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AdCare Health Systems (ADK) Closes $2.1 Million Convertible Note Placement and Secures $1.4 Million Bridge Loan Financing

AdCare Health Systems, Inc., a leading skilled nursing and assisted living provider, held an initial closing of $2.1 million on a private placement of subordinated convertible notes due March 2014.

The notes, which are unsecured and subordinated in right of payment to existing and future senior indebtedness, will pay interest quarterly at an annual rate of 10.0% and are convertible into shares of common stock of AdCare at an initial conversion price equal to 115% of the lesser of the volume-weighted average price of AdCare’s common stock for the 10 trading day periods prior to and following the filing of AdCare’s Annual Report on Form 10-K for the year ended December 31, 2010.

If after six months from the closing of the transaction AdCare’s 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 AdCare may force conversion at its option.

Cantone Research, Inc. served as the exclusive placement agent in connection with the notes offering.

The notes were offered and issued only to accredited investors in a private placement transaction. Also on March 31, 2011, AdCare borrowed $1.4 million under a 90-day promissory note supplied by an affiliate of Cantone Research.

AdCare expects to use the net proceeds from these financings for general corporate purposes, including the previously announced agreement to acquire three skilled nursing facilities in Georgia, and general and administrative expenses.

This announcement does not constitute an offer to sell, or the solicitation of offers to buy, any security and shall not constitute an offer, solicitation or sale of any security in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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