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2 01302393 deficiencies (including, but not limited to, building code violations) by Governmental Authorities and /or by HUD have been issued and remain unresolved to the satisfaction of the issuing public body or (iii) Borrower has been notified by HUD, Lender or a Governmental Authority that physical repairs and /or deficiencies exist and Borrower has not corrected or cured the identified items to HUD's satisfaction. Upon completion of the repairs, HUD may permit a Distribution to be placed in an escrow account until a subsequent inspection has been completed by HUD. If the Project passes a subsequent inspection, HUD may then authorize release of the funds in the escrow account to Borrower. HUD may also permit Distributions when there are minor or contested local code violations on a case -by -case basis. c. Any Distribution of any funds of the Project not permitted by this Agreement or Program Obligations shall be returned to the appropriate Project account as specified by HUD immediately. d. All allowable Distributions shall be made or taken only after the end of a semiannual or annual fiscal period, and only as permitted by the law of the applicable jurisdiction. All such Distributions to Limited Dividend Borrowers in any one fiscal year shall be limited to NA percent of initial equity, or to such other amounts as may be specified in Program Obligations, and the right to such Distributions shall be cumulative. No Distributions may be taken in the case of Public Body or Nonprofit Borrowers unless permitted by Program Obligations. For all other Borrowers, Distributions, if taken, must be taken out of the appropriate Project account as specified by HUD within the accounting period immediately following the computation of Surplus Cash and, if not taken within the identified period, these funds remain as Mortgaged Property and may only be used as permitted by this Agreement. The computation of Surplus Cash must be prepared at the end of the semiannual or annual fiscal period. e. Equity or capital contributions shall not be reimbursed from Project accounts without the prior written approval of HUD. Borrower advances for Reasonable Operating Expenses shall not be deemed to fall under this subsection but rather shall be treated under Section 15 below. 15. REIMBURSEMENT OF ADVANCES. My advances made by any Principal or by any entity on behalf of Borrower, or for Borrower with respect to the Project must be deposited into the Project's operating account as required by Program Obligations. My Principal or any entity that advances funds on behalf of Borrower or for Borrower for Reasonable Operating Expenses may be reimbursed from Surplus Cash at the end of the annual or semiannual period or such other time as may be approved in writing by HUD. Interest may be permitted on such advances with the prior written approval of HUD. Such repayment is not considered a Distribution if otherwise approved by HUD. 16. FINANCIAL ACCOUNTING. Borrower shall keep the books and accounts of the operation of the Mortgaged Property in accordance with Program Obligations. The books and accounts must be complete, accurate and current at all times. Posting must be made at least monthly to the ledger accounts, and year -end adjusting entries must be posted promptly in accordance with sound accounting principles. Any Undocumented Expense or Distribution shall Revious editions are obsolete Replaces form HtA92466 (11 /02) MR- Regulatory Agreement 1-11V-92466M(Rev.4/11) Page 13 FRI3CiVLLAGE