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8.A. - Page 42 Covenant for Superior Court Foreclosure Foreclosure Under the Act. Pursuant to Section 53356.1 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 thlt it will annually on or before August 1 of each year review the public records of the County of San Mateo relating to the collection of the Special Tax in order to determine the amount of the Special Tax collected in the prior Fiscal Year, and if the City determines on the basis of such review that the amount so collected is deficient of the total amount of the Specill Tax levied in such Fiscal Ye1r, it will within thirty (30) days thereafter institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent i�zstallment of the Special Tax against each Taxable Parcel for which such installment of the Special Tax is delinquent, and any Parcel with related Parking Units (see "SECURITY FOR THE BONDS—Summary of Rate and Method – Undi��ided Levy"), and will diligently prosecute and pursue such foreclosure proceedings to judgment and sale. 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 Sale Proceeds; Foreclosure Limitations and Delays. 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 s11e 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, admi�zistrative 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 a delay in payments to owners of the Bonds pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. Section 53356.6 of the Act requires thlt property sold pursulnt to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post- judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtauzed. However, under Section 53356.6 of the Act, the City, as judgment creditor, is entitled to purchase any property sold 1t foreclosure using a"credit bid," where the City could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the City becomes the purchaser under a credit bid, the City must pay the amount of its credit bid into the redemption fund established for the Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale. Neither the Act nor the Fiscal Agent Agreement requires the City to purchase or othervvise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale, and the City has no intent to be such a purchaser. The City will levy the Special Tax to pay the current year's debt service and related administrative expenses and to replerush the Reserve Fund to the Reserve Requirement, subject to the Maximum Annual Special Tax Rate. However, in the event such superior court foreclosure proceedings are necessary, and if the Reserve Fund is depleted, there could be a delay in paymeilts of principal of and interest on the Bonds peilding prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. See "SPECIAL RISK FACTORS—Bankruptcy Delays" and "—Proceeds of Foreclosure Sales." -18-