorporated herein by reference.

Item 9. Undertakings.

     Psychiatric Solutions hereby undertakes:

     1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

     (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

     (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the

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aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

     (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement:

     2. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

     4. That for the purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     5. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the mater has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

     Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Franklin, State of Tennessee, on this 7th day of October, 2002.

	Psychiatric Solutions, Inc.
	/s/ Joey A. Jacobs
	Joey A. Jacobs President and Chief Executive Officer
Date: October 7, 2002

Power of Attorney

     Each person whose signature to the Registration Statement appears below hereby appoints Joey A. Jacobs as the person’s attorney-in-fact to execute in the name and behalf of any such person, individually and in the capacity stated below, and to file all amendments and post-effective amendments to this Registration Statement, which amendment or amendments may make such changes and additions in this Registration Statement as such attorney-in-fact may deem necessary or appropriate.

     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.

SIGNATURE	TITLE	DATE
/s/ Joey A. Jacobs Joey A. Jacobs	President and Chief Executive Officer	October 7, 2002
/s/ Jack Polson Jack Polson	Chief Accounting Officer	October 7, 2002
/s/ Christopher Grant, Jr. Christopher Grant, Jr.	Director	October 10, 2002
/s/ Charles C. McGettigan Charles C. McGettigan	Director	October 10, 2002
/s/ Joseph P. Donlan Joseph P. Donlan	Director	October 10, 2002
/s/ Mark P. Clein Mark P. Clein	Director	October 10, 2002
/s/ Edward K. Wissing Edward K. Wissing	Director	October 10, 2002
/s/ David S. Heer David S. Heer	Director	October 10, 2002

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Exhibit Index

Exhibit No.	Description of Exhibit
4.1	The Company’s Restated Certificate of Incorporation, filed with the Delaware Secretary of State on March 9, 1998 (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 1998)
4.2	Amendments to the Company’s Restated Certificate of Incorporation, filed with the Delaware Secretary of State on August 5, 2002 (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2002)
4.3	The Company’s Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 1997)
4.4	Psychiatric Solutions, Inc. 1997 Incentive and Nonqualified Stock Option Plan for Key Personnel.
5.1	Opinion of Harwell Howard Hyne Gabbert & Manner, P.C.
23.1	Consent of Ernst &Young LLP, Independent Auditors
23.2	Consent of Ernst & Young LLP, Independent Auditors
23.3	Consent of Harwell Howard Hyne Gabbert & Manner, P.C. (contained in Exhibit 5.1)
24	Power of Attorney (see signature page)

6 EX-4.4 3 g78683exv4w4.txt 1997 INCENTIVE & NONQUALIFIED STOCK OPTION PLAN Exhibit 4.4 PSYCHIATRIC SOLUTIONS, INC. 1997 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN FOR KEY PERSONNEL 1. The Purpose of the Plan. This Plan is intended to provide an opportunity for Key Persons performing services to the Corporation and its Subsidiaries to acquire shares of the Corporation's Common Stock, providing an equity interest in the Corporation and additional compensation based on appreciation of the value of such stock. The Plan provides for the grant of stock options intended to constitute (a) incentive stock options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and (b) nonqualified stock options, as an incentive to service or continued service to the Corporation in order to aid the Corporation in obtaining and retaining key personnel of outstanding ability and/or in substitution for stock options of entities which may be acquired by the Corporation. 2. Definitions. For purposes of this Plan, the following terms will be defined as indicated: (a) "Board" means the Board of Directors of the Corporation. (b) "Cause" means habitual drug use or drunkenness, embezzlement of Corporation funds, conduct which is injurious to the Corporation, or conviction of a felony, all as determined in good faith by the Board or Committee. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" has the meaning prescribed in paragraph 4. (e) "Common Stock" means the common stock of the Corporation, $.01 par value. (f) "Corporation" means Psychiatric Solutions, Inc., a Delaware corporation. (g) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (h) "Fair Market Value" means the closing price of the Common Stock, as reported by the New York Stock Exchange or by any other national securities market upon which the Common Stock is traded, including Nasdaq. In the event the Common Stock is not listed on an exchange or traded in the over-the-counter market, then the Board or Committee will determine Fair Market Value, which determination will be made in good faith and will be binding. (i) "ISO" means an incentive stock Option as defined in Section 422 of the Code. (j) "Key Person" means a consultant, advisor, director or full-time salaried employee of either the Corporation or any present or future subsidiary who, in the judgment of the Board or Committee, is instrumental to the success of the Corporation or one of its Subsidiaries; including officers. (k) "NQSO" means a non-qualified stock option. (l) "Option" means an option granted pursuant to the Plan, whether an ISO or an NQSO. (m) "Plan" means the Corporation's 1997 Incentive and Nonqualified Stock Option Plan for Key Personnel described herein. (n) "Rule 16b-3" means Rule 16b-3 as promulgated under the Exchange Act, as the rule may be amended from time to time, or any successor rule or other comparable regulatory requirements. (o) "Subsidiary" means any person or entity which is controlled by the Corporation. (p) "Substitute Option" means an Option granted in substitution for options to purchase equity securities of an equity acquired by the Corporation. 3. Stock Subject to the Plan. There will be reserved for issuance under the Plan an aggregate of 331,712 shares of Common Stock, which will be authorized and unissued Common Stock. If an Option expires or terminates for any reason without being exercised in full, the shares subject thereto which have not been purchased will again be available for purposes of the Plan. The number of shares as to which Options may be granted under the Plan will be proportionately adjusted, to the nearest whole share, in the event of any stock dividend, stock split, reorganization, merger, consolidation, share combination or similar recapitalization involving the Common Stock or any spin-off, spin-out or other significant distribution of assets of stockholders for which the Corporation receives no consideration. In the event that there is an insufficient number of authorized shares of Common Stock available to allow exercise of the Options on the date of any grant hereunder, such Options will not be exercisable until there are sufficient shares of Common Stock authorized for issuance. 4. Administration of the Plan. The Board may administer this Plan itself or may appoint a Committee of the Board to administer the Plan. Subject to the provisions of the Plan, the Committee will have full authority and discretion to determine the Key Persons of the Corporation and its Subsidiaries to whom Options will be granted, the number of shares to be subject to each Option, the Option prices, and the exercise period for the Options. In making such determinations, the Committee may take into account the nature of the services rendered or to be rendered by such persons, their past, present or potential contributions to the Corporation, and any other factors which the Committee deems relevant. Subject to the provisions of the Plan, the Committee will have full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Option agreements (which need not be identical); and to make all other determinations necessary or advisable for the proper administration of the Plan. The Board may at any time remove members from or add members to the Committee, or may abolish the Committee and revest in the Board the administration of the Plan. Vacancies on the Committee, howsoever caused, will be filled by the Board in accordance with the bylaws of the Corporation. 5. Option Agreement. Each grant of an Option will be evidenced by an Option agreement, executed by the holder of the Option and the Corporation, and such other instruments in such form as the Board or Committee approves from time to time, which instruments will (i) comply with and include expressly or by reference the terms and conditions set forth in this Plan, and (ii) may include such other provisions not inconsistent with the provisions of this Plan as the Board or Committee deems advisable, including provisions granting the holder the right to receive property at the time of exercise of the Option (provided that Section 83 of the Code applies to any such property other than cash). The terms and conditions of the Option agreements need not contain similar provisions. The granting of any Option under the Plan will not be deemed either to entitle the holder of the Option to, or to disqualify such holder from, participation in any other grant of Options under the Plan. 6. Eligibility. Options may be granted to Key Persons of the Corporation and its present or future Subsidiaries, provided, however, that Options granted to directors and certain officers of the Corporation will 2 comply with the applicable provisions of paragraph 4(b) of this Plan. Substitute Options may be granted to Key Persons of any entity acquired by the Corporation (or any subsidiary of such acquired entity). 7. Terms and Conditions of Options. All Options will be in such form and upon such terms and conditions as the Board or Committee, in its discretion, may from time to time determine. To the extent not included in a specific Option agreement or other document (such as an employment agreement), the following terms and provisions shall apply to each Option granted hereunder. (a) Option Price. Except in the case of Substitute Options, the Option price per share will be an amount determined by the Committee or the Board at the time the Option is granted, taking into account the market price of the Common Stock on such date, the value of services provided or to be provided by the recipient of the Options, and the overall value of the compensation of the recipient by the Corporation and its Subsidiaries. The Option price per share for all ISOs will in no event be less than the Fair Market Value of the Common Stock on the trading day next preceding the date the Option is granted. Further, in the case of ISOs granted to a Key Person who beneficially owns more than ten percent (10%) of the then outstanding Common Stock, the Option price per share will in no event be less than 110% of the Fair Market Value of the Common Stock on the trading day next preceding the date of grant. In the case of Substitute Options, the Option price per share will be determined by multiplying the market price of the Common Stock immediately prior to acquisition by the exchange ratio applicable to the class of equity securities of the acquired entity subject to the acquired entity's options immediately prior to acquisition, if any, or, if no such exchange ratio is applicable, by a factor determined by the Board. The Corporation will not be required to issue Options or Substitute Options for fractional shares, but may, in the discretion of the Board or Committee, round to the nearest whole share. (b) Option Term. No Option will be exercisable after the expiration of ten (10) years from the date the Option is granted. Further, in the case of ISOs granted to a Key Person who beneficially owns more than ten percent (10%) of the then outstanding Common Stock, the term of the Option will not exceed five (5) years from the date of grant. The date of grant will be the date on which the Board or Committee has approved the terms and conditions of the Option agreement evidencing the Option, has determined the recipient of the Option, the number of shares covered by the Option and the Option price per share, and has taken all other action necessary to complete the grant of the Option. (c) Option Type. Each Option granted hereunder will be clearly identified as either an ISO or an NQSO. (d) Maximum Grants. Any Key Person will be entitled to receive, at any time over the life of this Plan, Options with respect to such number of shares of Common Stock as set by the Board or Committee, up to the total number of shares reserved for issuance upon exercise of Options as set forth in paragraph 3; provided, however, that ISOs granted in any calendar year to a Key Person and exercisable for the first time by such Key Person during any calendar year may not exceed the limits prescribed by the Code. (e) Payment and Withholding. Payment for all shares purchased pursuant to exercise of an Option will be made in cash, by delivery of unrestricted shares of Common Stock at Fair Market Value on the date of exercise, or a combination thereof. The payment will be made at the time the Option or any part thereof is exercised, and no shares will be issued until full payment therefor has been made. Payment in currency or by check, bank draft, cashier's check, postal money order or wire transfer will be considered payment in cash. In addition to the Option price, the Corporation will have the right, if applicable, to require the holder of an Option to remit to the Corporation an amount sufficient to satisfy any federal, state or local withholding tax liability prior to the delivery of any certificate or certificates for shares issuable upon exercise of the Option. 3 (f) Conditions to Exercise of an Option. Except in the case of a Substitute Option, no Option may be exercised to any extent until the holder will have been employed by the Corporation or one of its Subsidiaries continuously for at least three (3) months from the date of grant. Except as provided in subparagraph (h) below, an Option may not be exercised by the holder unless he is then a Key Person of the Corporation or one of its Subsidiaries. No Option may be exercised by a holder with respect to fractional shares unless approved by the Board or Committee. (g) Nontransferability of Options. An Option will not be transferable or assignable except by will, by the laws of descent and distribution, or, in the case of NQSOs, pursuant to a qualified domestic relations order as defined by the Code, Title I of the Employee Retirement Income Security Act or the rules thereunder, and an Option will be exercisable, during the holder's lifetime, only by him. Notwithstanding the limitations of this subparagraph (g), the Board or Committee may, in its sole discretion, allow transfer of an Option to an immediate member of the Optionholder's family or to a family partnership or trust. (h) Termination of Employment or Death. In the event that a holder ceases to be employed or retained by the Corporation or any of its Subsidiaries for any reason other than his death, disability or termination for Cause and will no longer be employed by any of them, such holder will have the right to exercise the Option at any time within three (3) months after his termination of employment or retention to the extent his right to exercise the Option has vested and has not previously been exercised at the date of termination. In the event of termination of employment or retention of the holder by reason of disability, the holder may exercise his Option at any time within twelve (12) months after the date of such termination. If the holder of an Option dies while he is employed by the Corporation or one of its Subsidiaries, his Option may be exercised (to the extent that the holder would have been entitled to do so at the date of his death) by a legatee or legatees of the holder under his last will, or by his personal representatives or distributees, at any time within twelve (12) months following his death. In the event of termination of employment of the holder for Cause, any and all Options of the holder shall automatically expire upon such termination. In all of the cases cited above, the Corporation's Board of Directors or the Committee may, in its discretion, extend the exercise period of the Option in question; provided, however, that notwithstanding this subparagraph (h), no Option may be exercised more than ten (10) years after the date on which such Option was granted. For purposes of this subparagraph (h), employment of a holder will not be deemed terminated so long as the holder is employed by the Corporation, a Subsidiary or another entity (or an affiliate of another entity) which has assumed this Option in a transaction to which Section 424(a) of the Code is applicable. (i) Changes in Capitalization; Merger; Liquidation. The number of shares of Common Stock covered by each outstanding Option will be proportionately adjusted, to the nearest whole share (i) for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or combination of shares or stock split or the payment of a stock dividend (but only on the Common Stock) or any other merger, reorganization, combination, consolidation or similar recapitalization or increase or decrease in the number of such shares effected without receipt of consideration by the Corporation, or (ii) for any spin-off or spin-out of assets to the Corporation's stockholders or any other significant distribution of assets by the Corporation to its stockholders without receipt of consideration by the Corporation. Any such adjustment to an outstanding Option will be made without changing the total price applicable to the unexercised portion of the Option, but with a corresponding adjustment in the price for each share covered by the Option. If the Corporation is the surviving corporation in any merger or consolidation, each outstanding Option will pertain to and apply to the securities to which a holder of the number of shares of Common Stock subject to the Option would have been entitled to receive in such merger or consolidation. A dissolution or liquidation of the Corporation or a merger or consolidation in which the Corporation is not the surviving corporation will cause each outstanding Option to terminate, except for Options as to which another entity assumes or substitutes another option in a transaction to which Section 424(a) of the Code is applicable; provided, however, that, as to any Options which are to so terminate, each holder will have the right immediately prior to such dissolution, liquidation, merger or consolidation, to exercise his Option in whole or in part, including with respect to shares as to which the right to exercise had not yet vested and without regard to any provisions deferring exercise contained herein. To the extent that the foregoing adjustments relate to stock or securities of the Corporation, the adjustments will be made by the Board or 4 Committee, whose determination will be conclusive. Except as expressly provided in this subparagraph (i), the holder of an Option will have no rights by reason of any subdivision or combination of shares of stock of any class, or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, or by reason of any spin-off, spin-out or comparable distribution of assets to the Corporation's stockholders, or by reason of any dissolution, liquidation, merger or consolidation or distribution to the Corporation's stockholders of assets or securities of another entity; and any issue by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, will not affect, and no adjustment by reason thereof will be made with respect to, the number or price of shares of Common Stock subject to the Option. The existence of the Plan and the Options granted pursuant to the Plan will not affect in any way the right or power of the Corporation to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Corporation, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Corporation, any sale or transfer of all or any part of the Corporation's business or assets, or any other corporate act or proceeding. (j) If at any time the Board or Committee determines that the listing or approval for quotation, registration or qualification of the shares subject to the Options upon any securities exchange or interdealer quotation system or under any state or federal securities or other law or regulation, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to or in connection with the granting of the Option or the issue or purchase of Common Stock thereunder, the Option may not be exercised, in whole or in part, unless such listing, approval for quotation, registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Board or Committee. The holder of the Option will supply the Corporation with such certificates, representations, opinions of counsel and information as the Corporation may request, including, without limitation, an investment letter certifying that all shares being purchased under an Option are being acquired for investment and not for the purpose of resale or distribution, and will otherwise cooperate with the Corporation in obtaining such listing, approval for quotation, registration, qualification, consent or approval. (k) No Option granted pursuant to the Plan will terminate when an employee is on military, maternity, sick leave or other bona fide leave of absence so long as his right to reemployment is guaranteed either by statute or contract. 8. Termination and Amendment of the Plan. The Plan shall terminate at midnight on April 9, 2007, ten (10) years after the date of its initial adoption by the Board. No Option will be granted under the Plan after that date, but Options granted before termination of the Plan will remain exercisable thereafter until they expire or lapse according to their terms. The Plan may be terminated, modified or amended by the Corporation's stockholders or Board. 9. Rule 16b-3 Compliance. In taking any action under the Plan involving a person who files reports under Section 16 of the Exchange Act, the Corporation will use its best efforts to ensure that such action is taken in compliance with Rule 16b-3. 10. No Rights as Stockholder. A holder of an Option will have no rights as a stockholder with respect to any Common Stock covered by his Option until the date of issuance of a stock certificate to him by the Corporation following exercise, in whole or in part, of the Option. 11. Indemnification and exculpation of Board or Committee. In addition to other rights of indemnification as they may have as members of the Board, each member of the Board or Committee will be indemnified by the Corporation against all costs and expenses reasonably incurred by him in connection with any action, suit or proceeding to which he may be party by reason of any action taken or failure to act under or in connection with the Plan, or any Option granted thereunder, and against all amounts paid by him in settlement thereof (provided the settlement is approved by legal counsel selected by the Corporation) or paid by him in satisfaction of a judgment in any such action, suit or proceeding, except a judgment based upon a finding of a breach of the duty of loyalty or acts or omissions either not in good faith or which involve intentional misconduct or a knowing violation of law. Upon the institution of any such action, suit or proceeding, each Board or Committee member affected will notify the Corporation in writing of the same, giving the Corporation an opportunity, at its own expense, to defend the same before the member undertakes to defend it on his own behalf. The members of the Board or Committee shall, to the fullest extent permitted by law, not be liable to the Corporation, its stockholders, option holders, employees, consultants or others, in connection with any action taken or failure to act under or in connection with the Plan, or any Option granted thereunder. 5 EX-5.1 4 g78683exv5w1.txt OPINION OF HARWELL HOWARD HYNE GABBERT & MANNER PC Exhibit 5.1 October 17, 2002 Psychiatric Solutions, Inc. 113 Seaboard Lane, Suite C-100 Franklin, Tennessee 37027 Ladies and Gentlemen: We have acted as special counsel to Psychiatric Solutions, Inc. (the "Company") in connection with the registration on Form S-8 (the "Registration Statement") being filed with the Securities and Exchange Commission (the "Commission") on the date hereof for the purpose of registering under the Securities Act of 1933, as amended (the "Securities Act"), 388,353 shares (the "Shares") of common stock, $0.01 par value, of the Company (the "Common Shares") which may be issued pursuant to the exercise of options outstanding under the Psychiatric Solutions, Inc. 1997 Incentive and Nonqualified Stock Option Plan for Key Personnel (the "Plan"). This firm hereby consents to the filing of this opinion as an exhibit to the Registration Statement and with agencies of such states and other jurisdictions as may be necessary in the course of complying with the laws of such states and jurisdictions regarding the offering and sale of the stock in accordance with the Registration Statement. This Opinion Letter is governed by, and shall be interpreted in accordance with the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law (1991). As a consequence, it is subject to a number of qualifications, assumptions, exceptions, definitions, limitations on coverage and other limitations, all as more particularly described in the Accord, and this Opinion Letter should be read in conjunction therewith. We have examined originals, or certified or photostatic copies of such statutes, records, regulations, certificates of the officers of the Company and of public officials, and such other information as we have deemed necessary for purposes of rendering this opinion. In stating our opinion, we have assumed: (i) that all signatures are genuine, all documents submitted to us as originals are authentic, and all documents submitted to us as copies conform to authentic original documents; and (ii) that the parties to such documents have the legal right and power under all applicable laws, regulations and agreements to enter into, execute, deliver and perform their respective obligations thereunder. On the basis of such review, but subject to the limitations expressed herein, we are of the opinion, as of the date hereof, that the securities being registered by the Registration Statement will, when issued in compliance with the Plan and sold as contemplated under the Registration Statement, be legally issued, fully paid and non-assessable. Our opinion herein is limited solely to the laws of the United States of America and the corporate law of the State of Tennessee. In rendering the opinion set forth herein, we have relied upon the documents referenced above and have made no independent verification or investigation of factual matters pertaining thereto or to the Company. Very truly yours, HARWELL HOWARD HYNE GABBERT & MANNER, P.C. /S/ HARWELL HOWARD HYNE GABBERT & MANNER, P.C EX-23.1 5 g78683exv23w1.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 dated October 18, 2002) pertaining to the Psychiatric Solutions, Inc. 1997 Incentive and Nonqualified Stock Option Plan for Key Personnel of Psychiatric Solutions, Inc. of our report dated April 5, 2002, with respect to the consolidated financial statements of Psychiatric Solutions, Inc. for the year ended December 31, 2001 included in the Registration Statement on Form S-4 (No. 333-90372) of PMR Corporation, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP October 17, 2002 Nashville, Tennessee EX-23.2 6 g78683exv23w2.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.2 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 to be filed on or about October 15, 2002) pertaining to the Psychiatric Solutions, Inc. 1997 Incentive and Nonqualified Stock Option Plan for Key Personnel of Psychiatric Solutions, Inc. of our report dated June 21, 2002, with respect to the consolidated financial statements and schedule of PMR Corporation included in PMR Corporation's Annual Report (Form 10-K) for the year ended April 30, 2002, filed with the Securities and Exchange Commission. San Diego, California October 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.4

                                                                    Exhibit 4.4


                          PSYCHIATRIC SOLUTIONS, INC.
                        1997 INCENTIVE AND NONQUALIFIED
                             STOCK OPTION PLAN FOR
                                 KEY PERSONNEL

         1.       The Purpose of the Plan. This Plan is intended to provide an
opportunity for Key Persons performing services to the Corporation and its
Subsidiaries to acquire shares of the Corporation's Common Stock, providing an
equity interest in the Corporation and additional compensation based on
appreciation of the value of such stock. The Plan provides for the grant of
stock options intended to constitute (a) incentive stock options, as defined in
Section 422 of the Internal Revenue Code of 1986, as amended, and (b)
nonqualified stock options, as an incentive to service or continued service to
the Corporation in order to aid the Corporation in obtaining and retaining key
personnel of outstanding ability and/or in substitution for stock options of
entities which may be acquired by the Corporation.

         2.       Definitions. For purposes of this Plan, the following terms
will be defined as indicated:

                  (a)      "Board" means the Board of Directors of the
         Corporation.

                  (b)      "Cause" means habitual drug use or drunkenness,
         embezzlement of Corporation funds, conduct which is injurious to the
         Corporation, or conviction of a felony, all as determined in good
         faith by the Board or Committee.

                  (c)      "Code" means the Internal Revenue Code of 1986, as
         amended from time to time.

                  (d)      "Committee" has the meaning prescribed in paragraph
         4.

                  (e)      "Common Stock" means the common stock of the
         Corporation, $.01 par value.

                  (f)      "Corporation" means Psychiatric Solutions, Inc., a
         Delaware corporation.

                  (g)      "Exchange Act" means the Securities Exchange Act of
         1934, as amended.

                  (h)      "Fair Market Value" means the closing price of the
         Common Stock, as reported by the New York Stock Exchange or by any
         other national securities market upon which the Common Stock is
         traded, including Nasdaq. In the event the Common Stock is not listed
         on an exchange or traded in the over-the-counter market, then the
         Board or Committee will determine Fair Market Value, which
         determination will be made in good faith and will be binding.

                  (i)      "ISO" means an incentive stock Option as defined in
         Section 422 of the Code.

                  (j)      "Key Person" means a consultant, advisor, director
         or full-time salaried employee of either the Corporation or any
         present or future subsidiary who, in the judgment of the Board or
         Committee, is instrumental to the success of the Corporation or one of
         its Subsidiaries; including officers.



                  (k)      "NQSO" means a non-qualified stock option.

                  (l)      "Option" means an option granted pursuant to the
         Plan, whether an ISO or an NQSO.

                  (m)      "Plan" means the Corporation's 1997 Incentive and
         Nonqualified Stock Option Plan for Key Personnel described herein.

                  (n)      "Rule 16b-3" means Rule 16b-3 as promulgated under
         the Exchange Act, as the rule may be amended from time to time, or any
         successor rule or other comparable regulatory requirements.

                  (o)      "Subsidiary" means any person or entity which is
         controlled by the Corporation.

                  (p)      "Substitute Option" means an Option granted in
         substitution for options to purchase equity securities of an equity
         acquired by the Corporation.

         3.       Stock Subject to the Plan. There will be reserved for
issuance under the Plan an aggregate of 331,712 shares of Common Stock, which
will be authorized and unissued Common Stock. If an Option expires or
terminates for any reason without being exercised in full, the shares subject
thereto which have not been purchased will again be available for purposes of
the Plan. The number of shares as to which Options may be granted under the
Plan will be proportionately adjusted, to the nearest whole share, in the event
of any stock dividend, stock split, reorganization, merger, consolidation,
share combination or similar recapitalization involving the Common Stock or any
spin-off, spin-out or other significant distribution of assets of stockholders
for which the Corporation receives no consideration. In the event that there is
an insufficient number of authorized shares of Common Stock available to allow
exercise of the Options on the date of any grant hereunder, such Options will
not be exercisable until there are sufficient shares of Common Stock authorized
for issuance.

         4.       Administration of the Plan. The Board may administer this
Plan itself or may appoint a Committee of the Board to administer the Plan.
Subject to the provisions of the Plan, the Committee will have full authority
and discretion to determine the Key Persons of the Corporation and its
Subsidiaries to whom Options will be granted, the number of shares to be
subject to each Option, the Option prices, and the exercise period for the
Options. In making such determinations, the Committee may take into account the
nature of the services rendered or to be rendered by such persons, their past,
present or potential contributions to the Corporation, and any other factors
which the Committee deems relevant. Subject to the provisions of the Plan, the
Committee will have full and conclusive authority to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective Option agreements (which
need not be identical); and to make all other determinations necessary or
advisable for the proper administration of the Plan. The Board may at any time
remove members from or add members to the Committee, or may abolish the
Committee and revest in the Board the administration of the Plan. Vacancies on
the Committee, howsoever caused, will be filled by the Board in accordance with
the bylaws of the Corporation.

         5.       Option Agreement. Each grant of an Option will be evidenced
by an Option agreement, executed by the holder of the Option and the
Corporation, and such other instruments in such form as the Board or Committee
approves from time to time, which instruments will (i) comply with and include
expressly or by reference the terms and conditions set forth in this Plan, and
(ii) may include such other provisions not inconsistent with the provisions of
this Plan as the Board or Committee deems advisable, including provisions
granting the holder the right to receive property at the time of exercise of
the Option (provided that Section 83 of the Code applies to any such property
other than cash). The terms and conditions of the Option agreements need not
contain similar provisions. The granting of any Option under the Plan will not
be deemed either to entitle the holder of the Option to, or to disqualify such
holder from, participation in any other grant of Options under the Plan.

         6.       Eligibility. Options may be granted to Key Persons of the
Corporation and its present or future Subsidiaries, provided, however, that
Options granted to directors and certain officers of the Corporation will


                                       2

comply with the applicable provisions of paragraph 4(b) of this Plan.
Substitute Options may be granted to Key Persons of any entity acquired by the
Corporation (or any subsidiary of such acquired entity).

         7.       Terms and Conditions of Options. All Options will be in such
form and upon such terms and conditions as the Board or Committee, in its
discretion, may from time to time determine. To the extent not included in a
specific Option agreement or other document (such as an employment agreement),
the following terms and provisions shall apply to each Option granted
hereunder.

                  (a)      Option Price. Except in the case of Substitute
         Options, the Option price per share will be an amount determined by
         the Committee or the Board at the time the Option is granted, taking
         into account the market price of the Common Stock on such date, the
         value of services provided or to be provided by the recipient of the
         Options, and the overall value of the compensation of the recipient by
         the Corporation and its Subsidiaries. The Option price per share for
         all ISOs will in no event be less than the Fair Market Value of the
         Common Stock on the trading day next preceding the date the Option is
         granted. Further, in the case of ISOs granted to a Key Person who
         beneficially owns more than ten percent (10%) of the then outstanding
         Common Stock, the Option price per share will in no event be less than
         110% of the Fair Market Value of the Common Stock on the trading day
         next preceding the date of grant. In the case of Substitute Options,
         the Option price per share will be determined by multiplying the
         market price of the Common Stock immediately prior to acquisition by
         the exchange ratio applicable to the class of equity securities of the
         acquired entity subject to the acquired entity's options immediately
         prior to acquisition, if any, or, if no such exchange ratio is
         applicable, by a factor determined by the Board. The Corporation will
         not be required to issue Options or Substitute Options for fractional
         shares, but may, in the discretion of the Board or Committee, round to
         the nearest whole share.

                  (b)      Option Term. No Option will be exercisable after the
         expiration of ten (10) years from the date the Option is granted.
         Further, in the case of ISOs granted to a Key Person who beneficially
         owns more than ten percent (10%) of the then outstanding Common Stock,
         the term of the Option will not exceed five (5) years from the date of
         grant. The date of grant will be the date on which the Board or
         Committee has approved the terms and conditions of the Option
         agreement evidencing the Option, has determined the recipient of the
         Option, the number of shares covered by the Option and the Option
         price per share, and has taken all other action necessary to complete
         the grant of the Option.

                  (c)      Option Type. Each Option granted hereunder will be
         clearly identified as either an ISO or an NQSO.

                  (d)      Maximum Grants. Any Key Person will be entitled to
         receive, at any time over the life of this Plan, Options with respect
         to such number of shares of Common Stock as set by the Board or
         Committee, up to the total number of shares reserved for issuance upon
         exercise of Options as set forth in paragraph 3; provided, however,
         that ISOs granted in any calendar year to a Key Person and exercisable
         for the first time by such Key Person during any calendar year may not
         exceed the limits prescribed by the Code.

                  (e)      Payment and Withholding. Payment for all shares
         purchased pursuant to exercise of an Option will be made in cash, by
         delivery of unrestricted shares of Common Stock at Fair Market Value
         on the date of exercise, or a combination thereof. The payment will be
         made at the time the Option or any part thereof is exercised, and no
         shares will be issued until full payment therefor has been made.
         Payment in currency or by check, bank draft, cashier's check, postal
         money order or wire transfer will be considered payment in cash. In
         addition to the Option price, the Corporation will have the right, if
         applicable, to require the holder of an Option to remit to the
         Corporation an amount sufficient to satisfy any federal, state or
         local withholding tax liability prior to the delivery of any
         certificate or certificates for shares issuable upon exercise of the
         Option.


                                       3

                  (f)      Conditions to Exercise of an Option. Except in the
         case of a Substitute Option, no Option may be exercised to any extent
         until the holder will have been employed by the Corporation or one of
         its Subsidiaries continuously for at least three (3) months from the
         date of grant. Except as provided in subparagraph (h) below, an Option
         may not be exercised by the holder unless he is then a Key Person of
         the Corporation or one of its Subsidiaries. No Option may be exercised
         by a holder with respect to fractional shares unless approved by the
         Board or Committee.

                  (g)      Nontransferability of Options. An Option will not be
         transferable or assignable except by will, by the laws of descent and
         distribution, or, in the case of NQSOs, pursuant to a qualified
         domestic relations order as defined by the Code, Title I of the
         Employee Retirement Income Security Act or the rules thereunder, and
         an Option will be exercisable, during the holder's lifetime, only by
         him. Notwithstanding the limitations of this subparagraph (g), the
         Board or Committee may, in its sole discretion, allow transfer of an
         Option to an immediate member of the Optionholder's family or to a
         family partnership or trust.

                  (h)      Termination of Employment or Death. In the event
         that a holder ceases to be employed or retained by the Corporation or
         any of its Subsidiaries for any reason other than his death,
         disability or termination for Cause and will no longer be employed by
         any of them, such holder will have the right to exercise the Option at
         any time within three (3) months after his termination of employment
         or retention to the extent his right to exercise the Option has vested
         and has not previously been exercised at the date of termination. In
         the event of termination of employment or retention of the holder by
         reason of disability, the holder may exercise his Option at any time
         within twelve (12) months after the date of such termination. If the
         holder of an Option dies while he is employed by the Corporation or
         one of its Subsidiaries, his Option may be exercised (to the extent
         that the holder would have been entitled to do so at the date of his
         death) by a legatee or legatees of the holder under his last will, or
         by his personal representatives or distributees, at any time within
         twelve (12) months following his death. In the event of termination of
         employment of the holder for Cause, any and all Options of the holder
         shall automatically expire upon such termination. In all of the cases
         cited above, the Corporation's Board of Directors or the Committee
         may, in its discretion, extend the exercise period of the Option in
         question; provided, however, that notwithstanding this subparagraph
         (h), no Option may be exercised more than ten (10) years after the
         date on which such Option was granted. For purposes of this
         subparagraph (h), employment of a holder will not be deemed terminated
         so long as the holder is employed by the Corporation, a Subsidiary or
         another entity (or an affiliate of another entity) which has assumed
         this Option in a transaction to which Section 424(a) of the Code is
         applicable.

                  (i)      Changes in Capitalization; Merger; Liquidation. The
         number of shares of Common Stock covered by each outstanding Option
         will be proportionately adjusted, to the nearest whole share (i) for
         any increase or decrease in the number of issued shares of Common
         Stock resulting from a subdivision or combination of shares or stock
         split or the payment of a stock dividend (but only on the Common
         Stock) or any other merger, reorganization, combination, consolidation
         or similar recapitalization or increase or decrease in the number of
         such shares effected without receipt of consideration by the
         Corporation, or (ii) for any spin-off or spin-out of assets to the
         Corporation's stockholders or any other significant distribution of
         assets by the Corporation to its stockholders without receipt of
         consideration by the Corporation. Any such adjustment to an
         outstanding Option will be made without changing the total price
         applicable to the unexercised portion of the Option, but with a
         corresponding adjustment in the price for each share covered by the
         Option. If the Corporation is the surviving corporation in any merger
         or consolidation, each outstanding Option will pertain to and apply to
         the securities to which a holder of the number of shares of Common
         Stock subject to the Option would have been entitled to receive in
         such merger or consolidation. A dissolution or liquidation of the
         Corporation or a merger or consolidation in which the Corporation is
         not the surviving corporation will cause each outstanding Option to
         terminate, except for Options as to which another entity assumes or
         substitutes another option in a transaction to which Section 424(a) of
         the Code is applicable; provided, however, that, as to any Options
         which are to so terminate, each holder will have the right immediately
         prior to such dissolution, liquidation, merger or consolidation, to
         exercise his Option in whole or in part, including with respect to
         shares as to which the right to exercise had not yet vested and
         without regard to any provisions deferring exercise contained herein.
         To the extent that the foregoing adjustments relate to stock or
         securities of the Corporation, the adjustments will be made by the
         Board or


                                       4

         Committee, whose determination will be conclusive. Except as expressly
         provided in this subparagraph (i), the holder of an Option will have
         no rights by reason of any subdivision or combination of shares of
         stock of any class, or the payment of any stock dividend or any other
         increase or decrease in the number of shares of stock of any class, or
         by reason of any spin-off, spin-out or comparable distribution of
         assets to the Corporation's stockholders, or by reason of any
         dissolution, liquidation, merger or consolidation or distribution to
         the Corporation's stockholders of assets or securities of another
         entity; and any issue by the Corporation of shares of stock of any
         class, or securities convertible into shares of stock of any class,
         will not affect, and no adjustment by reason thereof will be made with
         respect to, the number or price of shares of Common Stock subject to
         the Option. The existence of the Plan and the Options granted pursuant
         to the Plan will not affect in any way the right or power of the
         Corporation to make or authorize any adjustment, reclassification,
         reorganization or other change in its capital or business structure,
         any merger or consolidation of the Corporation, any issue of debt or
         equity securities having preferences or priorities as to the Common
         Stock or the rights thereof, the dissolution or liquidation of the
         Corporation, any sale or transfer of all or any part of the
         Corporation's business or assets, or any other corporate act or
         proceeding.

                  (j)      If at any time the Board or Committee determines
         that the listing or approval for quotation, registration or
         qualification of the shares subject to the Options upon any securities
         exchange or interdealer quotation system or under any state or federal
         securities or other law or regulation, or the consent or approval of
         any governmental regulatory body, is necessary or desirable as a
         condition to or in connection with the granting of the Option or the
         issue or purchase of Common Stock thereunder, the Option may not be
         exercised, in whole or in part, unless such listing, approval for
         quotation, registration, qualification, consent or approval will have
         been effected or obtained free of any conditions not acceptable to the
         Board or Committee. The holder of the Option will supply the
         Corporation with such certificates, representations, opinions of
         counsel and information as the Corporation may request, including,
         without limitation, an investment letter certifying that all shares
         being purchased under an Option are being acquired for investment and
         not for the purpose of resale or distribution, and will otherwise
         cooperate with the Corporation in obtaining such listing, approval for
         quotation, registration, qualification, consent or approval.

                  (k)      No Option granted pursuant to the Plan will
         terminate when an employee is on military, maternity, sick leave or
         other bona fide leave of absence so long as his right to reemployment
         is guaranteed either by statute or contract.

         8.       Termination and Amendment of the Plan. The Plan shall
terminate at midnight on April 9, 2007, ten (10) years after the date of its
initial adoption by the Board. No Option will be granted under the Plan after
that date, but Options granted before termination of the Plan will remain
exercisable thereafter until they expire or lapse according to their terms. The
Plan may be terminated, modified or amended by the Corporation's stockholders
or Board.

         9.       Rule 16b-3 Compliance. In taking any action under the Plan
involving a person who files reports under Section 16 of the Exchange Act, the
Corporation will use its best efforts to ensure that such action is taken in
compliance with Rule 16b-3.

         10.      No Rights as Stockholder. A holder of an Option will have no
rights as a stockholder with respect to any Common Stock covered by his Option
until the date of issuance of a stock certificate to him by the Corporation
following exercise, in whole or in part, of the Option.

         11.      Indemnification and exculpation of Board or Committee. In
addition to other rights of indemnification as they may have as members of the
Board, each member of the Board or Committee will be indemnified by the
Corporation against all costs and expenses reasonably incurred by him in
connection with any action, suit or proceeding to which he may be party by
reason of any action taken or failure to act under or in connection with the
Plan, or any Option granted thereunder, and against all amounts paid by him in
settlement thereof (provided the settlement is approved by legal counsel
selected by the Corporation) or paid by him in satisfaction of a judgment in
any such action, suit or proceeding, except a judgment based upon a finding of
a breach of the duty of loyalty or acts or omissions either not in good faith
or which involve intentional misconduct or a knowing violation of law. Upon the
institution of any such action, suit or proceeding, each Board or Committee
member affected will notify the Corporation in writing of the same, giving the
Corporation an opportunity, at its own expense, to defend the same before the
member undertakes to defend it on his own behalf. The members of the Board or
Committee shall, to the fullest extent permitted by law, not be liable to the
Corporation, its stockholders, option holders, employees, consultants or
others, in connection with any action taken or failure to act under or in
connection with the Plan, or any Option granted thereunder.


                                       5

EX-5.1

                                                                    Exhibit 5.1


                                October 17, 2002


Psychiatric Solutions, Inc.
113 Seaboard Lane, Suite C-100
Franklin, Tennessee  37027

Ladies and Gentlemen:

         We have acted as special counsel to Psychiatric Solutions, Inc. (the
"Company") in connection with the registration on Form S-8 (the "Registration
Statement") being filed with the Securities and Exchange Commission (the
"Commission") on the date hereof for the purpose of registering under the
Securities Act of 1933, as amended (the "Securities Act"), 388,353 shares (the
"Shares") of common stock, $0.01 par value, of the Company (the "Common
Shares") which may be issued pursuant to the exercise of options outstanding
under the Psychiatric Solutions, Inc. 1997 Incentive and Nonqualified Stock
Option Plan for Key Personnel (the "Plan"). This firm hereby consents to the
filing of this opinion as an exhibit to the Registration Statement and with
agencies of such states and other jurisdictions as may be necessary in the
course of complying with the laws of such states and jurisdictions regarding
the offering and sale of the stock in accordance with the Registration
Statement.

         This Opinion Letter is governed by, and shall be interpreted in
accordance with the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, assumptions, exceptions, definitions, limitations on coverage
and other limitations, all as more particularly described in the Accord, and
this Opinion Letter should be read in conjunction therewith.

         We have examined originals, or certified or photostatic copies of such
statutes, records, regulations, certificates of the officers of the Company and
of public officials, and such other information as we have deemed necessary for
purposes of rendering this opinion.

         In stating our opinion, we have assumed: (i) that all signatures are
genuine, all documents submitted to us as originals are authentic, and all
documents submitted to us as copies conform to authentic original documents;
and (ii) that the parties to such documents have the legal right and power
under all applicable laws, regulations and agreements to enter into, execute,
deliver and perform their respective obligations thereunder.

         On the basis of such review, but subject to the limitations expressed
herein, we are of the opinion, as of the date hereof, that the securities being
registered by the Registration Statement will, when issued in compliance with
the Plan and sold as contemplated under the Registration Statement, be legally
issued, fully paid and non-assessable.

         Our opinion herein is limited solely to the laws of the United States
of America and the corporate law of the State of Tennessee. In rendering the
opinion set forth herein, we have relied upon the documents referenced above
and have made no independent verification or investigation of factual matters
pertaining thereto or to the Company.


                                             Very truly yours,

                                             HARWELL HOWARD HYNE
                                             GABBERT & MANNER, P.C.

                                             /S/ HARWELL HOWARD HYNE
                                             GABBERT & MANNER, P.C

EX-23.1

                                                                    EXHIBIT 23.1


                         Consent of Independent Auditors



We consent to the incorporation by reference in the Registration Statement (Form
S-8 dated October 18, 2002) pertaining to the Psychiatric Solutions, Inc. 1997
Incentive and Nonqualified Stock Option Plan for Key Personnel of Psychiatric
Solutions, Inc. of our report dated April 5, 2002, with respect to the
consolidated financial statements of Psychiatric Solutions, Inc. for the year
ended December 31, 2001 included in the Registration Statement on Form S-4 (No.
333-90372) of PMR Corporation, filed with the Securities and Exchange
Commission.

                                                /s/ Ernst & Young LLP

October 17, 2002
Nashville, Tennessee

EX-23.2

                                                               EXHIBIT 23.2



               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 to be filed on or about October 15, 2002) pertaining to the Psychiatric
Solutions, Inc. 1997 Incentive and Nonqualified Stock Option Plan for Key
Personnel of Psychiatric Solutions, Inc. of our report dated June 21, 2002, with
respect to the consolidated financial statements and schedule of PMR Corporation
included in PMR Corporation's Annual Report (Form 10-K) for the year ended April
30, 2002, filed with the Securities and Exchange Commission.


San Diego, California
October 14, 2002