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200702332 time any unrented unit may be rented to non-preferred applicants; after which time any unrented units may be rented to non-preferred applicants; and 2) Thereafter, and on a continuing basis, such prcfcrred applicants shall be given preference ovcr non- preferred applicants in their placement on a waiting list to be maintained by the Owners; and 3) Notwithstanding the provisions of paragraphs (1) and (2), for 30% of the Section 8 units, the Section 221 or Section 231 occupancy preferencc shall be accorded only to those individuals qualifYing as vcry low incomc as specificd in the Housing Assistance Payments Contract. c) Without the prior written approval of the Secretary not more that 25% of the number of units in a project insured under Section 231 shall be occupied by persons other than elderly persons. d) All advertising or efforts to rent a project insured under Section 231 shall reflect a bona fide effort of the Owners to obtain occupancy by elderly persons. 7. Nonprofit Owners agrce that no dividends of any nature whatsoever will be paid on the capital stock issued by the corporation. 8. Owners shall not without the prior written approval ofthe Secrctary: a) Convey, transfer, or encumber any of the mortgaged property, or permit the conveyance, transfer, or encumbrance of such property. b) Assign, transfcr, dispose of, or encumber any personal property of the projcct, including rents, or payout any funds cxcept from surplus cash, except for reasonable opcrating expcnscs and necessary repairs. c) Convey, assign, or transfer any beneficial interest in any trust holding title to the propcrty, or any right to manage or receive the rents and profits from the mortgaged property. d) Remodel, add to, reconstruct, or demolish any part ofthe mortgaged property or subtract from any real or personal property of the project. e) Make, or receive and retain, any distribution of assets or any income of any kind ofthc project except surplus cash and except on the following conditions: 1) All distributions shall be made only as of and aftcr the end of semiannual or annual fiscal period, and only as permitted by the law of the applicable jurisdiction; and, in the case ofa limited distribution mortgagor, all distributions in anyone fiscal year shall bc limited to six per centum on the initial equity investmcnt, as determined by the Secretary which shall be cumulative; 2) No distribution shall be made from borrowed funds, prior to the completion ofthe project or when there is any default under this Agreement or under the note or mortgage; 3) Any distribution or any funds ofthe project, which the party receiving such funds is not entitlcd to retain hereunder, shall be held in trust separate and apart from any other funds; and 4) There shall have been compliance with all outstanding notices of requirement for proper maintenance of the project. f) Engage, except for natural persons, in any other business or activity, including the operation of any other rental project, or incur any liability or obligation not in connection with the project. g) Require, as a condition ofthc occupancy or leasing of any unit in the project any consideration or deposit other than thc prcpayment of the I1rst month's rent, plus a sccurity deposit in an amount not in cxccss of one month's rent (thc gross family contribution in Section 8 units) to guarantee the performance ofthe covcnants ofthc lease. Any funds collected as security deposits shall be kept separate and apart from all other flmds of the project in a trust account the amount of which shall at all timcs equal or exceed the aggregate of all outstanding obligations under said account. h) Permit the use of the dwelling accommodations of the project for any purpose except the use which was originally intended, or permit commercial use greater than that originally approved by the Secretary. 9. a) Owners have executed an Agreemcnt to enter into a Housing Assistance Payments Contract or have executed a I lousing Assistance Payments Contract if an insurance upon completion case. The terms of said Contract are shall be incorporated by reference into this Regulatory Agreement. 3