Refunding of Outstanding Sewage Works Revenue Bonds of 2006, 2007B in the Principal Amount not to Exceed $28,000,000

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Bonds may be deposited to the 2015 Subaccount, if any, of the Reserve Account, for the 2015 Bonds and applied as described below as determined by the Fiscal Officer. An amount of proceeds from the sale of the 2015 Bonds equal to the estimated costs of issuance of the 2015 Bonds and other fees and charges associated with the issuance of the 2015 Bonds, including the premium for any bond insurance obtained for the 2015 Bonds, shall be deposited into a fund of the utility hereby created and designated as "City of South Bend, Indiana Sewage Works 2015 Costs of Issuance Fund" (the "Costs of Issuance Fund"). The proceeds deposited in the Costs of Issuance Fund, together with all investment earnings thereon, shall be expended only for the purpose of paying the costs of issuance of the 2015 Bonds and other fees and charges associated with the issuance of the 2015 Bonds, including the premium for any bond insurance obtained for the 2015 Bonds. The remaining proceeds from the sale of the 2015 Bonds shall be deposited into a fund of the utility hereby created and designated as "City of South Bend, Indiana Sewage Works 2015 Refunding Fund" (the "Refunding Fund"). The proceeds deposited in the Refunding Fund, together with all investment earnings thereon, shall be expended only for the purpose of paying the costs of the Refunding. SECTION 12. Revenue Fund. All revenues derived from the operation of the Sewage Works and from the collection of sewage rates and charges shall be deposited in the Sewage Works Revenue Fund (the "Revenue Fund"), as set forth in the Prior Ordinances and continued hereby, and such revenues shall be segregated and kept separate and apart from all other funds and bank accounts of the City. Out of said revenues the proper and reasonable expenses of operation, repair and maintenance of the Sewage Works shall be paid, the principal and interest of all bonds and fiscal agency charges of bank paying agents shall be paid, and the costs of replacements, extensions, additions and improvements shall be paid as hereinafter provided. SECTION 13. Operation and Maintenance Fund. On the last day of each calendar month there shall be credited from the Revenue Fund to the Sewage Works Operations and Maintenance Fund (the "Operations Fund"), as set forth in the Prior Ordinances and continued hereby, a sufficient amount of the revenues of the Sewage Works so that the balance in said fund shall be sufficient to pay the expenses of operation, repair and maintenance for the then next succeeding two calendar months. The moneys credited to this fund shall be used for the payment of the reasonable and proper operation, repair and maintenance expenses of the Sewage Works on a day-to-day basis, but none of such moneys in such fund shall be used for deprecation, replacements, improvements, extensions or additions. Any balance in the Operations Fund in excess of the expected expenses of operation, repair and maintenance for the then next succeeding month may be transferred to the Sinking Fund referred to below if necessary to prevent a default in payment of principal or interest on outstanding bonds. - 11 -