The board of directors of Diversicare Healthcare Services, Inc. (“Diversicare” or the “Company”) is soliciting proxies for this year’s annual meeting of shareholders. This proxy statement contains important information for you to consider when deciding how to vote on matters brought before the meeting. Please read it carefully.

The board has set April 27, 2016,25, 2018, as the record date for the meeting. Shareholders who owned Diversicare common stock on that date are entitled to receive notice of and vote at the meeting. On the record date, there were 6,361,1326,541,495 shares of Diversicare common stock and no shares of preferred stock outstanding. Holders of the Company’s common stock are entitled to one vote per share owned of record. Cumulative voting is not permitted. The Company has the authority to issue shares of preferred stock in one or more series, although no series of preferred stock are currently outstanding.

You are receiving this proxy statement and proxy form because you own shares of Diversicare common stock. This proxy statement describes issues on which you are entitled to vote. If your shares are registered in your name with the Company’s transfer agent, you are considered to be the owner of record of those shares and these proxy materials are being sent to you directly. When you sign the proxy form, you appoint Kelly J. Gill, the Company’s Chief Executive Officer, and James R. McKnight, Jr., the Company’s Secretary, or either of them, as your representative at the meeting. Mr. Gill and Mr. McKnight will vote your shares at the meeting as you have instructed on the proxy form. This way, your shares will be voted even if you cannot attend the meeting.

If your shares are not voted in person or by telephone or on the Internet, they cannot be voted on your behalf unless you provide our Secretary with a signed proxy authorizing another person to vote on your behalf. Even if you expect to attend the meeting in person, in order to ensure that your shares are represented, please vote using the telephone or Internet voting instructions found on the enclosed proxy card or complete, sign and date the enclosed proxy form and return it promptly.

If your shares are held in a brokerage account or in the name of another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, trustee or nominee together with a voting instruction form. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote your shares. Since a beneficial owner is not the owner of record, you may not vote these

shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the annual meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or nominee how to vote your shares.

The Company’s board of directors is sending you this proxy statement in connection with its solicitation of proxies for use at the 20162018 annual meeting. Certain of our directors, officers and employees may solicit proxies by mail, telephone, facsimile or in person. The Company will pay for the costs of solicitation. Diversicare has decided to engage Georgeson Inc. to assist in the solicitation of proxies on behalf of the board of directors. As of the date of this proxy, we expect to pay Georgeson a customary fee of approximately $7,000 plus expenses for its assistance. We do not expect to pay any other compensation for the solicitation of proxies, except to brokers, nominees and similar record holders for reasonable expenses in mailing proxy materials to beneficial owners of the Company’s common stock.

At the annual meeting you will be asked to vote on fivethree proposals. The first proposal is an amendment to our Certificate of Incorporation to declassify our board of directors. The second proposal is the election of three “Class 1 Directors”seven directors to serve a one-year term (or three-year term if Proposal 1 is not approved) on the Company’s board of directors. The third proposal is an amendment to the 2008 Stock Purchase Plan to increase the number of shares available under the plan by 200,000 shares and to extend the term of the plan. The fourthsecond proposal is an advisory vote on the Company’s compensation paid to our named executive officers. The fifththird proposal is to ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm.

firm for 2018.

Only shareholders who owned Diversicare common stock as of the close of business on the record date, April 27, 2016,25, 2018, are entitled to receive notice of the annual meeting and to vote the shares that they held on that date at the meeting, or at any postponement or adjournment of the meeting.

You may vote your shares either in person at the annual meeting, by telephone, on the Internet or by mail. To vote by mail, you should mark, date, sign and mail the enclosed proxy in the prepaid envelope provided. Instructions for voting on the Internet or by telephone may be found in the Proxy Voting Instructions accompanying the proxy card. If your shares are registered in your own name and you attend the meeting, you may deliver your completed proxy in person. “Street name” shareholders, that is, those shareholders whose shares are held in the name of and through a broker or nominee, who wish to vote at the meeting will need to obtain a proxy form from the institution that holds their shares if they did not receive one directly. Shares held in street name may also be eligible for Internet or telephone voting in certain circumstances if the owner did not receive a proxy form directly.

Yes. You may revoke your proxy and change your vote at any time before the proxy is exercised by filing with Mr. McKnight either a written notice of revocation or another signed proxy bearing a later date. The powers of the proxy holders will be suspended if you attend the meeting in person and inform the Secretary that you wish to revoke or replace your proxy. Your attendance at the meeting will not by itself revoke a previously granted proxy. If you hold your shares in street name through a broker, bank or other nominee, you may revoke your proxy by following instructions provided by your broker, bank or nominee. No notice of revocation or later-dated proxy will be effective until received by Mr. McKnight at or prior to the annual meeting.

The board recommends a vote FOR proposals 1, 2 3, 4 and 5.3. If properly signed and returned in time for the annual meeting, the enclosed proxy will be voted in accordance with the choices specified thereon. If any other matters are properly considered at the meeting, Mr. Gill and Mr. McKnight will vote as recommended by the board of directors on such matters, or if the board does not give a recommendation, Mr. Gill and Mr. McKnight will have discretion to vote as they think best on such matters, in each case to the extent permitted under the Federal Securities Laws. If you return a signed proxy, but do not specify a choice, Mr. Gill and Mr. McKnight, as the persons named as the proxy holder on the proxy form, will vote as recommended by the board of directors. If a broker submits a proxy that indicates that the broker does not have discretionary authority as to certain shares to vote on one or more matters, those shares will be counted as shares that are present for purposes of determining the presence of a quorum but will not be considered as present and entitled to vote with respect to such matters. Abstentions will be counted as shares that are present for purposes of determining the presence of a quorum and are counted in the tabulations of votes cast on proposals presented to shareholders. Each proposal is tabulated separately.

If your shares are registered in your name and you do not return your proxy form or do not vote in person at the annual meeting, your shares will not be voted. If your shares are held in street name and you do not submit voting instructions to your broker, your broker may vote your shares for you. Brokers normally have discretion to vote on routine matters, such as ratification of auditors, but not on non-routine matters, such as shareholder proposals. Uncontested director elections are no longer considered routine matters and brokers no longer have discretion to vote on any director election.

As of the record date, the Company had a total of 6,361,1326,541,495 shares of outstanding common stock. A majority of the Company’s outstanding shares as of the record date (a quorum) must be present at the annual meeting in order to hold the meeting and conduct business. Shares are counted as present at the meeting if: (a) a shareholder is present and votes in person at the meeting; (b) a shareholder has properly submitted a proxy form, even if the shareholder marks abstentions on the proxy form; or (c) a broker or nominee has properly submitted a proxy form, even if the broker does not vote because the beneficial owner of the shares has not given the broker or nominee specific voting instructions and the broker or nominee does not have voting discretion (a “broker non-vote”). A share, once represented for

any purpose at the meeting, is deemed present for purposes of determining a quorum for the meeting (unless the meeting is adjourned and a new record date is set for the adjourned meeting), even if the holder of the share abstains from voting with respect to any matter brought before the meeting.

The nominees for director who receive the highest number of FOR votes cast will be elected. Withheld votes and broker non-votes, if any, are not treated as votes cast and, therefore, will have no effect on the proposal to elect directors.

Approval of Proposals 3, 42 and 53 requires the affirmative vote of the holders of at least a majority of shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. Abstentions are shares that are present and entitled to vote, so abstentions have the same effect as a vote against Proposals 3, 42 and 5.3. Broker non-votes are not considered shares that are entitled to vote and thus will have no effect on the outcome of the vote for these proposals. Proposals 42 and 53 are advisory votes and do not obligate the Company to take any action.

The Company has not received timely notice of any other shareholder proposals to be considered at the annual meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934. Shareholders may submit matters for a vote without inclusion in this proxy statement only in accordance with Rule 14a-4(c) or the Company’s bylaws. The Company does not intend to present any other business at the annual meeting and does not know of any other business intended to be presented other than as discussed or referred to in this proxy statement (the date specified in the Company’s bylaws for advance notice of proposals by shareholders has passed). If any other matters properly come before the annual meeting, the persons named in the accompanying proxy card will vote the shares represented by the proxy in the manner as the board of directors may recommend, or in their discretion.

It is contemplated that the Company’s 20172019 annual meeting of shareholders will take place in June 2017.2019. Shareholders’ proposals will be eligible for consideration for inclusion in the proxy statement for the 20172019 annual meeting pursuant to Rule 14a-8 if such proposals are received by the Company before the close of business on January 4, 2017.2, 2019. In addition, any shareholder submitting a recommendation for a director candidate must submit it to the secretary at the Company’s corporate headquarters on or before January 2, 2019. Any such director recommendation will be reviewed and evaluated as would any recommendation from any other source. Notices of shareholders’ proposals submitted outside the processes of Rule 14a-8 will generally be considered timely (but not considered for inclusion in our proxy statement), pursuant to the advance notice requirement set forth in Rule 14a-4(c). For shareholders seeking to present a proposal at the 20172019 annual meeting without inclusion of such proposal in the Company’s proxy materials, the proposal should be received by the Company no later than March 18, 2017.

19, 2019.

There are no appraisal rights or similar rights of dissenters with respect to the matters to be voted upon.

The board has established a process for shareholders to send communications to the board or any of the directors. Shareholders may send communications to the board or any of the directors by sending such communication addressed to the board of directors or any individual director c/o Diversicare Healthcare Services, Inc., 1621 Galleria Boulevard, Brentwood, Tennessee 37027. All communications will be compiled and submitted to the board or the individual directors on a monthly basis.

The Company is authorized to issue 20,000,000 shares of common stock and 1,000,000 shares of preferred stock. As of April 27, 2016,25, 2018, there were 6,361,1326,541,495 shares of common stock outstanding and no shares of preferred stock outstanding. The following table shows, as of April 27, 2016,25, 2018, the amount of Diversicare common stock beneficially owned (unless otherwise indicated) by (a) each director and director nominee; (b) each of the Named Executive Officers (as defined in “Executive Compensation,” below); (c) all of the Company’s directors and executive officers as a group; and (d) each shareholder known by the Company to be the beneficial owners of more than 5% of the outstanding shares of Diversicare common stock. Based on information furnished by the owners and except as otherwise noted, the Company believes that the beneficial owners of the shares listed below, have, or share with a spouse, voting and investment power with respect to the shares. The address for all of the persons listed below is 1621 Galleria Boulevard, Brentwood, Tennessee 37027, except as otherwise listed in the table below.

		Shares Beneficially Owned
Name		Number (1)				Percent(2)
Chad A. McCurdy(3)			1,285,791				20.2	%
Wallace E. Olson(5)			558,233				8.8	%
Osmium Partners, LLC(8)			469,360				7.4	%
300 Drakes Landing Road, Suite 172
Greenbrae, CA 94904
Altrinsic Global Advisors, LLC(6)			443,952				7.0	%
100 First Stamford Place, 6th Floor
Stamford, CT 06902
Central Funding, LLC(7)			400,000				6.3	%
700 Chappell Road
Charleston, WV 25304

		Shares Beneficially Owned
Name		Number (1)				Percent(2)
Covington Health Group, LLC(4)			368,060				5.8	%
1175 Peachtree Street, Suite 1230
Atlanta, GA 30361
Kelly J. Gill(9)			301,552				4.7	%
James R. McKnight, Jr.(10)			62,698				1.0	%
Leslie D. Campbell(12).			52,146					*
Richard M. Brame(11)			44,257					*
Robert Z. Hensley(13)			43,691					*
William C. O’Neil, Jr.(14)			38,691					*
Robert A. McCabe, Jr.(15)			8,013					*
All directors and executive officers as a group (9 persons)(16)			2,395,072				37.7	%

The following table provides aggregate information as of Directors

Item 3 of ARTICLE NINTHDecember 31, 2017, with respect to shares of our Certificate of Incorporation (the “Certificate”) currently providescommon stock that may be issued under our board of directors shall be classified in three classes, as nearly equal in size as possible, with each class serving for a term of three years. On April 14, 2016, our board unanimously adopted a proposal to amend our Certificate to remove the provisions providing for a classified board, subject to shareholder approval of the amendment, so that each director would stand for re-election on an annual basis.

The nominating and corporate governance committee recommended that the Company declassify its board of directors. The nominating and corporate governance committee has considered carefully the advantages and disadvantages of maintaining a classified board structure. After this assessment, the full board of directors, upon the recommendation of the nominating and corporate governance committee, has decided that this is an appropriate time to propose declassifying the board. This determination by the board of directors furthers its goal of ensuring that the Company’s corporate governance policies maximize management accountability to shareholders and would, if adopted, allow shareholders the opportunity each year to register their views on the performance of the board of directors.

The proposed amendment to our Certificate eliminates the classification of the board and provides for the annual election of all directors. If the Proposal No.existing equity compensation plans:

The Company’s Certificate provides that the number of directors to be elected by the shareholders shall be at least three and not more than 15, as established by the board of directors from time to time. The number of directors is currently set at seven.

The Certificate currently requireseight. Mr. William C. O’Neil, Jr., a director of the Company since its inception, has notified the Company that he will not stand for re-election at the Company’s2018 annual meeting and will retire from the board of directors be divided into three classeseffective immediately after the annual meeting, at which are as nearly equal intime the number as possible.

In Proposal No. 1 of this proxy statement, we have asked our shareholders to consider and vote upon a proposal to amend our Certificate to eliminate the staggered board provisions and provide that each member of our board of directors will be elected annually. If Proposal No. 1 is approved by our shareholders, the nominees listed below, if electedreduced to seven.

The declassification of the board of directors was approved at the annual meeting will hold office only until the 2017our 2016 annual meeting. However,This declassification was phased in over a three-year period beginning with the approval of the Proposal No. 1 will not impact the terms of the Class 2 or Class 3 directors. The Class 22016 annual meeting. All directors will remain directors until their existing term ends in 2017 and the Class 3 directors will remain directors until their existing term ends in 2018. Thus at the 2017 annual meeting, the Class 1 and Class 2 directors will be considered for reelection and in 2018 the entire board will be considered for reelection. If Proposal No. 1 is not approved by our shareholders, the nominees listed below, ifare now elected to the board at the Annual Meeting, will hold office until the 2019 annual meeting.

each year.

The board may reduce the number of seats on the board or designate a replacement nominee. If the board designates a replacement nominee, we will file and deliver an amended proxy statement that (1) identifies the replacement nominee, (2) discloses that such nominee has consented to being named in the revised proxy statement and to serve if elected, and (3) includes the information with respect to the replacement nominee that is required to be disclosed by the Securities and Exchange Commission’s proxy solicitation rules of the Exchange Act. Only after such supplemental disclosure will the shares represented by proxy be voted FOR the replacement nominee. The board presently has no knowledge that any nominee will refuse, or be unable, to serve.

It is the Company’s policy that all of its directors attend the annual meeting, if possible. All of the directors attended the 20152017 annual meeting of shareholders. All directors and all nominees are expected to be in attendance at the 20162018 meeting.

Information regarding the nominees is provided below, including name, age, principal occupation during the past five years and the year first elected as a director of the Company and the expiration date of each such director’sCompany. Each director will be elected for a one-year term. Each of the Class 1 nominees for director is presently a director of the Company.

The following directors have been nominated to continue in office for a new one year term or until the election and qualification of their successors in office:

During 2015,2017, the board of directors held fivenine meetings, onefour of which waswere telephonic. Each director attended at least 75% of the aggregate of (i) the total number of meetings of the board of directors and (ii) the total number of meetings held by all committees on which the individual director served.

In July 2015, the nominatingGovernance and corporate governance committeeNominating Committee recommended and the full board approved a revised director compensation plan. Under the revised director compensation, directors who are not officers, employees or consultants of the Company (currently(During 2017, directors Brame, Hensley, McCurdy, McCabe, O’Neil and Olson) receive a director’s fee of $40,000 annually, $2,500 per board meeting attended, and $2,000 for each planned committee meeting. The audit committee has four planned meetings each year, and the nominatinggovernance and corporate governancenominating committee and the compensation committee each have two planned meetings during the year. Board and committee chair annual retainers consist of $45,000 for the board chair, $17,500 for the audit chair, $15,000 for the risk management chair, $12,500 for the compensation chair and $10,000 for the nominatinggovernance and corporate governancenominating chair, with each retainer paid in quarterly installments. Additional telephonicTelephonic board and committee meetings and additional non-planned committee meetings on the day of other meetings are paid at $750 each. Directors are also entitled to participate in the Company’s health care plan. In addition, as part of the new director compensation plan, the board granted a one-time grant of 5,000 shares of common stock to each non-employee director. Directors who are officers or employees of the Company or its affiliates have not been compensated separately for services as a director. Directors are reimbursed for expenses incurred in connection with attendance at board and committee meetings.

In March 2015,2017, each non-employee director was granted 3332,000 shares of restricted stock. This restricted stock vests one-third on each of the first, second and third anniversaries of the grant date. On June 4, 2015, each non-employee director was granted 5,000 shares of common stock of the Company. As part of the revised director compensation plan discussed above, inIn March 2016,2018, each non-employee director was granted 2,000 shares of restricted stock. This

In addition, Mr. Brame and Mr. Hensley were granted an additional 350 shares of restricted stock and Mr. McCurdy was granted an additional 5,000 shares of restricted stock to replace SOSARs and stock options that expired in March 2018 but were underwater at the time of expiration. The restricted stock granted in March 2018 vests one-third on each of the first, second and third anniversaries of the grant date. The 2,000These shares of restricted stock were granted in 20162018 and therefore are not included in the table below. The following table shows the compensation of each of our non-employee directors during 2015.

		Non-Employee Director Compensation For the Year Ended December 31, 2015
		Fees Earned or Paid in Cash
Director		Regular Fees ($)(1)				Supplemental Fees ($)(2)				Equity Awards ($)(3)				All Other Compensation ($)				Total ($)
Wallace E. Olson			35,000				40,500	(5)			68,263				11,847	(4)			155,610
Chad A. McCurdy			35,000				73,000	(6)			68,263				17,022	(4)			193,285
William C. O’Neil			35,000				37,500	(7)			68,263				—				140,763
Richard M. Brame			35,000				51,500	(8)			68,263				11,377	(4)			166,140
Robert Z. Hensley			35,000				53,000	(9)			68,263				—				156,263
Robert A. McCabe, Jr.			10,000				4,500	(10)			63,029	(10)			—				77,529

2017.

The following section describes the compensation that the Company paid to its Chief Executive Officer, Chief Operating Officer and Chief Financial Officer during 20152017 (collectively, the “Named Executive Officers”) as well as the Company’s compensation plan for its executive officersNamed Executive Officers in 2016.

2018.

Decisions on compensation of our executive officers are made by the compensation committee of our board of directors. The compensation committee consists of Mr. Olson,O'Neil, Mr. Brame, Mr. McCabe and Mr. McCurdy. The board of directors has determined that each member of the compensation committee is an independent director. It is the responsibility of the compensation committee to assure the board that the executive compensation programs are reasonable and appropriate, meet their stated purpose and effectively serve our needs and the needs of our shareholders.

We believe that the executive compensation program should align the interests of shareholders and executives. Our primary objective is to provide high-quality patient care while maximizing shareholder value. The compensation committee seeks to forge a strong link between our strategic business goals and our compensation goals. We believe our executive compensation program is consistent with this overall philosophy for all management levels. We believe that the more employees are aligned with our strategic objectives, the greater our success on both a short-term and long-term basis. The compensation committee has discussed and concluded that we do not believe our policies and practices of compensating our employees, including non-executive officers, are reasonably likely to have a material adverse effect on the Company because such policies and practices do not relate to risk management practices and risk-taking incentives. The Company’s say-on-pay proposal was approved by over 84%91% of the votes cast at the 20152016 annual meeting. The compensation committee and the board had a discussion of the results of such shareholder vote and given the significant level of shareholder support, the compensation committee did not materially revise the Company’s compensation policies and decisions relating to the named executive officersNamed Executive Officers as a result of such vote. The compensation committee will continue to consider the outcome of shareholder votes and other shareholder feedback in making future compensation decisions for the named executive officers.

Named Executive Officers.

Based on this peer group, Compensation Strategies determined that each of the named executive officers’Named Executive Officers’ base salary was below market and that the long-term incentives were substantially below market. The compensation committee took this into consideration when setting the 2015 compensation.

The Company did not engage Compensation Strategies in 2016 or 2017.

In connection with this overall strategy, we strive to give assurance of fair treatment and financial protection so that an executive will be able to identify and consider transactions that would be beneficial to the long-term interests of shareholders but which might have a negative impact on the executive, without undue concern for his personal circumstances. We also give consideration to safeguarding the business of the Company, including protecting the Company from competition and other adverse activities by the executive during and after employment.

The Company’s strategic goals are:

•

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.

In order to accomplish our objectives, the compensation committee strives to design its executive compensation such that when the Company meets or exceeds its annual operating goals, the annual executive pay targets (i.e., base salary plus incentive) are competitive with the compensation of similar U.S. public healthcare companies having similar revenues.

As a result, we have generally established the following elements of compensation for our Named Executive Officers:

We pay base salaries to our Named Executive Officers which are intended to be at or near the market median for base salaries of similar companies. These amounts are evaluated annually. The compensation committee considered the information provided by Compensation Strategies. We believe that such base salaries are necessary to attract and retain executive talent.

On February 27, 2015,March 2, 2017, the compensation committee of the board of directors of the Company approved the 20152017 Annual Incentive Plan for the Company’s executive officers. The 20152017 Annual Incentive Plan provided the following Targets:

Position		Bonus Target
Chief Executive Officer		$	600,000
Chief Operating Officer		$	396,000
Chief Financial Officer		$	363,000

In 2014,2016, Mr. Gill, Ms. Campbell and Mr. McKnight elected to use a percentage of their 20152017 annual bonus to purchase shares of the Company’s common stock pursuant to the 2008 Stock Purchase Plan. The 2008 Stock Purchase Plan allows eligible employees to use a designated portion of their salary or bonus to purchase shares of stock at a 15% discount from the market price. The shares issued under the 2008 Stock Purchase Plan are either shares of restricted stock or restricted share units (“RSUs”), at the election of the compensation committee. Under the 2008 Stock Purchase Plan, the restricted stock shares or RSUs are purchased in March of the following year at the time the incentive bonus is paid and remain restricted for a two-year period at which time they become fully vested, provided the employee is with the Company on that date. The following Named Executive Officers purchased RSUs with a portion of their 20152017 bonus. This purchase was made on March 11, 2016. The issuance of the shares is subject to the shareholders approving the amendment to the Stock Purchase Plan as provided in Proposal 3.

Name		Bonus Used to Purchase RSUs				Number of RSUs Purchased
Kelly J. Gill		$	46,500				6,167
Leslie D. Campbell		$	30,690				4,070
James R. McKnight, Jr.		$	28,133				3,731

13, 2018.

Our long-term incentive compensation program has historically consisted of nonqualified stock options and SOSARs, the intrinsic value of which is related to improvement in long-term shareholder value. In March 2011, the Company elected to issue restricted stock instead of SOSARs, which are disclosed in the summary compensation table. These grants generally vest one-third on each of the first, second and third anniversary of the grant date. This structure encourages the executive to remain with the Company. In addition, the grant of restricted stock increases the executive’s ownership in the Company and provides an incentive that focuses the executive’s attention on managing the Company from the perspective of an owner with an equity stake in the business. These grants also focus operating decisions on long-term results that benefit the Company and its long-term shareholders.

We have long sponsored a qualified defined contribution plan (the “401(k) Plan”), which is available to all employees, including our Named Executive Officers. Qualified plans such as the 401(k) Plan carry with them a limit on the amount of compensation that employees can defer. Each of our Named Executive Officers is considered highly compensated and their contributions to the 401(k) Plan are limited. The Company maintains a non-qualified Executive Incentive Retirement Plan (“EIRP”). The EIRP provides a Company-matching contribution for eligible employees’ retirement savings on a dollar-for-dollar basis. For 2015,2017, the EIRP match was equal to 6% of their salary. The Company makes a cash payment to each participating employee on a quarterly basis. All of the Company’s Named Executive Officers participated in the EIRP in 20152017 and the amounts of the Company contribution are included in the Summary Compensation Table under Other Annual Compensation. As this is paid to the executive in cash, the executive is free to invest or not invest the money as he or she sees fit.

We also provide severance payments and benefits if the executive should resign or be terminated without Cause within six months after a change in control. This protection permits an executive to evaluate a potential change in control without concern for his or her own situation or

the need to seek employment elsewhere. Change-in-control transactions take time to unfold, and a stable management team can help to preserve our operations either to enhance the value delivered to a buyer in the transaction (and by extension the price such a buyer is willing to pay) or, if no transaction is consummated, to ensure that our business will continue without undue disruption and retain its value. Finally, we believe that the change-in-control protections in place encourage management to consider on an ongoing basis whether a strategic transaction might be advantageous to our shareholders, even one that would vest control of the Company in a third party. The compensation committee believes that the potential cost of executive

The employment agreements also subject our executive officers to significant contractual restrictions intended to prevent actions that potentially could harm our business, particularly after termination of employment. These business protections include obligations not to compete, not to hire away our employees, not to interfere with our relationships with suppliers and customers, not to disparage us, not to reveal confidential information, and to cooperate with us in litigation. Business protection provisions are included in agreements and equity awards. In addition, we have adopted an Employee Standards and Code of Conduct that require all of our employees, including our executive officers, to adhere to high standards of conduct. Failure to comply with this Code of Conduct or our Corporate Compliance Program or applicable laws will subject the executive to disciplinary measures, which may include loss of compensation, stock, and benefits, and termination of employment for cause.

The compensation committee makes all final determinations with respect to executive officers’ compensation, based on information provided by management and an appraisal of the Company’s financial status. The Company’s Chief Executive Officerchief executive officer makes recommendations to the compensation committee relating to the compensation of executive officers who directly report to him, but the compensation committee has full autonomy in determining executive compensation.

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), generally disallows a tax deduction to public companies for executive compensation in excess of $1.0 million. The compensation committee will periodically review and consider whether particular compensation and incentive payments to the Company’sCompany's executives will be deductible for federal income tax purposes. However, the compensation committee retains the ability to evaluate the performance of the Company’sCompany's executives and to pay appropriate compensation, even if it may result in the non-deductibility of certain compensation under federal tax law. For 2017 and earlier, Section 162(m) imposes a $1.0 million limit on the amount that a publicly traded company may deduct for compensation paid to its chief executive officer and its next three most highly compensated executives, excluding the chief financial officer. This limitation does not apply to pay that qualifies as “performance-based compensation.” In order to qualify as performance-based, compensation must, among other things, be based solely on the attainment of pre-established, objective goals under a shareholder approved plan with no discretion permitted in determining award payouts. However, the Tax Cuts and Jobs Act, which was enacted December 22, 2017, amended Section 162(m) to eliminate the exception for performance-based compensation, effective for taxable years following December 31, 2017. The 2010 Long-Term Incentive Plan approved by shareholders$1 million compensation limit was also expanded to include a public traded company’s chief financial officer and apply to certain individuals who were covered employees in 2010 permits awards that satisfyyears other than the requirements of section 162(m) of the Code.

2016then current taxable year.

The Company did not engage any compensation consultants in connection with setting executive compensation in 2016.

20162018.

On March 3, 2016,April 26, 2018, the compensation committee of the board of directors of the Company approved the 20162018 Annual Incentive Plan for the Company’s executive officers. The 20162018 Annual Incentive Plan provides the following Targets:

Position		Bonus Target
Chief Executive Officer		$	606,000
Chief Operating Officer		$	399,960
Chief Financial Officer		$	366,630

The Target Revenue: 33.33%Revenue Goal is a bonus equal to 20% of the bonus isNamed Executive Officer’s base salary based on achieving target revenue run rate for 20162018 of $500$585 million. In addition, the board will have the discretion to make other adjustments for unusual or unbudgeted items.

The Target EBITDA Growth: 33.33%EBITDAR Goal is a bonus equal to 40% of the targetNamed Executive Officer’s base salary based on achieving targeted EBITDAR of $78 million. The Other Goal is a bonus isequal to 40% of the Named Executive Officer’s base salary based upon management accomplishing certain specified portfolio risk assessment and management items, with a portion of the Goal earned for different specified goals. The 2018 Annual Incentive Plan provides that 0% to 110% of each of the Target Revenue Goal and the Target EBITDAR Goal can be earned based on a sliding scale of the achievement of targeted EBITDA Growth.

Discretionary: 33.33% of the bonus is based on the compensation committee’s discretion based on an assessment of the overall performance of the Company and achievement of otherrespective goals.

In addition, the 20162018 Annual Incentive Plan allows the compensation committee, in its sole discretion, to pay all or part of the bonus earned under the 20162018 Annual Incentive Plan in

shares of common stock of the Company. The number of shares that would be issued in the discretion of the compensation committee would be such number of shares with a fair market value on the date of award equal to the amount of the bonus being paid in common stock.

The compensation committee also has the discretion to grant bonuses based on pro forma results or as otherwise determined by the compensation committee in its discretion. The compensation committee also approved the continuation of the incentive plan that provides a one-time bonus for each Named Executive Officer equal to his or her respective then current annual base salary upon the achievement of $20 million in EBITDA for a trailing four-quarter period.

Compensation Committee Report

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management of the Company and, based on such review and discussions, the compensation committee recommended to the board of directors of the Company that the Compensation Discussion and Analysis be included in this proxy statement.

This report of the compensation committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under these acts.

The following table sets forth the compensation paid to the Named Executive Officers for their services in all capacities to the Company for the 2015, 20142017, 2016 and 20132015 fiscal years:

On March 10, 2015,13, 2017, Mr. Gill was granted 25,000 shares of restricted stock, Ms. Campbell was granted 12,500 shares of restricted stock and Mr. McKnight was granted 12,500 shares of restricted stock. This grant vests one-third on each of the first, second and third anniversary of the date of grant. This grant was based on the performance of the Named Executive Officer in 2014;2016; however, this grant of equity awards is required to be included in the table for the year(s) granted and are therefore included in these compensation tables or equity award tables. On March 11, 2016,13, 2018, Mr. Gill was granted 25,000 shares of restricted stock, Ms. Campbell was granted 12,500 shares of restricted stock and Mr. McKnight was granted 12,500 shares of restricted stock. These shares vest one-third on each of the first, second and third

anniversary of the date of grant, provided the executive remains with the Company on such date. These grants were based on the performance of the Named Executive Officer in 2015.2017. These grants were awarded in 20162018 and are required to be included in the table for the year(s) granted and are therefore not included in these compensation tables or equity award tables.