Delaware Limited Partnership Agreement

AGREEMENT
OF LIMITED PARTNERSHIP


OF


HCFP REIT OPERATING PARTNERSHIP, L.P.


2


TABLE OF CONTENTS


ARTICLE I
DEFINED TERMS...........................................................................................1


ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION.............................................................9


2.01 Organization...................................................................................9
2.02 Name, Office and Registered Agent..............................................................9
2.03 Partners.......................................................................................9
2.04 Term and Dissolution..........................................................................10
2.05 Filing of Certificate and Perfection of Limited Partnership...................................10
2.06 Certificates Describing Partnership Units.....................................................10


ARTICLE III
BUSINESS OF THE PARTNERSHIP............................................................................11


3.01 Purpose and Business..........................................................................11
3.02 Powers........................................................................................12


ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS.....................................................................12


4.01 Capital Contributions.........................................................................12
4.02 Additional Capital Contributions and Issuances of Additional
Partnership Interests.....................................................................12
4.03 Additional Funding............................................................................15
4.04 Capital Accounts..............................................................................15
4.05 Percentage Interests..........................................................................15
4.06 No Interest on Contributions..................................................................16
4.07 Return of Capital Contributions...............................................................16
4.08 No Third Party Beneficiary....................................................................16
4.09 No Preemptive Rights..........................................................................16


ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS......................................................................17


5.01 Allocation of Profit and Loss.................................................................17
5.02 Distribution of Cash..........................................................................19
5.03 REIT Distribution Requirements................................................................21
5.04 Distributions in Kind.........................................................................21
5.05 Limitations on Return of Capital Contributions................................................21
5.06 Distributions upon Liquidation................................................................21
5.07 Substantial Economic Effect...................................................................22
5.08 Allocations to Reflect Issuance of Additional Partnership Interests...........................22


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ARTICLE VI
RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER..................................................22


6.01 Management of the Partnership.................................................................22
6.02 Delegation of Authority.......................................................................25
6.03 Indemnification and Exculpation of Indemnitees................................................25
6.04 Liability of the General Partner..............................................................27
6.05 Reimbursement of General Partner..............................................................28
6.06 Outside Activities............................................................................28
6.07 Employment or Retention of Affiliates.........................................................28
6.08 General Partner Participation.................................................................29
6.09 Title to Partnership Assets...................................................................29
6.10 Miscellaneous.................................................................................29


ARTICLE VII
CHANGES IN GENERAL PARTNER.............................................................................30


7.01 Transfer of the General Partner's Partnership Interest........................................30
7.02 Admission of a Substitute or Additional General Partner.......................................31
7.03 Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner...................32
7.04 Removal of General Partner....................................................................33


ARTICLE VIII
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS.........................................................34


8.01 Management of the Partnership.................................................................34
8.02 Power of Attorney.............................................................................34
8.03 Limitation on Liability of Limited Partners...................................................35
8.04 Redemption Right..............................................................................35


ARTICLE IX
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS ............................................................37


9.01 Purchase of Investment........................................................................37
9.02 Restrictions on Transfer of Limited Partnership Interests.....................................38
9.03 Admission of Substitute Limited Partner.......................................................40
9.04 Rights of Assignees of Partnership Interests..................................................41
9.05 Effect of Bankruptcy, Death, Incompetence of
Termination of a Limited Partner..........................................................41
9.06 Joint Ownership of Interests..................................................................42


ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS.............................................................42


10.01 Books and Records.............................................................................42
10.02 Custody of Partnership Funds; Bank Accounts...................................................43
10.03 Fiscal and Taxable Year.......................................................................43
10.04 Annual Tax Information and Report.............................................................43


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10.05 Tax Matters Partner; Tax Elections; Special Basis Adjustments.................................43
10.06 Reports to Limited Partners...................................................................44


ARTICLE XI
AMENDMENT OF AGREEMENT.................................................................................45


ARTICLE XII
GENERAL PROVISIONS.....................................................................................46


12.01 Notices.......................................................................................46
12.02 Survival of Rights............................................................................46
12.03 Additional Documents..........................................................................46
12.04 Severability..................................................................................46
12.05 Entire Agreement..............................................................................46
12.06 Pronouns and Plurals..........................................................................46
12.07 Headings......................................................................................46
12.08 Counterparts..................................................................................46
12.09 Governing Law.................................................................................46
12.10 Partner Representations and Warranties........................................................47
12.11 Waiver........................................................................................47
12.12 Partition.....................................................................................47


EXHIBITS


EXHIBIT A - Partners, Capital Contributions and Percentage Interests


EXHIBIT B - Notice of Exercise of Redemption Right


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AGREEMENT OF LIMITED PARTNERSHIP


OF


HCFP REIT OPERATING PARTNERSHIP, L.P.


RECITALS


HCFP REIT Operating Partnership, L.P. (the "Partnership") is being formed as a limited partnership under the laws of the State of Delaware pursuant to a Certificate of Limited Partnership filed with the Office of the Secretary of State of the State of Delaware effective as of April 9, 1998. This Agreement of Limited Partnership (the "Agreement") is entered into this 6th day of May 1998 among HealthCare Financial Partners REIT, Inc., a Maryland corporation (the "General Partner") and HCFP Limited Inc., a Maryland corporation (the "Initial Limited Partner").


AGREEMENT


NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


ARTICLE I


DEFINED TERMS


The following defined terms used in this Agreement shall have the meanings specified below:


"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time.


"Additional Funds" has the meaning set forth in Section 4.03 hereof.


"Additional Limited Partner" means any Person admitted to the Partnership as a Limited Partner pursuant to Section 4.02 hereof.


"Additional Securities" means any additional REIT Shares (other than REIT Shares issued in connection with a redemption pursuant to Section 8.05 hereof) or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase REIT Shares, as set forth in Section 4.02(a)(ii). 6


"Adjusted Capital Account Deficit" means, with respect to any partner, the deficit balance, if any, in such Partner's Capital account as of the end of the relevant fiscal year, after giving effect to the following adjustments:


(i) Credit to such Capital Account any amounts which such Partner is obligated to restore pursuant to any provisions of this Agreement or is otherwise treated as being obligated to restore under Regulations Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to the penultimate sentence of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and


(ii) Debit to such Capital Account the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6).


The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704(b)(2)(ii)(d) and shall be interpreted consistently therewith.


"Administrative Expenses" means (i) all administrative and operating costs and expenses incurred by the Partnership, (ii) those administrative costs and expenses of the General Partner, including any salaries or other payments to directors, trustees, officers or employees of the General Partner, and any accounting and legal expenses of the General Partner, which expenses, the Partners agree, are expenses of the Partnership and not the General Partner, and (iii) to the extent not included in clause (ii) above, REIT Expenses; PROVIDED, HOWEVER, that Administrative Expenses shall not include any administrative costs and expenses incurred by the General Partner that are attributable to Properties or partnership interests in a Subsidiary Partnership that are owned by the General Partner directly.


"Affiliate" means with respect to any Person, (i) any Person that, directly or indirectly, controls or is controlled by or is under common control with such Person, (ii) any other Person that owns, beneficially, directly or indirectly, 10% or more of the outstanding capital stock, shares or equity interests of such Person, or (iii) any officer, director, trustee, employee, partner or trustee of such Person or any Person controlling, controlled by or under common control with such Person (excluding trustees and persons serving in similar capacities who are not otherwise an Affiliate of such Person). For the purposes of this definition, "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, through the ownership of voting securities, partnership or limited liability company interests or otherwise.


"Agreed Value" means the fair market value of a Partner's non-cash Capital Contribution as of the date of contribution as agreed to by such Partner and the General Partner. The names and addresses of the Partners, number of Partnership Units issued to each Partner, and the Agreed Value of non-cash Capital Contributions as of the date of contribution is set forth on EXHIBIT A.


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"Agreement" means this Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time.


"Capital Account" has the meaning provided in Section 4.04 hereof.


"Capital Contribution" means the total amount of cash, cash equivalents, and the Agreed Value of any Property or other asset contributed or agreed to be contributed, as the context requires, to the Partnership by each Partner pursuant to the terms of the Agreement. Any reference to the Capital Contribution of a Partner shall include the Capital Contribution made by a predecessor holder of the Partnership Interest of such Partner.


"Cash Amount" means an amount of cash equal to the Value of the REIT Shares Amount on the date of receipt by the General Partner of a Notice of Redemption. Notwithstanding the foregoing, if the General Partner raises the Cash Amount through an offering of securities, borrowings or otherwise, the cash Amount shall be reduced by an amount equal to the expenses incurred by the General Partner in connection with raising such funds (to the extent that such expenses are allocable to funds used to pay the Cash Amount); provided, however, that the total reduction of the Cash Amount for such expenses shall not exceed five percent (5%) of the total Cash Amount as determined prior to reduction for such expenses.


"Certificate" means any instrument or document that is required under the laws of the State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be signed or sworn to by one or more Partners of the Partnership (either by themselves or pursuant to the power-of-attorney granted to the General Partner in Section 8.02 hereof) and filed for recording in the appropriate public offices in the State of Delaware or such other jurisdiction to perfect or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or substitution of any Partner of the Partnership, or to protect the limited liability of the Limited Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.


"Charter" means the Articles of Incorporation of the General Partner, as amended, filed with the Maryland State Department of Assessments and Taxation, as amended, supplemented or restated from time to time.


"Code" means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time. Reference to any particular provision of the Code shall mean that provision in the Code at the date hereof and any successor provision of the Code.


"Commission" means the U.S. Securities and Exchange Commission.


"Common Stock" means the common stock of the General Partner, $0.0001 par value per share.


"Conversion Factor" means 1.0, PROVIDED THAT, (a) in the event that the General Partner (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its


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outstanding REIT Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on such date; and (b) in the event that the General Partner declares or pays a dividend or other distribution on its outstanding REIT Shares (other than (A) cash dividends payable in the ordinary course of the General Partner's business or (B) dividends payable in REIT Shares that give rise to an adjustment in the Conversion Factor under subsection (a) hereof) and the Value of the REIT Shares on the 20th trading day following the record date ("Record Date") for such dividend or distribution (the "Post-Distribution Value") is less than the Value of the REIT Shares on the business day immediately preceding such Record Date (the "Pre-Distribution Value"), then the Conversion Factor in effect after the Record Date shall be adjusted by multiplying the Conversion Factor in effect prior to the Record Date by a fraction, the numerator of which is the Pre-Distribution Value and the denominator of which is the Post-Distribution Value, PROVIDED, HOWEVER, that no adjustment shall be made if (x) with respect to any cash dividend or distribution with respect to REIT Shares, the Partnership distributes with respect to each Partnership Unit an amount equal to the amount of such dividend or distribution multiplied by the Conversion Factor or (y) with respect to any dividend or distribution of securities or property other than cash, the Partnership distributes with respect to each Partnership Unit an amount of securities or other property equal to the amount distributed with respect to each REIT Share multiplied by the Conversion Factor or a partnership interest or other security readily convertible into such securities or other property. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; PROVIDED, HOWEVER, that if the General Partner receives a Notice of Redemption after the record date, but prior to the effective date of such dividend, distribution, subdivision or combination, the Conversion Factor shall be determined as if the General Partner had received the Notice of Redemption immediately prior to the record date for such dividend, distribution, subdivision or combination.


"Event of Bankruptcy" as to any Person means the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978, as amended, or similar provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); insolvency or bankruptcy of such Person as finally determined by a court proceeding; filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, PROVIDED, HOWEVER, that if such proceeding is commenced by another, such Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days.


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"General Partner" means HealthCare Financial Partners REIT, Inc., a Maryland corporation, and any Person who becomes a substitute or additional General Partner as provided herein, and any of their successors as General Partner.


"General Partnership Interest" means a Partnership Interest held by the General Partner that is a general partnership interest.


"HCFP" means HealthCare Financial Partners, Inc., a Delaware corporation.


"Indemnitee" means (i) any Person made a party to a proceeding by reason of its status as the General Partner or a director, trustee, officer or employee of the Partnership or the General Partner, and (ii) such other Persons (including the Manager and Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time, in its sole and absolute discretion.


"Independent Director" means a person who is (i) independent of management of the General Partner, HCFP and the Manager, (ii) not employed by or an officer of the Company, HCFP or the Manager, (iii) not an "affiliate" (as defined in Rule 405 under the Securities Act) of the Company, HCFP, the Manager, or of any subsidiary of the Company, HCFP or the Manager, and (iv) not a person who acts on a regular basis as an individual or representative of an organization serving as a professional advisor, legal counsel or consultant to the management of the Company, HCFP or the Manager.


"Initial Limited Partner" means HCFP Limited, Inc., a Maryland corporation.


"Limited Partner" means any Person named as a Limited Partner on EXHIBIT A attached hereto, and any Person who becomes a Substitute or Additional Limited Partner, in such Person's capacity as a Limited Partner in the Partnership.


"Limited Partnership Interest" means the ownership interest of a Limited Partner in the Partnership at any particular time, including the right of such Limited Partner to any and all benefits to which such Limited Partner may be entitled as provided in this Agreement and in the Act, together with the obligations of such Limited Partner to comply with all the provisions of this Agreement and of such Act. A Limited Partnership Interest may be expressed as a number of Partnership Units.


"Loss" has the meaning provided in Section 5.01(f) hereof.


"Manager" means HCFP REIT Management, Inc., a Maryland corporation.


"Notice Of Redemption" means the Notice of Exercise of Redemption Right substantially in the form attached as EXHIBIT B hereto.


"NYSE" means the New York Stock Exchange.


"Offer" has the meaning set forth in Section 7.01(c) hereof.


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"Offering" means the initial offer and sale by the General Partner and the purchase by the Underwriters (as defined in the Prospectus) of REIT Shares for sale to the public.


"Partner" means any General Partner or Limited Partner.


"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in Regulations Section 1.704-2(i). A Partner's share of Partner Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5).


"Partnership" means the limited partnership formed under the Act and pursuant to this Agreement, and any successor thereto.


"Partnership Interest" means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.


"Partnership Minimum Gain" has the meaning set forth in Regulations Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the amount of Partnership Minimum Gain is determined by first computing, for each Partnership nonrecourse liability, any gain the Partnership would realize if it disposed of the property subject to that liability for no consideration other than full satisfaction of the liability, and then aggregating the separately computed gains. A Partner's share of Partnership Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(g)(1).


"Partnership Record Date" means the record date established by the General Partner for the distribution of cash pursuant to Section 5.02 hereof, which record date shall be the same as the record date established by the General Partner for a distribution to its shareholders of some or all of its portion of such distribution.


"Partnership Unit" means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder. The allocation of Partnership Units among the Partners shall be as set forth on EXHIBIT A, as may be amended from time to time.


"Percentage Interest" means the percentage ownership interest in the Partnership of each Partner, as determined by dividing the Partnership Units owned by a Partner by the total number of Partnership Units then outstanding. The Percentage Interest of each Partner shall be as set forth on EXHIBIT A, as may be amended from time to time.


"Person" means any individual, partnership, limited liability company, corporation, joint venture, trust or other entity.


"Profit" has the meaning provided in Section 5.01(f) hereof.


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"Property" means any loan, real property or other investment in which the Partnership holds an ownershi ...