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ARTICLE V COVENANTS OF THE CITY; TAX COVENANTS Section 5.01. Collection of Unpaid Assessments. The unpaid assessments as set forth on the list thereof on file with the Treasurer together with the interest thereto, shall be payable in annual series corresponding in number to the number of serial maturities of the Bonds issued. An annual proportion of each unpaid assessment shall be payable in each year preceding the date of maturity of each of the several series of Bonds issued, sufficient to pay the Bonds when due and such proportion of each unpaid assessment coming due in any year, together with the annual interest thereon, shall be payable in the same manner and at the same time and in the same installments as the general taxes on real property are payable, and become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interests after delinquency as do the general taxes on real property. All sums received from the collection of said unpaid assessments and of the interest and penalties thereon shall be placed in the Redemption Fund. Section 5.02. Foreclosure. The City hereby covenants with and for the benefit of the Owners of the Bonds that it will order, and cause to be commenced within 150 days following the date of delinquency, and thereafter diligently prosecuted, an action in the superior court to foreclose the lien of any assessment or installment thereof not paid when due, pursuant to and as provided in sections 8830 through 8835, inclusive, of the Bond Law. Section 5.03. No Advances from Available Surplus Funds. The City shall not be obligated to advance available surplus funds of the City to cure any deficiency which may occur in the Redemption Fund; provided, however, that said determination shall not prevent the City, in its sole discretion, from so advancing funds. Section 5.04. Punctual Payment; Compliance With Documents. The City shall punctually payor cause to be paid the interest and principal to become due with respect to all of the Bonds in strict conformity with the terms of the Bonds and of this Resolution, and will faithfully observe and perform all of the conditions, covenants and requirements of this Resolution and all Supplemental Resolutions. Section 5.05. No Priority for Additional Obligations. The City covenants that no additional bonds or other obligations shall be issued or incurred having any priority over the Bonds in payment of principal or interest out of the Assessments. Nothing in this Resolution shall prohibit or impair the authority of the City to issue bonds or other obligations secured by and payable from Assessments which are on a parity with or subordinate to the Bonds, upon such terms and in such principal amounts as the City may determine. Section 5.06. No Arbitrage. The City shall not take, nor permit nor suffer to be taken, any action with respect to the proceeds of any of the Bonds which would cause any of the Bonds to be "arbitrage bonds" within the meaning of the Tax Code. -16- 11305