##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-K/A
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
 For the transition period from to.
 Commission file number 1-12996
 ADVOCAT INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    62-1559667(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)1621 Galleria Boulevard, Brentwood, TN
    
    37027(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (615) 771-7575
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each Exchange on which registeredCommon Stock, $0.01 par value per share
    
    The NASDAQ Capital Market
 Securities registered pursuant to Section 12(g) of the Act:
 None.
 o þ
 o þ
 þ o
 o
  o o o  þ
 o þ
 
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##### 



EXPLANATORY STATEMENT
   PagePART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    2ITEM 11. EXECUTIVE COMPENSATION
    
    
    5ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
    
    
    18ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE
    
    
    20ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    20PART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
    
    
    21EX-31.1EX-31.2EX-32
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors
  Information about Class 3 Directors  Current Term Ending 2009
 Name of Nominees
    
    Age
    
    Director Since
    
    Principal Occupation Last Five YearsWilliam R. Council, III
    
    
    47
    
    
    October 2002
    
    Member of the Board of Directors of
the Company since 2002; President
and Chief Executive Officer from
March 2003 to present; Interim
Chief Executive Officer from
October 2002 to March 2003;
Executive Vice President, Chief
Financial Officer and Secretary of
the
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##### Table of Contents



Company from March 2001 to
December 2002. Mr. Council is a
Certified Public Accountant.Richard M. Brame
    
    
    55
    
    
    December 2002
    
    Member of the Board of Directors of
the Company since December 2002;
Chief Financial Officer of
Covington Senior Living, LLC,
Atlanta, GA. President of Regency
Health Management, LLC from July
1999 to March 2008; President of
Regency Healthcare, LLC from 2006
to March 2008; President of
Ooltewah Investments, Inc. from
1992 to 2006. President of the
General Partner of San Angelo
Nursing Center, LP from October
2001 to March 2005.
 Information
About Class 1 Directors - Current Term Ending 2010
 Name of Directors
    
    Age
    
    Director Since
    
    Principal Occupation Last Five YearsWilliam C. ONeil, Jr.
    
    
    74
    
    
    Inception
    
    Member of the Board of Directors of
the Company since 1994; Private
Investor; director of Healthways,
Inc., a specialty health care
service company; director of
American HomePatient, Inc., a
provider of home health care
products and services.Robert Z. Hensley
    
    
    51
    
    
    July 2005
    
    Member of the Board of Directors of
the Company since July 2005;
director, Capella Healthcare Inc.
from January 2009 to present;
Senior Advisor to Alvarez & Marsal
Transaction Advisory Group from
June 2008 to present; A Founder of
Lifes A Beach Publications LLC, a
private publishing company, from
2003 to present; Managing member
and principal owner of two real
estate and rental property
development companies from 2001 to
present; Currently a director of
HealthSpring, Inc., Spheris, Inc.
and Comsys IT Partners, Inc.; Audit
Partner at Ernst & Young, LLP from
July 2002 to September 2003; Audit
Partner at Arthur Andersen, LLP
from 1990 to 2002; Managing Partner
at Arthur Andersen, LLP from 1997
to 2002. Mr. Hensley holds a
Master of Accountancy degree, a BS
in Accounting and is a Certified
Public Accountant.
 Information
About Class 2 Directors - Current Term Ending 2011
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##### Table of Contents



Name of Director
    
    Age
    
    Director Since
    
    Principal Occupation Last Five YearsWallace E. Olson
    
    
    62
    
    
    March 2002
    
    Chairman of the Board of Directors
of the Company from October 2002 to
present; Member of the Board of
Directors of the Company since
March 2002. He has been a private
investor, managing his personal
finances, since May 1996.Chad A. McCurdy
    
    
    40
    
    
    March 2008
    
    Member of the Board of Directors of
the Company since March 2008;
Managing Partner of Marlin Capital
Partners, LLC from 2004 to present;
Broker with First Dallas Securities
from 2003 through 2004. Mr.
McCurdy is a graduate of Southern
Methodist University, Cox School of
Business.
 Executive Officers
  Name of Officer
    
    Age
    
    Officer Since
    
    Position with the CompanyWilliam R. Council, III
    
    
    47
    
    
    March 5, 2001
    
    President and Chief
Executive Officer from
March 2003 to present;
Interim Chief Executive
Officer from October
2002 to March 2003;
Executive Vice
President, Chief
Financial Officer and
Secretary of the Company
from March 5, 2001 to
December 2002. Mr.
Council is a Certified
Public Accountant.Raymond L. Tyler, Jr.
    
    
    58
    
    
    October 18, 2002
    
    Senior Vice President of
Nursing Home Operations
of the Company from
March 2009 to present;
Executive Vice President
and Chief Operating
Officer of the Company
from December 2003 to
March 2009; Senior Vice
President of Operations
of the Company from
October 2002 to December
2003; Vice President of
Operations of the
Company from January
2001 to October 2002.L. Glynn Riddle, Jr.
    
    
    49
    
    
    December 9, 2002
    
    Executive Vice
President, Chief
Financial Officer and
Secretary of the Company
since December 2002.
Mr. Riddle is a
Certified Public
Accountant.
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##### Table of Contents



Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
 www.irinfo.com/AVC
 Audit Committee
 www.irinfo.com/AVC
 
 ITEM 11. EXECUTIVE COMPENSATION
 Executive Compensation
  Compensation Discussion and Analysis
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
    
    Performance based. Emphasizing pay for performance
by having a significant portion of executive compensation at risk.
    
    Retention. Providing compensation opportunities that attract and retain
talented and committed executives on a long-term basis.
    
    Balance. Appropriately balancing the Companys short-term and long-term
business, financial and strategic goals.
   
    
    Profitability. To maximize financial returns to its shareholders, in the
context of providing high quality service.
    
    Quality. To achieve leadership in the provision of relevant and high quality
health services.
    
    Stability. To be a desirable employer and a responsible corporate citizen.
  Compensation Consultant
   6




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##### Table of Contents



Almost Family, Inc.
    
    Healthways, Inc.Amedisys, Inc.
    
    LCA-Vision Inc.Amsurg Corp.
    
    LHC Group, Inc.Assisted Living Concepts, Inc.
    
    National HealthCare CorporationCapital Senior Living Corporation
    
    Odyssey HealthCare Inc.Continucare Corporation
    
    RehabCare Group, Inc.Emeritus Corporation
    
    Skilled Healthcare Group, Inc.Ensign Group, Inc.
    
    U.S. Physical Therapy, Inc.Hanger Orthopedic Group, Inc.
 Elements of Our Compensation Program for Named Executive Officers
  Base Salary
  Name
    
    Position
    
    2008 SalaryWilliam R. Council, III
    
    Chief Executive Officer
    
    $442,000Raymond L. Tyler, Jr.
    
    Chief Operating Officer
    
    $308,000L. Glynn Riddle, Jr.
    
    Chief Financial Officer
    
    $229,000
 Annual Incentives
  Position
    
    Bonus TargetChief Executive Officer
    
    50% of base salaryChief Operating Officer
    
    40% of base salaryChief Financial Officer
    
    35% of base salary
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Net Operating Income
    
    
    70
    %Discretionary/quality measures/individual performance
    
    
    30
    %Total
    
    
    100
    %
 Net Operating Income.
 

    80% or less of budget, executive earns 0% of the target bonus for this category;

    81% to 100% of budget, executive earns 5% of the target bonus for this category for each
1% of budget achieved over 80%;

    101% to 125% of budget, 15% of the incremental earned net operating income is placed
into a pool to be shared among the participants. Sharing of the pool may be discretionary
and/or pro rata.

    Above 125% - additional amounts may be awarded at the discretion of the Board of
Directors.
 Discretionary
  Percent ofName
    
    Position
    
    2008 Bonus
    
    Base SalaryWilliam R. Council, III
    
    Chief Executive Officer
    
    $53,000
    
    12.0%Raymond L. Tyler, Jr.
    
    Chief Operating Officer
    
    $20,000
    
    6.5%L. Glynn Riddle, Jr.
    
    Chief Financial Officer
    
    $25,000
    
    10.9%
 Long-Term Incentives
    8




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st nd rd
 Retirement and Post Employment Compensation
     9




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##### Table of Contents



Amount of 2008 Bonus
    
    Number ofName
    
    Used to Purchase RSUs
    
    RSUs PurchasedWilliam R. Council, III
    
    $
    26,500
    
    
    
    12,801.93Raymond L. Tyler, Jr.
    
    $
    10,000
    
    
    
    4,830.92L. Glynn Riddle, Jr.
    
    $
    12,500
    
    
    
    6,038.65
  do not
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Role of Executive Officers in Determining Compensation
  Tax and Accounting Considerations
  2009 Annual Incentive Plan and Base Salary
  Named Executive Officer
    
    Position
    
    Bonus TargetWilliam R. Council, III
    
    Chief Executive Officer
    
    50% of base salaryRaymond L. Tyler, Jr.
    
    Senior Vice President of Nursing Home Ops
    
    35% of base salaryL. Glynn Riddle, Jr.
    
    Chief Financial Officer
    
    35% of base salary
   Net operating income (as defined)
    
    
    70
    %Discretionary/quality measures/individual performance
    
    
    30
    %Total
    
    
    100
    %
 Net Operating Income
  

    80% (or less) of budget - executive would earn 0% of the target bonus for this
category

    81% to 100% of budget - executive would earn 5% of the target bonus for this
category for each 1% of budget achieved above 80%.

    101% to 125% - 15% of the incremental earned net operating income would be
placed into a pool, to be shared among the participants. Sharing of the pool can
be discretionary and/or pro rata.

    Above 125% - additional amounts may be awarded at the discretion of the Board of
Directors.
 Discretionary
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##### Table of Contents



Name
    
    Position
    
    2009 SalaryWilliam R. Council, III
    
    Chief Executive Officer
    
    $442,000Raymond L. Tyler, Jr.
    
    Senior Vice President of Nursing Home Operations
    
    $250,000L. Glynn Riddle, Jr.
    
    Chief Financial Officer
    
    $229,000
 Compensation Committee Report
  Compensation Committee:
    
    Richard M. Brame, ChairWilliam C. ONeil, Jr.Wallace E. Olson
   Summary Compensation TableName and Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Option
    
    Other Annual
    
    All OtherPosition
    
    Year
    
    Salary($)
    
    Bonus($)(1)
    
    Awards(2)
    
    Compensation($)(3)
    
    Compensation($)(4)
    
    Total ($)(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)
    
    (g)William R. Council, III
    
    
    2008
    
    
    
    442,000
    
    
    
    53,000
    
    
    
    194,752
    
    
    
    35,360
    
    
    
    1,839
    
    
    
    726,951President and
    
    
    2007
    
    
    
    425,000
    
    
    
    298,835
    
    
    
    126,192
    
    
    
    34,000
    
    
    
    1,647
    
    
    
    885,674Chief Executive Officer
    
    
    2006
    
    
    
    389,000
    
    
    
    264,041
    
    
    
    1,191,000
    (5)
    
    
    31,098
    
    
    
    1,555
    
    
    
    1,876,694Raymond L. Tyler, Jr.
    
    
    2008
    
    
    
    308,000
    
    
    
    20,000
    
    
    
    116,851
    
    
    
    24,652
    
    
    
    1,784
    
    
    
    471,287Executive Vice President and
    
    
    2007
    
    
    
    296,000
    
    
    
    156,923
    
    
    
    75,715
    
    
    
    23,704
    
    
    
    2,616
    
    
    
    554.958Chief Operating
Officer(6)
    
    
    2006
    
    
    
    285,000
    
    
    
    150,628
    
    
    
    397,000
    (5)
    
    
    22,805
    
    
    
    2,834
    
    
    
    858,267L. Glynn Riddle, Jr.
    
    
    2008
    
    
    
    229,000
    
    
    
    25,000
    
    
    
    77,901
    
    
    
    18,288
    
    
    
    1,716
    
    
    
    351,905Executive Vice President and
    
    
    2007
    
    
    
    220,000
    
    
    
    111,792
    
    
    
    50,477
    
    
    
    17,854
    
    
    
    1,858
    
    
    
    401,981Chief Financial Officer
    
    
    2006
    
    
    
    211,000
    
    
    
    100,547
    
    
    
    794,000
    (5)
    
    
    16,917
    
    
    
    1,516
    
    
    
    1,123,980
 (1)
    
    Includes annual incentive bonus amounts which were expensed during 2008 and
paid in March 2009. Each Named Executive Officer elected to receive 50% of this bonus
in Restricted Share Units.
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(2)
    
    Expense related to equity awards is valued under the assumptions contained in
Note 9 to our Consolidated Financial Statements. Such expense is recognized over the
vesting period of the equity awards. The expense is calculated in accordance with
generally accepted accounting principles in the United States of America and does not
necessarily reflect the actual value received by the executive, which may be more or
less than the amount shown or zero. As discussed below, the Named Executive Officers
were granted SOSARs in March 2009 which were related to performance by the Named
Executive Officers in 2008.(3)
    
    Includes contributions under the Companys Executive Incentive Retirement
Plan.(4)
    
    Includes matching contributions under the Companys 401(k) plan as well as a
holiday bonus of $816, $816 and $748 paid in December 2008 to Mr. Council, Mr. Tyler
and Mr. Riddle, respectively.(5)
    
    Option award expense is significantly higher than other years due to special
one time grant of 332,400 options during 2005. The options were subject to shareholder
approval and resulted in the compensation expense being recorded in 2006. The increase
in the Companys stock price from December 2005 to June 2006 resulted in the large
non-cash compensation charge.(6)
    
    Mr. Tyler served as Chief Operating Officer until March 2009 and presently
serves as Senior Vice President of Nursing Home Operations.
  Grants of Plan-Based Awards
    
    
    
    
    
    All OtherAll
    
    OptionOther
    
    Awards:Stock
    
    Number of
    
    Exercise
    
    GrantEstimated Future Payouts Under
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    Securities
    
    or Base
    
    Date FairNon-Equity Incentive Plan Awards
    
    Estimated Future Payouts Under
    
    Number
    
    Underlying
    
    Price of
    
    Value of(1)
    
    
    
    
    

Equity Incentive Plan Awards
    
    of Shares
    
    Option
    
    Option
    
    Stock andGrant
    
    Threshold
    
    Target
    
    Maximum
    
    Threshold
    
    Target
    
    Maximum
    
    of Stock
    
    Grants (#)
    
    Awards
    
    OptionName
    
    Date
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    (#)
    
    (2)(3)
    
    ($/sh)(4)
    
    AwardsWilliam R. Council III
    
    
    N/A
    
    
    
    -
    
    
    
    221,000
    
    
    
    N/A
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Raymond L. Tyler, Jr.
    
    
    N/A
    
    
    
    -
    
    
    
    154,000
    
    
    
    N/A
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -L. Glynn Riddle, Jr.
    
    
    N/A
    
    
    
    -
    
    
    
    115,000
    
    
    
    N/A
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -William R. Council III
    
    
    03/14/08
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    25,000
    
    
    $
    10.88
    
    
    $
    235,000Raymond L. Tyler, Jr.
    
    
    03/14/08
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    15,000
    
    
    $
    10.88
    
    
    $
    141,000L. Glynn Riddle, Jr.
    
    
    03/14/08
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    10,000
    
    
    $
    10.88
    
    
    $
    94,000
 (1)

    Amounts represent target bonus percentages for 2008 and are based upon the
salaries of the executive officers as of December 31, 2008. The target amount is based on
the Company achieving 100% of budget. The amount actually paid under this non-equity
incentive plan is included in the Summary Compensation Table (column d).(2)

    These SOSARs were granted in March 2008 and the expense is recognized for
financial statement purposes over the vesting period beginning in 2008 although the grant
of the SOSAR related to performance for 2007. This table does not include the SOSARs
granted in March 2009 which related to performance for 2008 as discussed below.(3)

    These awards are also included in the Summary Compensation Table (column e) and
the Outstanding Equity Awards at Year End table.(4)

    Base price of SOSAR awards is based on the average of the high and low price on
the date of grant
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Outstanding Equity Awards at Year End December 31, 2008
 SOSAR and Option Awards
    
    Stock AwardsEquityEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    IncentiveIncentive Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Plan Awards:
    
    Equity IncentiveNumber of
    
    
    
    
    
    Awards:
    
    
    
    
    
    
    
    
    
    Number
    
    Market
    
    Number of
    
    Plan Awards:Securities
    
    Number of
    
    Number of
    
    
    
    
    
    
    
    
    
    of Shares
    
    Value of
    
    Unearned
    
    Market or PayoutUnderlying
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    or Units
    
    Shares or
    
    Shares, Units
    
    Value ofUnexercised
    
    Underlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    of Stock
    
    Units of
    
    or Other
    
    Unearned SharesOptions (#)
    
    Unexercised
    
    Unexercised
    
    Option
    
    Option
    
    That
    
    Stock That
    
    Rights That
    
    Units or OtherExercisable
    
    Options (#)
    
    Unearned
    
    Exercise
    
    Expiration
    
    Have Not
    
    Have Not
    
    Have Not
    
    Rights That HaveName
    
    (1)
    
    Unexercisable(1)
    
    Options (#)
    
    Price ($)
    
    Date
    
    Vested
    
    Vested (#)
    
    Vested (#)
    
    Not Vested (#)William R. Council III
    
    
    50,000
    
    
    
    -
    
    
    
    -
    
    
    
    $0.35
    
    
    
    04/09/2011
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -William R. Council III
    
    
    75,000
    
    
    
    -
    
    
    
    -
    
    
    
    $5.44
    
    
    
    12/13/2015
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -William R. Council III
    
    
    8,333
    
    
    
    16,667
    
    
    
    -
    
    
    
    $11.59
    
    
    
    03/07/2017
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -William R. Council III
    
    
    -
    
    
    
    25,000
    
    
    
    -
    
    
    
    $10.88
    
    
    
    03/14/2018
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Raymond L. Tyler, Jr.
    
    
    25,000
    
    
    
    -
    
    
    
    -
    
    
    
    $0.35
    
    
    
    04/09/2011
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Raymond L. Tyler, Jr.
    
    
    25,000
    
    
    
    -
    
    
    
    -
    
    
    
    $5.44
    
    
    
    12/13/2015
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Raymond L. Tyler, Jr.
    
    
    5,000
    
    
    
    10,000
    
    
    
    -
    
    
    
    $11.59
    
    
    
    03/07/2017
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Raymond L. Tyler, Jr.
    
    
    -
    
    
    
    15,000
    
    
    
    -
    
    
    
    $10.88
    
    
    
    03/14/2018
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -L. Glynn Riddle, Jr.
    
    
    50,000
    
    
    
    -
    
    
    
    -
    
    
    
    $5.44
    
    
    
    12/13/2015
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -L. Glynn Riddle, Jr.
    
    
    3,333
    
    
    
    6,667
    
    
    
    -
    
    
    
    $11.59
    
    
    
    03/07/2017
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -L. Glynn Riddle, Jr.
    
    
    -
    
    
    
    10,000
    
    
    
    -
    
    
    
    $10.88
    
    
    
    03/14/2018
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
 (1)

    Each option and SOSAR grant vests one-third on each of the first, second and
third anniversary of the date of grant.
  Key employment agreements or advisor agreements.
  14




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Potential Payments upon Termination or Change-in-Control
  William R. Council, III
 Termination
    
    
    Change inwithout
    
    
    Control
    
    
    Change inCause or
    
    
    Resulting in
    
    
    Control NotVoluntary
    
    
    Termination
    
    
    Constructive
    
    
    Termination or
    
    
    Resulting inEstimated Payments
    
    Termination
    
    
    for Cause
    
    
    Discharge
    
    
    Resignation
    
    
    Termination
    
    
    Death
    
    
    DisabilitySeveranceSalary
    
    
    
    
    
    
    
    
    
    $
    1,105,000
    
    
    $
    1,105,000
    
    
    
    
    
    
    
    
    
    
    
    SeveranceBonus
    
    
    
    
    
    
    
    
    
    $
    53,000
    (1)
    
    $
    53,000
    (1)
    
    
    
    
    
    
    
    
    
    
    Vesting of unvested

equity awards
    
    
    
    
    
    
    
    
    
    
    
    (2)
    
    
    
    (2)
    
    
    
    (2)
    
    
    
    
    
    
    Repurchase of

outstanding options
    
    
    
    
    
    
    
    
    
    $
    132,000
    (3)
    
    $
    132,000
    (3)
    
    
    
    
    
    
    
    
    
    
    Benefits/Perquisites
    
    
    
    
    
    
    
    
    
    $
    63,202
    (4)
    
    $
    63,202
    (4)
    
    
    
    
    
    
    
    
    
    
    TOTAL
    
    
    
    
    
    
    
    
    
    $
    1,353,202
    
    
    $
    1,353,202
    
    
    
    
    
    
    
    
    
    
    
    
 (1)
    
    Based on the annual incentive earned by Mr. Council during 2008 which was not
paid as of December 31, 2008.(2)
    
    As of December 31, 2008, Mr. Council had 41,667 SOSAR equity awards which were
not already fully vested. The exercise price of these SOSARs was greater than the closing
share price of Advocats stock at December 31, 2008; therefore, no amounts would be paid
for those SOSARs upon termination. In March 2009, Mr. Council received SOSARs which vest
over a 3 year period.(3)
    
    Based on options to purchase 50,000 shares of common stock held by Mr. Council
times $2.99, the closing price of Advocats stock on the last trading date of the year,
less the exercise price of the options. The exercise price of 75,000 vested options and
8,333 vested SOSARs was greater than the closing share price of Advocats stock at December
31, 2008.
 15




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##### Table of Contents



(4)
    
    Based on estimated cost of continued health insurance, disability insurance,
401(k) Company match and EIRP amounts for 18 months following termination.
 Raymond L. Tyler, Jr.
 Termination
    
    
    Change inwithout
    
    
    Control
    
    
    Change inCause or
    
    
    Resulting in
    
    
    Control NotVoluntary
    
    
    Termination
    
    
    Constructive
    
    
    Termination or
    
    
    Resulting inEstimated Payments
    
    Termination
    
    
    for Cause
    
    
    Discharge
    
    
    Resignation
    
    
    Termination
    
    
    Death
    
    
    DisabilitySeveranceSalary
    
    
    
    
    
    
    
    
    
    $
    308,148
    
    
    $
    308,148
    
    
    
    
    
    
    
    
    
    
    
    SeveranceBonus
    
    
    
    
    
    
    
    
    
    $
    20,000
    (1)
    
    $
    20,000
    (1)
    
    
    
    
    
    
    
    
    
    
    Vesting of unvested 
equity awards
    
    
    
    
    
    
    
    
    
    
    
    (2)
    
    
    
    (2)
    
    
    
    (2)
    
    
    
    
    
    
    Repurchase of 
outstanding options
    
    
    
    
    
    
    
    
    
    $
    66,000
    (3)
    
    $
    66,000
    (3)
    
    
    
    
    
    
    
    
    
    
    Benefits/Perquisites
    
    
    
    
    
    
    
    
    
    $
    53,264
    (4)
    
    $
    53,264
    (4)
    
    
    
    
    
    
    
    
    
    
    TOTAL
    
    
    
    
    
    
    
    
    
    $
    447,412
    
    
    $
    447,412
    
    
    
    
    
    
    
    
    
    
    
    
 (1)
    
    Based on the annual incentive earned by Mr. Tyler during 2008 which was not paid
as of December 31, 2008.(2)
    
    As of December 31, 2008, Mr. Tyler had 25,000 SOSAR equity awards which were not
already fully vested. The exercise price of these SOSARs was greater than the closing
share price of Advocats stock at December 31, 2008; therefore, no amounts would be paid
for these SOSARs upon termination. In March 2009, Mr. Tyler received SOSARs which vest
over a 3 year period.(3)
    
    Based on options to purchase 25,000 shares of common stock held by Mr. Tyler
times $2.99, the closing price of Advocats stock on the last trading date of the year,
less the exercise price of the options. The exercise price of 25,000 options and 5,000
vested SOSARs was greater than the closing share price of Advocats stock at December 31,
2008.(4)
    
    Based on estimated cost of continued health insurance, disability insurance,
401(k) Company match and EIRP amounts for 18 months following termination.
 L. Glynn Riddle, Jr.
 Termination
    
    
    Change inwithout
    
    
    Control
    
    
    Change inCause or
    
    
    Resulting in
    
    
    Control NotVoluntary
    
    
    Termination
    
    
    Constructive
    
    
    Termination or
    
    
    Resulting inEstimated Payments
    
    Termination
    
    
    for Cause
    
    
    Discharge
    
    
    Resignation
    
    
    Termination
    
    
    Death
    
    
    DisabilitySeveranceSalary
    
    
    
    
    
    
    
    
    
    $
    228,596
    
    
    $
    228,596
    
    
    
    
    
    
    
    
    
    
    
    SeveranceBonus
    
    
    
    
    
    
    
    
    
    $
    25,000
    (1)
    
    $
    25,000
    (1)
    
    
    
    
    
    
    
    
    
    
    Vesting of unvested 
equity awards
    
    
    
    
    
    
    
    
    
    
    
    (2)
    
    
    
    (2)
    
    
    
    (2)
    
    
    
    
    
    
    Repurchase of 
outstanding options
    
    
    
    
    
    
    
    
    
    
    
    (3)
    
    
    
    (3)
    
    
    
    
    
    
    
    
    
    
    Benefits/Perquisites
    
    
    
    
    
    
    
    
    
    $
    51,590
    (4)
    
    $
    51,590
    (4)
    
    
    
    
    
    
    
    
    
    
    TOTAL
    
    
    
    
    
    
    
    
    
    $
    305,186
    
    
    $
    305,186
    
    
    
    
    
    
    
    
    
    
    
    
 (1)
    
    Based on the annual incentive earned by Mr. Riddle during 2008 which was not paid
as of December 31, 2008.(2)
    
    As of December 31, 2008, Mr. Riddle had 16,667 SOSAR equity awards which were not
already fully vested. The exercise price of these SOSARs was greater than the closing
share price of Advocats stock at December 31, 2008; therefore, no amounts would be paid
for these SOSARs upon termination. In March 2009, Mr. Riddle received SOSARs which vest
over a 3 year period.
 16




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##### Table of Contents



(3)
    
    Based on options to purchase 50,000 shares of common stock and 3,333 vested
SOSARs held by Mr. Riddle all of which had a greater exercise price than the closing price
of Advocats stock on the last trading date of the year.(4)
    
    Based on estimated cost of continued health insurance, disability insurance,
401(k) Company match and EIRP amounts for 18 months following termination.
 Director Compensation
 ,
   17




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##### Table of Contents



Non-Employee Director CompensationFor the Year Ended December 31, 2008Fees Earned or Paid in CashRegular
    
    Supplemental
    
    Option
    
    All OtherDirector
    
    Fees ($)(1)
    
    Fees ($)(2)
    
    Awards ($)(7)
    
    Compensation ($)(8)
    
    Total ($)Wallace E. Olson
    
    
    33,000
    
    
    
    44,000
    (3)
    
    
    7,790
    
    
    
    12,103
    
    
    
    96,893William C. ONeil, Jr.
    
    
    33,000
    
    
    
    42,500
    (4)
    
    
    7,790
    
    
    
    -
    
    
    
    83,290Richard M. Brame
    
    
    33,000
    
    
    
    36,250
    (5)
    
    
    7,790
    
    
    
    -
    
    
    
    77,040Robert Z. Hensley
    
    
    33,000
    
    
    
    36,750
    (6)
    
    
    7,790
    
    
    
    -
    
    
    
    77,540Chad A. McCurdy(9)
    
    
    24,000
    
    
    
    27,500
    
    
    
    -
    
    
    
    -
    
    
    
    51,500
 (1)
    
    Regular fees represent an annual directors fee of $36,000 paid to directors who
are not officers, employees, or consultants of the Company for the period from January 1
through June 30, 2008. Effective July 1, 2008 the Board restructured the compensation fee
schedule and this amount change to $30,000 annually.(2)
    
    Supplemental fees are paid to directors for attendance at board meetings and
committee meetings.(3)
    
    Mr. Olson received $15,000 for serving as Chair of the Board meetings.(4)
    
    Mr. ONeil received $12,500 for serving as Chair of the audit committee meetings.(5)
    
    Mr. Brame received $6,250 for serving as Chair of the compensation committee
meetings.(6)
    
    Mr. Hensley received $6,250 for serving as Chair of the nominating and corporate
governance committee meetings.(7)
    
    The expense related to equity awards is based on equity grants valued under the
assumptions contained in Note 9 to our Consolidated Financial Statements and is non-cash in
nature. Such expense is recognized over the vesting period of the equity awards.(8)
    
    Includes insurance premiums paid by the Company for non-employee directors.(9)
    
    Mr. McCurdy became a board member effective March 12, 2008 and, therefore, did
not receive the full year compensation for the annual directors fee.
 Compensation Committee Interlocks and Insider Participation
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
  18




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##### Table of Contents



Shares Beneficially Owned(1)Name
    
    Number(1)
    
    
    Percent(2)Chad A. McCurdy (3)
    
    
    632,300
    
    
    
    11.1
    %1621 Galleria Blvd.
     Brentwood, TN 37027Wallace E. Olson (4)
    
    
    555,199
    
    
    
    9.8
    %1621 Galleria Blvd.
     Brentwood, TN 37027Ameriprise Financial, Inc. (5)
    
    
    491,400
    
    
    
    8.7
    %RiverSource Investments, LLC
     c/o Ameriprise Financial, Inc.
     145 Ameriprise Financial Center
     Minneapolis, MN 55474Altrinsic Global Advisors, LLC (6)
    
    
    435,000
    
    
    
    7.7
    %100 First Stamford Place, 6th Floor
Stamford, CT 06902Bristol Investment Fund, LTD (7)
    
    
    393,450
    
    
    
    6.9
    %c/o Bristol Capital Advisors, LLC
     10990 Wilshire Blvd., Suite 1410
     Los Angeles, CA 90024FMR LLC (8)
    
    
    345,254
    
    
    
    6.1
    %82 Devonshire St.
     Boston, MA 02109Wellington Management Company, LLP (9)...
    
    
    315,248
    
    
    
    5.6
    %75 State Street
     Boston, MA 02109William R. Council, III (10)
    
    
    180,219
    
    
    
    3.1
    %William C. ONeil, Jr. (11)
    
    
    26,999
    
    
    
    *Richard M. Brame (12)
    
    
    29,999
    
    
    
    *Robert Z. Hensley (13)
    
    
    21,999
    
    
    
    *Raymond L. Tyler, Jr. (14)
    
    
    68,230
    
    
    
    1.2
    %L. Glynn Riddle, Jr. (15)
    
    
    74,949
    
    
    
    1.3
    %All directors and executive officers as a group (8
persons) (16)
    
    
    1,589,894
    
    
    
    26.5
    %
 *
    
    less than 1%(1)
    
    Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares
shown as beneficially owned by them, subject to community property laws, where applicable. 19




---



##### Table of Contents



(2)
    
    The percentages shown are based on 5,675,987 shares of common stock outstanding plus, as to each individual and group listed, the number of
shares of common stock deemed to be owned by such holder pursuant to Rule 13d-3 under the Exchange Act, assuming exercise of options or SOSARs held by such
holder that are exercisable within 60 days of April 15, 2009.(3)
    
    Mr. McCurdys shares include 1,000 shares owned by his child and 567,100 owned by Marlin Capital Partners, LLC of which Mr. McCurdy is the
Managing Partner. Includes 10,000 shares purchasable upon exercise of options.(4)
    
    Mr. Olsons shares include 1,300 shares owned jointly with his daughter and 548,900 owned by a partnership controlled by Mr. Olson. Includes
4,999 shares purchasable upon exercise of options and SOSARs.(5)
    
    Based solely on a Schedule 13G filed by Ameriprise Financial, Inc.
and RiverSource Investments, LLC on February 12, 2009.(6)
    
    Based solely on a Schedule 13G/A filed by Altrinsic Global Advisors, LLC on February 10, 2009.(7)
    
    Based solely on a Preliminary Proxy statement filed by Bristol Investment Fund, LTD on April 10, 2009.(8)
    
    Based solely on a Schedule 13G filed by FMR LLC on February 17, 2009.(9)
    
    Based solely on a Schedule 13G filed by Wellington Management Company, LLP on February 17, 2009.(10)
    
    Includes 149,999 shares purchasable upon exercise of options and SOSARs. Ownership does not include 12,802 Restricted Share Units purchased
on March 13, 2009 in lieu of cash bonus. Restricted Share Units will be converted to shares and delivered on March 13, 2011.(11)
    
    Includes 21,999 shares purchasable upon exercise of options and SOSARs.(12)
    
    Includes 3,999 shares purchasable upon exercise of options and SOSARs.(13)
    
    Includes 15,999 shares purchasable upon exercise of options and SOSARs.(14)
    
    Includes 65,000 shares purchasable upon exercise of options and SOSARs. Ownership does not include 4,831 Restricted Share Units purchased on
March 13, 2009 in lieu of cash bonus. Restricted Share Units will be converted to shares and delivered on March 13, 2011.(15)
    
    Includes 59,999 shares purchasable upon exercise of options and SOSARs. Ownership does not include 6,039 Restricted Share Units purchased
on March 13, 2009 in lieu of cash bonus. Restricted Share Units will be converted to shares and delivered on March 13, 2011.(16)
    
    Includes 331,994 shares purchasable upon exercise of options and SOSARs. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
    
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  20




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##### Table of Contents



2008
    
    
    2007Audit Fees(1)
    
    $
    637,000
    
    
    $
    610,000Audit-Related Fees(2)
    
    
    10,000
    
    
    
    11,000Tax Fees(3)
    
    
    100,000
    
    
    
    113,000Total Fees for Services Provided
    
    $
    747,000
    
    
    $
    734,000
 (1)
    
    Audit Fees include fees billed for professional services rendered
in connection with the audit of the Companys financial statements, audit of
internal control over financial reporting (pursuant to Section 404 of
Sarbanes-Oxley) and fees charged for the review of the Companys quarterly
financial statements. These fees also include assistance with the review of
documents filed with the SEC.(2)
    
    Audit Related Fees consist of audits of the Companys savings plan
and trust.(3)
    
    Tax Fees include those charged for tax advice, planning and
compliance.
   
 PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  ExhibitNumber
    
    Description of Exhibits31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).32
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b)
or Rule 15d-14(b).
 21




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##### Table of Contents



ADVOCAT INC.
 /s/ William R. Council, III

William R. Council, IIIPresident and Chief Executive Officer(Principal Executive Officer)April 30, 2009
 22