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12/03/2012 Bonds, and (ii) payment of any fees and expenses due to the Fiscal Agent. See Appendix C – "Summary of Fiscal Agent Agreement." Whenever Bonds are to be redeemed with proceeds of Prepayments of Special Taxes pursuant to the provisions of the Fiscal Agent Agreement, a proportionate share, determined as provided below, of the amount on deposit in the Reserve Fund shall, on the Business Day prior to the date on which such Bonds are to be redeemed, be transferred by the Fiscal Agent from the Reserve Fund to the Series 2013 Prepayment Account and shall be applied to the redemption of said Bonds; provided, however, that such amount shall be so transferred only to the extent that the amount remaining on deposit in t11e Reserve Fund will be at least equal to the Reserve Requirement (excluding from the calculation thereof said Bonds to be redeemed). Such proportionate share shall be equal to the largest integral multiple of $5,000 that is not larger than the amount equal to the product of (i) the amount on deposit in the Reserve Fund on the date five (5) Business Days prior to the date notice of redemption of such Bonds is required to be given pursuant to the provisions hereof, times (ii) a fraction, the numerator of which is the principal amount of Bonds to be so redeemed and the denominator of which is the principal amount of Bonds to be Outstanding on the day prior to the date on which such Bonds are to be so redeemed. Covenant for Superior Court Foreclosure Foreclosure Under the Act. Pursuant to Section 53356.7 of the Act, in the event of any delinquency in the payment of the Special Tax on the taxed parcel, the City may order the institution of a superior court action to foreclose the lien on the taxed parcel within specified time limits. In such an action, the real property subject to the unpaid. amount of the Special Tax lien may be sold at judicial foreclosure sale. City Foreclosure Covenant. The City has covenanted in the Fiscal Agent Agreement for the benefit of the Bondowners that it (i) will commence judicial foreclosure proceedings against all parcels owned by a property owner that is delinquent in the payment of Special Taxes by the October 1. following the close of each Fiscal Year in which such Special Taxes were due, and (ii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the Fiscal Agent Agreement provides that the City may elect to defer foreclosure proceedings on any Developed Commercial Parcel (see "SECURITY FOR THE BONDS—Summary of Rate and Method – Classification of Parcels") which is owned by a delinquent property owner whose property is not, in the aggregate, delinquent in the payment of Special Taxes for a period of two years or more or in an amount in excess of 55,000 so long as (a) the amount in the Reserve Fund is at least equal to the Reserve Requirement, and (b) with respect to the Bonds, the City is not in default in the payment of the principal of or interest on the Bonds. The City may, but is not obligated and does not intend to, advance funds from any source of legally available funds in order to maintain the Reserve Fund at the Reserve Requirement or to avoid a default in payment on the Bonds. No assurance can be given as to the time necessary to complete any foreclosure sale or that any foreclosure sale will be successful. The City is not required to be a bidder at any foreclosure sale. Sufficiency of Foreclosure SraIe Proceeds; Foreclosure Limitations and belays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. Subject to the maximum rate, the Rate and Method is designed to generate from all non-exempt property within the District the current year's debt service, administrative expenses, and replenishment of the Reserve Fund to the Reserve Requirement. However, if foreclosure proceedings are necessary, and the Reserve Fund has been depleted, there could be -18- 26 RESO. # 15237 MUFF # 505