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style="FONT-SIZE: 10pt; COLOR: #000000; LINE-HEIGHT: 12pt; FONT-FAMILY: Times New Roman">
<P style="FONT-SIZE: 14pt; MARGIN: 0px; LINE-HEIGHT: 16pt"
align=center><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>Washington, D.C. &nbsp;20549</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 14pt; MARGIN: 0px; LINE-HEIGHT: 16pt" align=center><B>FORM
8-K</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center>CURRENT
REPORT</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center>PURSUANT
TO SECTION 13 OR 15(d) OF </P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center>THE
SECURITIES EXCHANGE ACT OF 1934</P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>Date of
Report: &nbsp;April 6, 2011</P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>Date of
Earliest Event Reported: &nbsp;March 31, 2011</P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 18.5pt; MARGIN: 0px; LINE-HEIGHT: 20.5pt"
align=center><B>AdCare Health Systems, Inc.</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><I>(Exact Name of Registrant as specified in its Charter)</I></P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="DISPLAY: none; FONT-SIZE: 0px" height=0>
<TD width=400></TD>
<TD width=357></TD></TR>
<TR>
<TD vAlign=bottom width=400>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>Ohio</B></P></TD>
<TD vAlign=bottom width=357>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>31-1332119</B></P></TD></TR>
<TR>
<TD vAlign=top width=400>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(State or other jurisdiction of</I></P>
<P
style="FONT-SIZE: 10.5pt; MARGIN: 0px; TEXT-INDENT: 87px; LINE-HEIGHT: 12.5pt"><I>incorporation
or organization)</I></P></TD>
<TD vAlign=top width=357>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(I.R.S. Employer Identification No.)</I></P></TD></TR>
<TR>
<TD vAlign=bottom width=400>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>5057 Troy Rd, Springfield, OH</B></P></TD>
<TD vAlign=bottom width=357>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>45502-9032</B></P></TD></TR>
<TR>
<TD vAlign=top width=400>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(Address of principal executive offices)</I></P></TD>
<TD vAlign=top width=357>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(Zip Code)</I></P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>Registrant&#146;s Telephone Number, Including Area Code</B></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>(937) 964-8974</B></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Check the appropriate box below if the form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (See General Instruction A2. below):</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>[ &nbsp;] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>[ &nbsp;] Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>[ &nbsp;] Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>[ &nbsp;] Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)).</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 16px" align=justify><BR><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>1</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 12.5pt"
align=justify><B>Item 1.01. Entry into a Material Definitive Agreement.</B></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt" align=justify>On
March 31, 2011, AdCare Health Systems, Inc. (the &#147;Company&#148;) entered into a
Securities Purchase Agreement (the &#147;Purchase Agreement&#148;) with certain accredited
investors (the &#147;Purchasers&#148;) to sell and issue to the Purchasers an aggregate of
$2,115,000 in principal amount of the Company&#146;s Subordinated Convertible Notes
(the &#147;Notes&#148;), bearing 10.0% interest per annum payable quarterly in cash in
arrears beginning June 30, 2011. &nbsp;The Company expects to issue up to
$3,385,000 principal amount of additional Notes of the same series on or before
April 30, 2011. &nbsp;Additionally, the Company agreed to issue to the placement
agent a warrant to purchase 250,000 shares of common stock at an exercise price
per share equal to the conversion price per share of the Notes. &nbsp;The Notes
and the warrant are being issued and sold solely to accredited investors in
reliance on Section 4(2) of the Securities Act of 1933, as amended (the
&#147;Securities Act&#148;) and Regulation D promulgated thereunder. Cantone Research,
Inc. acted as sole placement agent in connection with the issuance of the
Notes.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt" align=justify>The
Notes are convertible into shares of common stock of the Company at an initial
conversion price equal to 115% of the lesser of the volume-weighted average
price of Company&#146;s common stock for the ten trading day periods prior to and
following the filing of the Company&#146;s Annual Report on Form 10-K for the year
ended December 31, 2010, but in no event will the conversion price be less than
$4.13 per share. &nbsp;The initial conversion price is subject to adjustment for
any stock dividend, stock split, combination of shares, reorganization,
recapitalization, reclassification or other similar event. &nbsp;However, unless
the Company first obtains the approval of its stockholders as required by the
applicable rules of the NYSE Amex, in no event shall the Company be obligated to
issue any shares of Common Stock upon conversion of the Notes if the issuance of
such shares of Common Stock would exceed the aggregate number of shares of
Common Stock which the Company may issue upon conversion of the Notes without
breaching the Company&#146;s obligations under the rules and regulations of the NYSE
Amex.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt" align=justify>The
Notes are unsecured and subordinated in right of payment to existing and future
senior indebtedness.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt" align=justify>The
Notes mature on March 31, 2014. &nbsp;However, if after six (6) months from the
closing of the transaction, the Common Stock trades at or above 200% of the
conversion price for 20 out of 30 consecutive trading days, with an average
daily trading volume of over 50,000 shares, then the Company may, subject to the
satisfaction of certain other conditions, redeem the Notes in cash at a price
equal to the sum of (i) 100% of the principal being redeemed plus (ii) any
accrued and unpaid interest on the principal, plus late charges, if any (the
principal amount being redeemed, plus any accrued and unpaid interest, plus any
other charges, is collectively referred to in this Report as the &#147;Redemption
Amount&#148;). &nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt" align=justify>In
addition, holders may require the Company to redeem all or a portion of their
Notes upon a change of control transaction, as described in the Notes, at a
redemption price in cash equal to the greater of (i) 110% of the Redemption
Amount being redeemed and (ii) the product of (A) the Redemption Amount being
redeemed multiplied by (B) the quotient determined by dividing (1) the greatest
closing sale price of the shares of Common Stock during the period beginning on
the date immediately preceding the earlier to occur of (x) the consummation of
the change of control and (y) the public announcement of such change of control
and ending on the date the holder delivers its redemption notice to the Company,
by (2) the conversion price then in effect. &nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Additionally, the Notes may become immediately due and payable
upon an &#147;event of &nbsp;default,&#148; which, with respect to each Note, generally
includes, without limitation, each of the following:</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -48px; FONT-FAMILY: Symbol"
align=justify>&#183;</P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: 13px"
align=justify>any registration failure under the terms of the Registration
Rights Agreement;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -48px; FONT-FAMILY: Symbol"
align=justify>&#183;</P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: 13px"
align=justify>the suspension from trading or failure of the Common Stock to be
listed on the NYSE Amex or any other national securities exchange for a period
of five (5) consecutive trading days or for more than an aggregate of fifteen
(15) trading days in any 365-day period;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -48px; FONT-FAMILY: Symbol"
align=justify>&#183;</P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: 13px"
align=justify>the Company&#146;s (A) failure to cure a conversion failure by delivery
of the required number of shares of Common Stock within the time period
specified in the Notes, or (B) notice of our intention not to comply with a
request for conversion of any Notes into shares of Common Stock;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -48px; FONT-FAMILY: Symbol"
align=justify>&#183;</P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: 13px"
align=justify>failure to pay any amount of principal, interest or other amounts
when and as due under the Notes (if such failure continues beyond the expiration
of any applicable cure or grace periods);</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -48px; FONT-FAMILY: Symbol"
align=justify>&#183;</P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: 13px"
align=justify>specific events of bankruptcy, insolvency, reorganization or
liquidation;</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 13px" align=justify><BR><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>2</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: -16px; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -48px; FONT-FAMILY: Symbol"
align=justify>&#183;</P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: 13px"
align=justify>the Company breaches any material warranty, covenant or other term
or condition of any transaction document, except, in the case of a breach of a
covenant or other term or condition of any transaction document which is
curable, only if such breach continues for a period of at least ten (10) days;
and</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: -16px; TEXT-INDENT: -48px; FONT-FAMILY: Symbol"
align=justify>&#183;</P>
<P style="MARGIN-TOP: 0px; PADDING-LEFT: 96px; MARGIN-BOTTOM: 13px"
align=justify>any event of default occurs with respect to any other Notes.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>In connection with the issuance of the Notes, the Company entered
into a Registration Rights Agreement with the Purchasers obligating the Company
to register for resale the shares of the Common Stock issuable upon the
conversion of the Notes on a registration statement on Form S-3 to be filed with
the Securities and Exchange Commission within fifty (50) days after the closing
of the sale of the Notes.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Additionally, in connection with the financing, the Company also
entered into customary Lock-Up Agreements with each of its directors and
officers. The Lock-Up Agreements expire on the 180th day following the closing
date of the financing. </P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>This announcement is not an offer to sell either the Notes or the
Common Stock issuable upon conversion of the Notes. &nbsp;Neither the Notes nor
the shares of Common Stock issuable upon conversion of the Notes have been
registered under the Securities Act, and the foregoing may not be offered or
sold in the United States absent registration or availability of an applicable
exemption from registration.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Additionally, on March 31, 2011, the Company borrowed $1,385,000
under a promissory note issued to Anthony Cantone, an affiliate of Cantone
Research, Inc. &nbsp;The promissory note bears interest at the rate of 12%, due
and payable through the maturity date, July 1, 2011. &nbsp;The Company paid a
commitment fee of 4% or $55,400 in connection with the promissory note.
&nbsp;The promissory note is attached hereto as Exhibit 10.5 and is hereby
incorporated herein by reference. &nbsp;The promissory note may be accelerated
upon the occurrence of an event of default, which includes (a) failure of the
Company to make a payment of interest or principal for a period of five days
after receipt of notice that the same was not paid when due; (b) certain events
of bankruptcy, insolvency, reorganization or liquidation; (c) default under
other indebtedness of the Company and (d) failure of the Company to have timely
filed required reports with the SEC. &nbsp;In the ordinary course of business,
Cantone Research, Inc. and certain of its affiliates provide financial advisory
and other services to the Company and have in the past and may in the future
engage in transactions of a financial nature with the Company, including as a
lender, for which services and transactions they receive customary compensation.
&nbsp;</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>The foregoing description of the private placement and the
promissory note does not purport to be complete and is qualified in its entirety
by reference to the Purchase Agreement, Registration Rights Agreement, the form
of Note, the form of Lock-Up Agreement entered into in connection with the
private placement, and the promissory note, copies of which are filed herewith
as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively. &nbsp;A copy of the
press release announcing the initial closing of the private placement on March
31, 2011 is attached hereto as Exhibit 99.1 and is hereby incorporated by
reference. &nbsp;The foregoing documents have been attached to provide investors
with information regarding their terms. &nbsp;They are not intended to provide
any other factual information about the Company or the Purchasers. &nbsp;In
particular, the assertions embodied in the representations and warranties
contained in the Purchase Agreement, as qualified by the Disclosure Schedule
attached thereto, were used for the purpose of allocating risk between the
Company and the Purchasers rather than establishing matters as facts.
&nbsp;Accordingly, you should not rely on the representations and warranties in
the Purchase Agreement as characterizations of the actual state of facts about
the Company or the Purchasers.</P>
<P
style="MARGIN-TOP: 5px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><B>Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant.</B></P>
<P
style="MARGIN-TOP: 5px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>The disclosure set forth above under Item 1.01 is hereby
incorporated by reference into this Item 2.03.</P>
<P
style="MARGIN-TOP: 5px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><B>Item 3.02. &nbsp;Unregistered Sale of Equity
Securities.</B></P>
<P
style="MARGIN-TOP: 5px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>The disclosure set forth above under Item 1.01 is hereby
incorporated by reference into this Item 3.02. &nbsp;The issuance of the Notes
and the grant of the warrant qualified for exemption from registration under
Section 4(2) under the 1933 Act and Regulation D promulgated thereunder because,
among other things, the transactions did not involve a public offering, each
investor represented that is an accredited investor and that it took the
securities for investment and not resale, each investor had access to
information about the Company and such investor&#146;s investment, and the Company
has taken appropriate measures to restrict the transfer of the securities.</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px" align=justify><BR><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>3</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 12.5pt"
align=justify><B>Item 9.01. &nbsp;Financial Statements and Exhibits.</B></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: -16px; TEXT-INDENT: 48px; LINE-HEIGHT: 12.5pt"
align=justify>(d)</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; TEXT-INDENT: 96px; LINE-HEIGHT: 12.5pt"
align=justify>Exhibits</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="DISPLAY: none; FONT-SIZE: 0px" height=0>
<TD width=127></TD>
<TD width=511></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><U>Exhibit Number</U></P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><U>Description of Exhibit</U></P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.1</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Securities Purchase Agreement dated March 31, 2010, by and
among AdCare Health Systems, Inc. and the investors named therein.
</P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.2</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Registration Rights Agreement dated March 31, 2011, by and
among AdCare Health Systems, Inc. and the investors named therein.
</P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.3</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Form of Subordinated Convertible Note. </P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.4</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Form of Lock-Up Agreement. &nbsp;Each of the directors and
officers identified on Schedule 7(xii) of the Securities Purchase
Agreement entered into a Lock-Up Agreement with AdCare Health Systems,
Inc. </P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.5</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Promissory Note dated March 31, 2011, by and among AdCare
Health Systems, Inc. and Anthony Cantone.</P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>99.1</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Press Release dated April 1, 2011.</P></TD></TR></TABLE>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>&nbsp;&nbsp;</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 16px" align=center><BR><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>4</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 48px; LINE-HEIGHT: 12.5pt"
align=center>SIGNATURES</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; TEXT-INDENT: 48px; LINE-HEIGHT: 12.5pt"
align=justify>Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereto duly authorized.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Date: &nbsp;April 6, 2011</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 336px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt">ADCARE
HEALTH SYSTEMS, INC.</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 336px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt">By:<U>
&nbsp;/s/ Scott Cunningham</U></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 336px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt">Name:
Scott Cunningham</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 336px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt">Title:
&nbsp;Chief Financial Officer</P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px"><BR><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>5</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 32px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 14pt"
align=center><B>EXHIBIT INDEX</B></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="DISPLAY: none; FONT-SIZE: 0px" height=0>
<TD width=127></TD>
<TD width=511></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><U>Exhibit Number</U></P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><U>Description of Exhibit</U></P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.1</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Securities Purchase Agreement dated October 26, 2010, by and
among AdCare Health Systems, Inc. and the investors named therein.
</P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.2</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Registration Rights Agreement dated October 26, 2010, by and
among AdCare Health Systems, Inc. and the investors named therein.
</P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.3</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Form of Subordinated Convertible Note. </P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.4</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Form of Lock-Up Agreement. &nbsp;Each of the directors and
officers identified on Schedule 7(xii) of the Securities Purchase
Agreement entered into a Lock-Up Agreement with AdCare Health Systems,
Inc.</P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>10.5</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Promissory Note dated March 31, 2011, by and among AdCare
Health Systems, Inc. and Anthony Cantone.</P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>99.1</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Press Release dated April 1, 2011.</P></TD></TR></TABLE>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px"><BR></P>
<H1><BR>&nbsp;</H1>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px"><BR><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>6</P>
<P
style="MARGIN: 0px"><BR></P></BODY>
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Form 8-K (00941424-2).DOC
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date of
Report:  April 6, 2011
Date of
Earliest Event Reported:  March 31, 2011
AdCare Health Systems, Inc.
(Exact Name of Registrant as specified in its Charter)
Ohio
31-1332119
(State or other jurisdiction of
incorporation
or organization)
(I.R.S. Employer Identification No.)
5057 Troy Rd, Springfield, OH
45502-9032
(Address of principal executive offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code
(937) 964-8974
Check the appropriate box below if the form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (See General Instruction A2. below):
[  ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[  ] Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
[  ] Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)
[  ] Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)).
1
Item 1.01. Entry into a Material Definitive Agreement.
On
March 31, 2011, AdCare Health Systems, Inc. (the "Company") entered into a
Securities Purchase Agreement (the "Purchase Agreement") with certain accredited
investors (the "Purchasers") to sell and issue to the Purchasers an aggregate of
$2,115,000 in principal amount of the Company's Subordinated Convertible Notes
(the "Notes"), bearing 10.0% interest per annum payable quarterly in cash in
arrears beginning June 30, 2011.  The Company expects to issue up to
$3,385,000 principal amount of additional Notes of the same series on or before
April 30, 2011.  Additionally, the Company agreed to issue to the placement
agent a warrant to purchase 250,000 shares of common stock at an exercise price
per share equal to the conversion price per share of the Notes.  The Notes
and the warrant are being issued and sold solely to accredited investors in
reliance on Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Regulation D promulgated thereunder. Cantone Research,
Inc. acted as sole placement agent in connection with the issuance of the
Notes.
The
Notes are convertible into shares of common stock of the Company at an initial
conversion price equal to 115% of the lesser of the volume-weighted average
price of Company's common stock for the ten trading day periods prior to and
following the filing of the Company's Annual Report on Form 10-K for the year
ended December 31, 2010, but in no event will the conversion price be less than
$4.13 per share.  The initial conversion price is subject to adjustment for
any stock dividend, stock split, combination of shares, reorganization,
recapitalization, reclassification or other similar event.  However, unless
the Company first obtains the approval of its stockholders as required by the
applicable rules of the NYSE Amex, in no event shall the Company be obligated to
issue any shares of Common Stock upon conversion of the Notes if the issuance of
such shares of Common Stock would exceed the aggregate number of shares of
Common Stock which the Company may issue upon conversion of the Notes without
breaching the Company's obligations under the rules and regulations of the NYSE
Amex.
The
Notes are unsecured and subordinated in right of payment to existing and future
senior indebtedness.
The
Notes mature on March 31, 2014.  However, if after six (6) months from the
closing of the transaction, the Common Stock trades at or above 200% of the
conversion price for 20 out of 30 consecutive trading days, with an average
daily trading volume of over 50,000 shares, then the Company may, subject to the
satisfaction of certain other conditions, redeem the Notes in cash at a price
equal to the sum of (i) 100% of the principal being redeemed plus (ii) any
accrued and unpaid interest on the principal, plus late charges, if any (the
principal amount being redeemed, plus any accrued and unpaid interest, plus any
other charges, is collectively referred to in this Report as the "Redemption
Amount").
In
addition, holders may require the Company to redeem all or a portion of their
Notes upon a change of control transaction, as described in the Notes, at a
redemption price in cash equal to the greater of (i) 110% of the Redemption
Amount being redeemed and (ii) the product of (A) the Redemption Amount being
redeemed multiplied by (B) the quotient determined by dividing (1) the greatest
closing sale price of the shares of Common Stock during the period beginning on
the date immediately preceding the earlier to occur of (x) the consummation of
the change of control and (y) the public announcement of such change of control
and ending on the date the holder delivers its redemption notice to the Company,
by (2) the conversion price then in effect.
Additionally, the Notes may become immediately due and payable
upon an "event of  default," which, with respect to each Note, generally
includes, without limitation, each of the following:
·
any registration failure under the terms of the Registration
Rights Agreement;
·
the suspension from trading or failure of the Common Stock to be
listed on the NYSE Amex or any other national securities exchange for a period
of five (5) consecutive trading days or for more than an aggregate of fifteen
(15) trading days in any 365-day period;
·
the Company's (A) failure to cure a conversion failure by delivery
of the required number of shares of Common Stock within the time period
specified in the Notes, or (B) notice of our intention not to comply with a
request for conversion of any Notes into shares of Common Stock;
·
failure to pay any amount of principal, interest or other amounts
when and as due under the Notes (if such failure continues beyond the expiration
of any applicable cure or grace periods);
·
specific events of bankruptcy, insolvency, reorganization or
liquidation;
2
·
the Company breaches any material warranty, covenant or other term
or condition of any transaction document, except, in the case of a breach of a
covenant or other term or condition of any transaction document which is
curable, only if such breach continues for a period of at least ten (10) days;
and
·
any event of default occurs with respect to any other Notes.
In connection with the issuance of the Notes, the Company entered
into a Registration Rights Agreement with the Purchasers obligating the Company
to register for resale the shares of the Common Stock issuable upon the
conversion of the Notes on a registration statement on Form S-3 to be filed with
the Securities and Exchange Commission within fifty (50) days after the closing
of the sale of the Notes.
Additionally, in connection with the financing, the Company also
entered into customary Lock-Up Agreements with each of its directors and
officers. The Lock-Up Agreements expire on the 180th day following the closing
date of the financing.
This announcement is not an offer to sell either the Notes or the
Common Stock issuable upon conversion of the Notes.  Neither the Notes nor
the shares of Common Stock issuable upon conversion of the Notes have been
registered under the Securities Act, and the foregoing may not be offered or
sold in the United States absent registration or availability of an applicable
exemption from registration.
Additionally, on March 31, 2011, the Company borrowed $1,385,000
under a promissory note issued to Anthony Cantone, an affiliate of Cantone
Research, Inc.  The promissory note bears interest at the rate of 12%, due
and payable through the maturity date, July 1, 2011.  The Company paid a
commitment fee of 4% or $55,400 in connection with the promissory note.
 The promissory note is attached hereto as Exhibit 10.5 and is hereby
incorporated herein by reference.  The promissory note may be accelerated
upon the occurrence of an event of default, which includes (a) failure of the
Company to make a payment of interest or principal for a period of five days
after receipt of notice that the same was not paid when due; (b) certain events
of bankruptcy, insolvency, reorganization or liquidation; (c) default under
other indebtedness of the Company and (d) failure of the Company to have timely
filed required reports with the SEC.  In the ordinary course of business,
Cantone Research, Inc. and certain of its affiliates provide financial advisory
and other services to the Company and have in the past and may in the future
engage in transactions of a financial nature with the Company, including as a
lender, for which services and transactions they receive customary compensation.
The foregoing description of the private placement and the
promissory note does not purport to be complete and is qualified in its entirety
by reference to the Purchase Agreement, Registration Rights Agreement, the form
of Note, the form of Lock-Up Agreement entered into in connection with the
private placement, and the promissory note, copies of which are filed herewith
as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively.  A copy of the
press release announcing the initial closing of the private placement on March
31, 2011 is attached hereto as Exhibit 99.1 and is hereby incorporated by
reference.  The foregoing documents have been attached to provide investors
with information regarding their terms.  They are not intended to provide
any other factual information about the Company or the Purchasers.  In
particular, the assertions embodied in the representations and warranties
contained in the Purchase Agreement, as qualified by the Disclosure Schedule
attached thereto, were used for the purpose of allocating risk between the
Company and the Purchasers rather than establishing matters as facts.
 Accordingly, you should not rely on the representations and warranties in
the Purchase Agreement as characterizations of the actual state of facts about
the Company or the Purchasers.
Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The disclosure set forth above under Item 1.01 is hereby
incorporated by reference into this Item 2.03.
Item 3.02.  Unregistered Sale of Equity
Securities.
The disclosure set forth above under Item 1.01 is hereby
incorporated by reference into this Item 3.02.  The issuance of the Notes
and the grant of the warrant qualified for exemption from registration under
Section 4(2) under the 1933 Act and Regulation D promulgated thereunder because,
among other things, the transactions did not involve a public offering, each
investor represented that is an accredited investor and that it took the
securities for investment and not resale, each investor had access to
information about the Company and such investor's investment, and the Company
has taken appropriate measures to restrict the transfer of the securities.
3
Item 9.01.  Financial Statements and Exhibits.
(d)
Exhibits
Exhibit Number
Description of Exhibit
10.1
Securities Purchase Agreement dated March 31, 2010, by and
among AdCare Health Systems, Inc. and the investors named therein.
10.2
Registration Rights Agreement dated March 31, 2011, by and
among AdCare Health Systems, Inc. and the investors named therein.
10.3
Form of Subordinated Convertible Note.
10.4
Form of Lock-Up Agreement.  Each of the directors and
officers identified on Schedule 7(xii) of the Securities Purchase
Agreement entered into a Lock-Up Agreement with AdCare Health Systems,
Inc.
10.5
Promissory Note dated March 31, 2011, by and among AdCare
Health Systems, Inc. and Anthony Cantone.
99.1
Press Release dated April 1, 2011.
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereto duly authorized.
Date:  April 6, 2011
ADCARE
HEALTH SYSTEMS, INC.
By:
/s/ Scott Cunningham
Name:
Scott Cunningham
Title:
 Chief Financial Officer
5
EXHIBIT INDEX
Exhibit Number
Description of Exhibit
10.1
Securities Purchase Agreement dated October 26, 2010, by and
among AdCare Health Systems, Inc. and the investors named therein.
10.2
Registration Rights Agreement dated October 26, 2010, by and
among AdCare Health Systems, Inc. and the investors named therein.
10.3
Form of Subordinated Convertible Note.
10.4
Form of Lock-Up Agreement.  Each of the directors and
officers identified on Schedule 7(xii) of the Securities Purchase
Agreement entered into a Lock-Up Agreement with AdCare Health Systems,
Inc.
10.5
Promissory Note dated March 31, 2011, by and among AdCare
Health Systems, Inc. and Anthony Cantone.
99.1
Press Release dated April 1, 2011.
6