Regular meeting of the Ludington City Council held in the Council Chambers of the Municipal Building on Monday, May 21, 2007 at 7:30 o clock p.m.

May 21, 2007 Regular meeting of the Ludington City Council held in the Council Chambers of the Municipal Building on Monday, May 21, 2007 at 7:30 o clock p.m. Present: His Honor, Mayor John Henderson, Councilors Kaye Holman, Paul Peterson, Greg Dykstra, Brent Scott, Dave Weston, Pete Engblade, and Gary Castonia. Absent: None Also present were City Manager John Shay, City Attorney Roger Anderson, Police Chief Mark Barnett, City Treasurer Mary Reeds-Mortensen, and City Clerk Deborah Luskin. Invocation was pronounced by Councilor Pete Engblade. Pledge to the Flag was given. The agenda was corrected to remove Sidewalk 1, 502 N. Harrison St., from the agenda as the owners came in and paid today. Moved by Councilor Holman, seconded by Councilor Peterson, to approve the agenda as corrected. Motion Carried The meeting was opened for public comments. Mary Ann Phillips, 402 E. Foster, has come to council before with a problem regarding a barking dog. She has called 911 on May 13, 14, 17 and 20 th on the dog at 403 S. Delia. She stated that she has gotten no relief and that the dog keeps her and her grandchildren awake. His Honor Mayor John Henderson stated that this will be moved to the Public Safety Committee for review. Police Chief Mark Barnett stated that his officers have answered both calls this weekend and issued two tickets and it will be up to the judge to make a rule on this. He will follow up with the judge so the judge is aware of this problem. Scott Ames Jr., 1017 S. Madison St., came to the meeting at the request of Jack Byers regarding the property at 1007 S. Madison St. and 1009 S. Madison St. He stated that the back of 1007 S. Madison St. is unbelievable and is in bad need of repair, with a tree down, tires, and knee high grass. He is asking for some relief and that something is done with this property. The house at 1009 S. Madison is a rental and is infested with fleas and mice. His Honor Mayor Henderson asked that 1007 and 1009 S. Madison be sent to the Building & Licensing Committee to look at and report back in two weeks. After no further comments were received, the regular order of business was resumed. Moved by Councilor Holman, seconded by Councilor Dykstra, that the minutes of the regular meeting held 5/7/07 be approved as printed. Motion Carried. Moved by Councilor Holman, seconded by Councilor Scott, that the minutes of the special meeting held 5/16/07 be approved as printed. Motion Carried. The meeting was opened for the scheduled public hearing on the Determination of Necessity and Confirmation of Assessment Roll at 313 E. Foster St. After no further comments were received, the regular order of business was resumed. SPECIAL ASSESSMENT ROLL CERTIFICATE RESSEGUIE S ADDITION S ½ OF LOT 6 BLOCK 9 (313 E. FOSTER ST.) TO THE CITY OF LUDIINGTON I hereby certify and report that the foregoing is the special assessment roll and the assessments made by me pursuant to a resolution of the City Council of the City of Ludington adopted May 21, 2007, for the purpose of paying that part of the cost which the City Council decided should be paid and borne by special assessment for the repair/construction of sidewalk on the above parcel; that in making such assessment I have, as near as may be and according to my best judgment, conformed in all things to the directions contained in the resolution of the City Council hereinbefore referred to, and the Charter and City Code of the City of Ludington relating to such assessment. The foregoing Special Assessment Roll was presented and certified by City Assessor Rich Dykstra. DETERMINATION OF NECESSITY AND CONFIRMATION OF ASSESSMENT ROLL 2007 SIDEWALK REPLACEMENT NO. 4: (313 E. FOSTER ST.) RESSEGUIE S ADDITION S ½ OF LOT 6 BLOCK 9 Legal 030A 1

Legal 030A 2 IN THE CITY OF LUDINGTON WHEREAS, a combined hearing was held by the City Council to determine the necessity for the above improvement and to consider the confirmation of the proposed assessment roll, and WHEREAS, due notice was provided by the City Clerk to all property owners or parties in interest in the property to be specially assessed, and WHEREAS, the City Council finds that the above project is necessary for the benefit of the property owners to be assessed, and WHEREAS, the City Council finds that the cost of the improvement has been fairly allocated and assessed against the properties benefited, THEREFORE, BE IT RESOLVED: 1. That the City Council determines that the above improvement is necessary for the benefit of the properties to be benefited. 2. That the Special Assessment District is described as: RESSEGUIE S ADDITION S ½ OF LOT 6 BLOCK 9 (313 E. FOSTER) 3. That the above improvement is in the best interest of the resident whose property is benefited by such improvement. 4. That the estimated cost of the improvement is: ONE THOUSAND SIX HUNDRED THIRTY-ONE DOLLARS AND TWENTY-FIVE CENTS ($1,631.25). 5. That seventy five percent (75%) of the total cost of such improvement shall be paid by special assessments. 6. That the assessments as contained in the attached assessment roll are hereby confirmed. 7. That the assessments may be paid in full or in scheduled monthly installments until June 1, 2008, at which time the remaining balance will be placed on the homeowner s summer taxes. 8. That the assessments shall be a lien upon the property described in the attached assessment roll in accordance with State Statute and Local Ordinances, including Chapter 42 of the Code of the City of Ludington. Moved by Councilor Scott, seconded by Councilor Dykstra, that the foregoing Determination of Necessity and Confirmation of Assessment Roll be adopted. Motion Carried. The meeting was opened for the scheduled public hearing on the Determination of Necessity and Confirmation of Assessment Roll at 604 W. Ludington Ave. After no further comments were received, the regular order of business was resumed. SPECIAL ASSESSMENT ROLL CERTIFICATE ORIGINAL PLAT LOTS 8, 9 & 10 BLOCK 30 IN THE CITY OF LUDINGTON I hereby certify and report that the foregoing is the special assessment roll and the assessments made by me pursuant to a resolution of the City Council of the City of Ludington adopted May 21, 2007, for the purpose of paying that part of the cost which the City Council decided should be paid and borne by special assessment for the repair/construction of sidewalk on the above parcel; that in making such assessment I have, as near as may be and according to my best judgment, conformed in all things to the directions contained in the resolution of the City Council hereinbefore referred to, and the Charter and City Code of the City of Ludington relating to such assessment. The foregoing Special Assessment Roll was presented and certified by City Assessor Rich Dykstra. DETERMINATION OF NECESSITY AND CONFIRMATION OF ASSESSMENT ROLL 2007 SIDEWALK REPLACEMENT NO. 5: ORIGINAL PLAT LOTS 8, 9 & 10 BLOCK 30 IN THE CITY OF LUDINGTON WHEREAS, a combined hearing was held by the City Council to determine the necessity for the above improvement and to consider the confirmation of the proposed assessment roll, and WHEREAS, due notice was provided by the City Clerk to all property owners or parties in interest in the property to be specially assessed, and WHEREAS, the City Council finds that the above project is necessary for the benefit of the property owners to be assessed, and WHEREAS, the City Council finds that the cost of the improvement has been fairly allocated and assessed against the properties benefited, THEREFORE, BE IT RESOLVED: 1. That the City Council determines that the above improvement is necessary for the benefit of the properties to be benefited. 2. That the Special Assessment District is described as: ORIGINAL PLAT LOTS 8, 9 & 10 BLOCK 30 3. That the above improvement is in the best interest of the resident whose property is benefited by such improvement. 4. That the estimated cost of the improvement is: TWO THOUSAND ONE HUNDRED NINETY- TWO DOLLARS AND FIFTY CENTS ($2,192.50). 5. That seventy five percent (75%) of the total cost of such improvement shall be paid by special assessments.

6. That the assessments as contained in the attached assessment roll are hereby confirmed. 7. That the assessments may be paid in full or in scheduled monthly installments until June 1, 2008, at which time the remaining balance will be placed on the homeowner s summer taxes. 8. That the assessments shall be a lien upon the property described in the attached assessment roll in accordance with State Statute and Local Ordinances, including Chapter 42 of the Code of the City of Ludington. Moved by Councilor Scott, seconded by Councilor Dykstra, that the foregoing Determination of Necessity and Confirmation of Assessment Roll be adopted. Motion Carried. The date of 6/11/07 was set for a public hearing on the application received from Straits Steel & Wire Company for an Industrial Facilities Tax Exemption Certificate. Moved by Councilor Peterson, seconded by Councilor Engblade, that the request received from the AAUW Ludington Branch to place signs in the City advertising the 18 th annual Antique Show on July 8, be approved. Motion Carried. Moved by Councilor Holman, seconded by Councilor Dykstra, to approve the Finance Report with total expenditures in the amount of $428,081.50 for this period be approved and orders drawn according to the City Charter. Motion Carried. Moved by Councilor Holman, seconded by Councilor Peterson, to amend the 2006 General Fund revenues and expenditures budget to reflect contract financing and purchase of the BS&A software package and that the 2006 Local Streets Fund expenditure budget be amended to reflect an increase in expenditures as a result of audit reclassifications. Motion Carried. Ken Berthiaume, CPA, addressed the Council to present the 2006 Audit, stating that once again the City was given an unqualified opinion, which is the highest opinion possible. He summarized the entire Audit and commended the City staff during the transition in audit software. Moved by Councilor Holman, seconded by Councilor Peterson, that the 2006 Audit Report be accepted as presented. Motion Carried. BOND RESOLUTION Sewage Disposal System Junior Lien Revenue Bonds, Series 2007 WHEREAS, this City Council does hereby determine that it is necessary to acquire, construct and install improvements to the City's sewage disposal system, consisting of the acquisition and construction of a lift station to replace the Lavinia Street lift station and the acquisition and construction of sanitary sewer mains to replace existing sanitary sewer mains in the City, and related appurtenances (the Project ); and WHEREAS, the cost of acquiring and constructing the Project is estimated to be approximately One Million Six Hundred Forty-Four Thousand Dollars ($1,644,000); and WHEREAS, the City desires to issue bonds, as authorized by the provisions of Act 94, Public Acts of Michigan, 1933, as amended ( Act 94 ), to pay the cost of acquiring and constructing the Project; and WHEREAS, the City wishes at this time to authorize the issuance of such bonds to defray the cost of acquiring and constructing the Project and to sell the bonds in a private negotiated sale to the Michigan Municipal Bond Authority (the Authority ) as authorized by Act 227, Public Acts of Michigan, 1985, as amended ( Act 227 ), in order to enable the Authority to provide assistance with respect to the Project from the proceeds of the State of Michigan Water Pollution Control Revolving Fund. THEREFORE, BE IT RESOLVED by the City Council of the City of Ludington, Mason County, Michigan, as follows: Legal 030A 3

DEFINITIONS. Whenever used in this Resolution, except when otherwise indicated by the context: Additional Junior Lien Bonds means any additional bonds of equal standing with the Series 2007 Bonds issued pursuant to Section 23 hereof. Bond Reserve Requirement means the lesser of the Maximum Annual Debt Service on any outstanding Senior Lien Bonds or the maximum amount permitted by the Code. Bond Reserve Subaccount means the subaccount established within the Redemption Account pursuant to Section 14B. Bonds means the Series 2007 Bonds, together with any Additional Junior Lien Bonds and any Senior Lien Bonds. City means the City of Ludington, County of Mason, Michigan. Code means the Internal Revenue Code of 1986, as it may be amended. Council means the City Council of the City. Fiscal Year means the fiscal and operating year of the City which begins on January 1 and ends on the following December 31. Issue Date means the date on which the Series 2007 Bonds are delivered to the original purchaser thereof. Junior Lien Bonds means the Series 2007 Bonds, together with any Additional Junior Lien Bonds. Junior Lien Redemption Account means the account established pursuant to Section 14C. Maximum Annual Debt Service means, at any point in time, with respect to any outstanding Senior Lien Bonds or Junior Lien Bonds, as the case may be, the maximum amount of principal (whether by scheduled maturity or mandatory redemption) and interest becoming due in the then current or any future Fiscal Year; provided, however, that principal of and interest on Senior Lien Bonds or Junior Lien Bonds, as the case may be, maturing or becoming due by mandatory redemption on the first day of any Fiscal Year shall be deemed for purposes of this definition to mature or be subject to mandatory redemption on the last day of the immediately preceding Fiscal Year. Operation and Maintenance Account means the account established pursuant to Section 14A hereof. Receiving Account means the account established pursuant to Section 14 hereof. Repair and Replacement Account means the account established pursuant to Section 14D hereof. Revenues and Net Revenues shall be construed as defined in Section 3 of Act 94. Senior Lien Bonds means bonds or other obligations which may hereafter be issued or incurred by the City to provide funds for any lawful purpose of the System which are of senior standing and priority of lien with respect to the Net Revenues to the claim of the Junior Lien Bonds, as provided in Section 24. System means the City s complete sewage disposal system, both inside and outside the City, including all sanitary sewers, combined sanitary and storm sewers, plants, works, equipment, instrumentalities and properties used or useful in connection with the collection, treatment or disposal of sewage or industrial wastes, as the same now exists, together with all additions, extensions, repairs and improvements thereto hereafter acquired. NECESSITY; PUBLIC PURPOSE; PROJECT COSTS; PERIOD OF USEFULNESS. It is hereby determined to be a necessary public purpose of the City to acquire and construct the Project in accordance with the plans and specifications prepared by Prein & Newhof, which plans and specifications are now on file with the Clerk and are hereby approved and adopted. The City hereby adopts the estimate of 21 years and upwards as the period of usefulness of the Project and also the estimate of not to exceed $1,644,000 as the cost of the Project, both of which estimates are on file with the Clerk. AUTHORIZATION OF SERIES 2007 BONDS - PURPOSE. To pay part of the cost of the Project, including payment of legal, financial and other expenses incidental thereto and incidental to the issuance and sale of the Series 2007 Bonds, the City shall borrow the sum of not to exceed One Million Five Hundred Thousand Dollars ($1,500,000), as determined by the City Manager at the time of sale, and issue the Series 2007 Bonds therefore pursuant to the provisions of Act 94 and other applicable statutory provisions. The remaining cost of the Project shall be paid by the City from federal or state grants and/or from funds on hand and legally available for such use. SERIES 2007 BOND DETAILS. The Series 2007 Bonds shall be designated Sewage Disposal System Junior Lien Revenue Bonds, Series 2007 ; shall be dated as of the date of delivery thereof; shall be numbered from 1 upwards; shall be fully registered; shall be in the denomination of $5,000 each or any integral multiple thereof not exceeding the aggregate principal amount for each maturity at the option of the purchaser thereof (provided, however, that so long as the Series 2007 Bonds are registered in the name of the Authority, the Series 2007 Bonds may be in the form of a single bond in the denomination of $1,500,000 or such lower amount as approved by the City Manager at the time of sale, with an exhibit attached thereto which identifies the annual maturities for the Series 2007 Bonds and references herein to the Series 2007 Bonds shall mean that single bond registered in the name of the Authority); shall bear interest at the rate of 1.625% per annum from the date of delivery of the various principal installments as hereinafter described, payable on such dates as shall be determined by the City Manager at the time of sale; and shall mature on such dates and in such principal amounts as shall be determined by the City Manager at the time of sale. The Series 2007 Bonds are expected to be delivered to the Authority as the initial purchaser thereof in installments (the Installments ) equal to the amounts advanced from time to time by the Authority to the City pursuant to the Purchase Contract and the Supplemental Agreement (each as hereinafter defined). Legal 030A 4

PAYMENT OF PRINCIPAL AND INTEREST; PRIORITY OF LIEN. The Bonds and the interest thereon shall be payable solely from the Net Revenues, and to secure such payment, there is hereby created a statutory lien upon the whole of the Net Revenues that shall continue until payment in full of the principal of and interest on all Bonds payable from the Net Revenues, or until sufficient cash or direct obligations of the United States of America or obligations the principal and interest of which are fully guaranteed by the United States of America, not redeemable at the option of the issuer thereof, the principal and interest payments on which, without reinvestment of interest, come due at such times and in such amounts as to be fully sufficient to pay, when due, the principal of and interest on all Bonds payable from the Net Revenues to be paid or defeased to their stated maturity date or earlier redemption, shall have been deposited in trust for payment in full of such Bonds to their maturity or, if called for redemption, to the date fixed for redemption. Upon such deposit, the statutory lien herein created shall be terminated with respect to such Bonds to be defeased, the holders of such Bonds shall have no further rights under this Resolution except for payment from the deposited funds, and such Bonds no longer shall be considered to be outstanding under this Resolution. The statutory lien on the Net Revenues securing any Senior Lien Bonds shall be a first lien and shall at all times and in all respects be and remain superior to the lien on the Net Revenues securing the Series 2007 Bonds and any Additional Junior Lien Bonds. The principal of, premium, if any, and interest on the Series 2007 Bonds shall be payable in lawful money of the United States. So long as the Series 2007 Bonds are registered in the name of the Authority, the Series 2007 Bonds are payable as to principal, redemption premium, if any, and interest at The Bank of New York Trust Company, N.A. or at such other place as shall be designated in writing to the City by the Authority (the Authority s Depository ). So long as the Authority is the owner of the Series 2007 Bonds, the City agrees that it will deposit with the Authority s Depository payments of the principal of, premium, if any, and interest on the Series 2007 Bonds in immediately available funds at least five business days prior to the date on which any such payment is due, whether by maturity, redemption or otherwise. If the Series 2007 Bonds are not registered in the name of the Authority, the principal of and premium, if any, on the Series 2007 Bonds are payable upon the surrender thereof at the office of the bond registrar and paying agent and the interest is payable by check or draft mailed by the bond registrar and paying agent to the registered owner of the Series 2007 Bonds at the address appearing on the registration books of the City kept by the bond registrar and paying agent as of the 15th day of the month preceding the month in which an interest payment is due. BONDHOLDERS RIGHTS; RECEIVER. The registered owner or owners of the Bonds representing in the aggregate not less than twenty percent (20%) of the entire principal amount thereof then outstanding may, by suit, action, mandamus or other proceedings, protect and enforce the statutory lien upon the Net Revenues and may, by suit, action, mandamus or other proceedings, enforce and compel performance of all duties of the officers of the City, including the fixing of sufficient rates, the collection of Revenues, the proper segregation of the Revenues of the System and the proper application thereof. The statutory lien upon the Net Revenues, however, shall not be construed as to compel the sale of the System or any part thereof. If there is a default in the payment of the principal of or interest on the Bonds, any court having jurisdiction in any proper action may appoint a receiver to administer and operate the System on behalf of the City and under the direction of the court, and by and with the approval of the court to perform all of the duties of the officers of the City more particularly set forth herein and in Act 94. The registered owner or owners of the Bonds shall have all other rights and remedies given by Act 94 for the payment and enforcement of the Bonds and the security therefore. PRIOR REDEMPTION. The Series 2007 Bonds shall be subject to redemption prior to maturity upon the terms and conditions set forth in the form of Series 2007 Bond contained in Section 19 hereof. BOND REGISTRAR AND PAYING AGENT. Until a successor is appointed by the City Council, the City Treasurer shall act as bond registrar and paying agent. EXECUTION AND DELIVERY OF THE SERIES 2007 BONDS. The Series 2007 Bonds shall be executed in the name of the City by the manual or facsimile signatures of the City Manager and the Clerk of the City and authenticated by the manual signature of the bond registrar and paying agent, and the seal of the City (or a facsimile thereof) shall be impressed or imprinted on the Series 2007 Bonds. After the Series 2007 Bonds have been executed and authenticated for delivery to the Authority as the initial purchaser thereof, they shall be delivered by the Treasurer to the purchaser upon receipt of the purchase price or upon compliance with the terms and conditions of the Purchase Contract. Additional Series 2007 Bonds bearing the manual or facsimile signatures of the City Manager and the Clerk, and upon which the seal of the City (or a facsimile thereof) has been impressed or imprinted, may be delivered to the bond registrar and paying agent for authentication and delivery in connection with the exchange or transfer of the Series 2007 Bonds. The bond registrar and paying agent shall indicate on each Series 2007 Bond the date of its authentication. EXCHANGE AND TRANSFER OF THE SERIES 2007 BONDS. Any Series 2007 Bond, upon surrender thereof to the bond registrar and paying agent with a written instrument of transfer satisfactory to the bond registrar and paying agent duly executed by the registered owner or his duly authorized attorney, at the option of the registered owner thereof, may be exchanged for Series 2007 Bonds of any other authorized denominations of the same aggregate principal amount and maturity date and bearing the same rate of interest as the surrendered Series 2007 Bond. Each Series 2007 Bond shall be transferable only upon the books of the City, which shall be kept for that purpose by the bond registrar and paying agent, upon surrender of such Series 2007 Bond together with a written instrument of transfer satisfactory to the bond registrar and paying agent duly executed by the Legal 030A 5

registered owner or his duly authorized attorney. Upon the exchange or transfer of any Series 2007 Bond, the bond registrar and paying agent on behalf of the City shall cancel the surrendered Series 2007 Bond and shall authenticate and deliver to the transferee a new Series 2007 Bond or Bonds of any authorized denomination of the same aggregate principal amount and maturity date and bearing the same rate of interest as the surrendered Series 2007 Bond. If, at the time the bond registrar and paying agent authenticates and delivers a new Series 2007 Bond pursuant to this Section, payment of interest on the Series 2007 Bonds is in default, the bond registrar and paying agent shall endorse upon the new Series 2007 Bond the following: Payment of interest on this bond is in default. The last date to which interest has been paid is,. The City and the bond registrar and paying agent may deem and treat the person in whose name any Series 2007 Bond shall be registered upon the books of the City as the absolute owner of such Series 2007 Bond, whether such Series 2007 Bond shall be overdue or not, for the purpose of receiving payment of the principal of and interest on such Series 2007 Bond and for all other purposes, and all payments made to such registered owner, or upon his order, in accordance with the provisions of Section 5 of this Resolution shall be valid and effectual to satisfy and discharge the liability upon such Series 2007 Bond to the extent of the sum or sums so paid, and neither the City nor the bond registrar and paying agent shall be affected by any notice to the contrary. The City agrees to indemnify and save the bond registrar and paying agent harmless from and against any and all loss, cost, charge, expense, judgment or liability incurred by it, acting in good faith and without negligence hereunder, in so treating such registered owner. For every exchange or transfer of the Series 2007 Bonds, the City or the bond registrar and payment agent may make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer, which sum or sums shall be paid by the person requesting such exchange or transfer as a condition precedent to the exercise of the privilege of making such exchange or transfer. The bond registrar and paying agent shall not be required to transfer or exchange Series 2007 Bonds or portions of Series 2007 Bonds which have been selected for redemption. MANAGEMENT OF SYSTEM. The management and operation of the System shall be under the supervision and control of the Council. The Council may employ such persons in such capacities as it deems advisable to carry on the efficient management and operation of the System. The Council may make such rules and regulations as it deems necessary and advisable to assure the efficient management and operation of the System and not inconsistent with the provisions of this Resolution. NO FREE SERVICE OR USE. No free service or use of the System, or service or use of the System at less than cost, shall be furnished by the System to any person, firm or corporation, public or private, or to any public agency or instrumentality. FIXING AND REVISING RATES; RATE COVENANT. The rates and charges for service furnished by and the use of the System and the methods of collection and enforcement of the collection of the rates shall be those in effect on the date of adoption of this Resolution. Rates shall be fixed and revised from time to time by the Council so as to produce amounts that are sufficient to provide for the payment of the expenses of administration and operation and such expenses for maintenance of the System as are necessary to preserve the System in good repair and working order, to pay an amount equal to at least 100% of the principal of and interest on the Junior Lien Bonds as the same become due and payable, to pay an amount equal to at least 110% of the principal of and interest on the Senior Lien Bonds as the same become due and payable, and to provide for all other obligations, expenditures and funds for the System required by law and this Resolution. The City covenants and agrees to review such rates at least annually and maintain at all times such rates for service furnished by the System as shall be sufficient to provide for the foregoing. ACCOUNTS; FLOW OF FUNDS. All Revenues of the System shall be set aside as collected and credited to the SEWAGE DISPOSAL SYSTEM RECEIVING ACCOUNT (the Receiving Account ) which is hereby established. Moneys on hand in the Receiving Account are pledged for the purpose of the following accounts and shall be transferred from the Receiving Account periodically in the manner and at the times and in the following order of priority: A. Operation and Maintenance Account: There shall be first set aside in, or credited to, an account designated OPERATION AND MAINTENANCE ACCOUNT (the Operation and Maintenance Account ), periodically, a sum sufficient to provide for all payment of the expenses of administration and operation of the System and such current expenses for maintenance thereof as may be necessary to preserve the System in good repair and working order. B. Bond and Interest Redemption Account: There shall be established and maintained a separate depository account designated BOND AND INTEREST REDEMPTION ACCOUNT (the Redemption Account ), the moneys on deposit therein from time to time to be used solely for the purpose of paying the principal of and interest on the Senior Lien Bonds. The moneys in the Redemption Account shall be accounted for separately. Revenues remaining in the Redemption Account after provision for the requirements of the Operation and Maintenance Account shall be set aside, but not more often than monthly, in the Redemption Account for the Senior Lien Bonds in accordance with the resolution authorizing the issuance or sale of such Senior Lien Bonds so that on each interest payment date and principal payment date for such Senior Lien Bonds there shall be sufficient funds in the Redemption Account to pay the interest and principal due on such dates. No further payments need to be made into the Redemption Account after enough of the Senior Lien Bonds have been retired so that the amount then held in the Redemption Account is equal to the entire amount of principal and interest that will be payable at the time of maturity of all the then outstanding Senior Lien Bonds. Legal 030A 6

There is hereby established in the Redemption Account a separate subaccount to be known as the Bond Reserve Subaccount, into which shall be deposited on the date of delivery of each series of Senior Lien Bonds, such moneys or securities, as determined by the City in the resolution authorizing the issuance or sale of such Senior Lien Bonds, that will cause the amount on deposit in the Bond Reserve Subaccount to equal the Bond Reserve Requirement. Thereafter, from the Revenues remaining in the Receiving Account after provision has been made for the Operation and Maintenance Fund and the Redemption Account, there shall be deposited in the Bond Reserve Subaccount each month an amount equal to the balance in the Receiving Fund or the amount necessary to accumulate and maintain in the Bond Reserve Subaccount a sum equal to the Bond Reserve Requirement, whichever is lesser. Except as otherwise provided herein, moneys in the Bond Reserve Subaccount shall be used solely for the payment of the principal of and interest on Senior Lien Bonds as to which there would otherwise be default. C. Junior Lien Bond and Interest Redemption Account. There shall be established and maintained a separate depository account designated JUNIOR LIEN BOND AND INTEREST REDEMPTION ACCOUNT (the Junior Lien Redemption Account ), the moneys on deposit therein from time to time to be used solely for the purpose of paying the principal of and interest on the Series 2007 Bonds and any Additional Junior Lien Bonds. The moneys in the Junior Lien Redemption Account shall be accounted for separately. Revenues remaining in the Receiving Account after provision for the requirements of the Operation and Maintenance Account and the Redemption Account including the Bond Reserve Subaccount, shall be set aside each month in the Junior Lien Redemption Account in an amount proportionately sufficient to provide for the payment when due of the current principal of and interest on the Junior Lien Bonds, less any amount in the Junior Lien Redemption Account representing accrued interest and premium, if any, on the Junior Lien Bonds. Commencing the month in which the Issue Date occurs, until the Junior Lien Bonds are paid in full the amount set aside each month for interest on the Junior Lien Bonds shall be 1/6 of the total amount of interest on the Junior Lien Bonds coming due on the next interest payment date or such greater or lesser amount in approximately equal monthly installments necessary to accumulate the amount of interest next coming due by the date such interest is to be paid. Commencing the month in which the Issue Date occurs, the amount set aside each month for principal shall be 1/12 of the total principal amount of the Junior Lien Bonds next coming due or such greater or lesser amount in approximately equal monthly installments necessary to accumulate the principal amount next coming due by the date such principal is to be paid. If there is any deficiency in the amounts previously set aside, that deficiency shall be added to the next succeeding month s requirements. No further payments need to be made into the Junior Lien Redemption Account after enough of the Junior Lien Bonds have been retired so that the amount then held in the Junior Redemption Account is equal to the entire amount of principal and interest that will be payable at the time of maturity of all the then outstanding Junior Lien Bonds. D. Repair and Replacement Account: There shall be established and maintained an account designated REPAIR AND REPLACEMENT ACCOUNT (the Repair and Replacement Account ). The Council shall include in the annual budget and there shall be deposited in the Repair and Replacement Account such amounts so as to maintain the System in proper repair and working order. Out of the Revenues remaining after meeting the monthly requirements of the foregoing accounts, there shall be deposited monthly into the Repair and Replacement Account such amounts described in the preceding sentence. The money deposited in the Repair and Replacement Account shall be used for the purpose of paying the costs of making repairs and replacements to parts of the System as determined by the Council or to reimburse the City for any amounts advanced for such purpose. E. Surplus Moneys: Any Revenues remaining in the Receiving Account at the end of any Fiscal Year after satisfying the foregoing requirements of this Section shall be deemed to be surplus moneys, and may, at the option of the City, be used and applied for any purpose related to the System for which the foregoing accounts were established or to improve or extend the System; provided however, that if there should be any deficit in the Operation and Maintenance Account, the Redemption Account including the Bond Reserve Subaccount or the Junior Lien Redemption Account, then deposits of surplus moneys shall be made to such accounts in the priority and order named to the extent of any such deficit. Legal 030A 7

DEPOSITARY AND FUNDS ON HAND. Moneys in the several accounts of the System established pursuant to this Resolution and moneys derived from the proceeds of the sale of the Bonds shall be deposited with a bank, savings and loan association, or credit union designated by resolution of the Council. Moneys in the several accounts, except moneys in the Redemption Account (including the Bond Reserve Subaccount) and Junior Lien Redemption Account and moneys derived from the proceeds of the sale of the Bonds, may be kept in one account at a bank, savings and loan association or credit union; provided that the moneys in the account shall be allocated on the books and records of the City in the manner provided in this Resolution. The moneys in the Redemption Account (including the Bond Reserve Subaccount) and the Junior Lien Redemption Account and moneys derived from the proceeds of the sale of the Bonds shall each be kept in a separate depository account. PRIORITY OF ACCOUNTS. In the event the moneys in the Receiving Account are insufficient to provide for the current requirements of the Operation and Maintenance Account, the Redemption Account or the Junior Lien Redemption Account, any moneys or securities in other funds of the System, except the proceeds of the sale of the Bonds, shall be credited or transferred, first, to the Operation and Maintenance Account, second, to the Redemption Account, and third, to the Junior Lien Redemption Account, to the extent of any deficit therein. INVESTMENTS. Moneys in the accounts established herein and moneys derived from the proceeds of the sale of the Bonds may be invested by the City in accordance with the City s investment policy adopted by the City Council pursuant to Act 20, Public Acts of Michigan, 1943, as amended. Profit realized or interest income earned on investment of funds in the Receiving Account, the Operation and Maintenance Account, the Redemption Account, the Junior Lien Redemption Account and the Repair and Replacement Account shall be deposited in or credited as received to the Receiving Account. SERIES 2007 BOND PROCEEDS. From the proceeds of the sale of the Series 2007 Bonds there shall be immediately deposited in the Junior Lien Redemption Account an amount equal to the accrued interest and premium, if any, received on the delivery of the Series 2007 Bonds. The balance of such proceeds shall be used solely to pay part of the cost of the Project and any engineering, legal and other expenses incident thereto, and shall be paid out only upon authorization of the Council; provided that the Council shall not authorize the payment of any such moneys for acquisition and construction of the Project until there shall have been first filed with it by the consulting engineer in charge of such work, a written statement to the effect that the sum so to be paid is in full or partial payment of a contractual obligation in connection with the Project and that the City has received the consideration for such payment. The statement of the consulting engineer shall also show the cost of acquisition and construction of the Project that has theretofore been approved by him for payment and the amount of the balance that will be required for completion of the Project. SERIES 2007 BOND FORM. The Series 2007 Bonds shall be in substantially the following form, with such changes and additions as shall be required by the purchaser and approved by the City Manager and the Clerk, with such approval to be evidenced by their manual or facsimile signatures thereon: Legal 030A 8

No. UNITED STATES OF AMERICA STATE OF MICHIGAN COUNTY OF MASON CITY OF LUDINGTON SEWAGE DISPOSAL SYSTEM JUNIOR LIEN REVENUE BOND, SERIES 2007 INTEREST RATE MATURITY DATE DATE OF ORIGINAL ISSUE 1.625% See Exhibit A Registered Owner: Michigan Municipal Bond Authority Principal Amount: Dollars ($ ) The City of Ludington, County of Mason, State of Michigan (the City ), acknowledges itself indebted to and for value received hereby promises to pay to the Registered Owner identified above, or registered assigns, the Principal Amount set forth above or so much thereof as shall have been advanced to the City pursuant to a Purchase Contract between the City and the Michigan Municipal Bond Authority (the Authority ) and a Supplemental Agreement by and among the City, the Authority and the State of Michigan acting through the Department of Environmental Quality on the maturity dates and in the amounts set forth in Exhibit A attached hereto, unless redeemed prior thereto as hereinafter provided, the final payment to be made upon presentation and surrender of this bond at the office of the Treasurer, City of Ludington, County of Mason, Michigan, the bond registrar and paying agent, or at such successor bond registrar and paying agent as may be designated pursuant to the Resolution (as hereinafter defined), and to pay to the Registered Owner, as shown on the registration books at the close of business on the 15th day of the calendar month preceding the month in which an interest payment is due, by check or draft drawn upon and mailed by the bond registrar and paying agent by first class mail postage prepaid to the Registered Owner at the registered address, interest at the rate per annum specified above on such Principal Amount, to the extent advanced to the City pursuant to the Purchase Contract and the Supplemental Agreement until the City s obligation with respect to the payment of such Principal Amount is discharged. Interest is payable on the first days of April and October in each year, commencing on 1, 200_. Principal and interest are payable in lawful mony of the United States of America. Legal 030A 9

In the event of a default in the payment of principal or interest hereon when due, whether at maturity, by redemption or otherwise, the amount of such default shall bear interest (the additional interest ) at a rate equal to the rate of interest which is two percent above the Authority's cost of providing funds (as determined by the Authority) to make payment on the bonds of the Authority issued to provide funds to purchase this bond but in no event in excess of the maximum rate of interest permitted by law. The additional interest shall continue to accrue until the Authority has been fully reimbursed for all costs incurred by the Authority (as determined by the Authority) as a consequence of the City's default. Such additional interest shall be payable on the interest payment date following demand of the Authority. In the event that (for reasons other than the default in the payment of any municipal obligation purchased by the Authority) the investment of amounts in the reserve account established by the Authority for the bonds of the Authority issued to provide funds to purchase this bond fails to provide sufficient available funds (together with any other funds which may be made available for such purpose) to pay the interest on outstanding bonds of the Authority issued to fund such account, the City shall and hereby agrees to pay on demand only the City s pro rata share (as determined by the Authority) of such deficiency as additional interest on this bond. During the time funds are being drawn down by the City under this bond, the Authority periodically will provide the City a statement showing the amount of principal that has been advanced and the date of each advance, which statement shall constitute prima facie evidence of the reported information; provided that no failure on the part of the Authority to provide such a statement or to reflect a disbursement or the correct amount of a disbursement shall relieve the City of its obligation to repay the outstanding principal amount actually advanced, all accrued interest thereon, and any other amount payable with respect thereto in accordance with the terms of this bond. This bond is one of a series of bonds (issued in the form of a single registered bond in the principal sum of Thousand Dollars ($ )) issued by the City under and pursuant to a resolution duly adopted by the City Council of the City on May 21, 2007 (the Resolution ), and under and in full compliance with the Constitution and statutes of the State of Michigan, including specifically Act 94, Public Acts of Michigan, 1933, as amended, for the purpose of defraying part of the cost of acquiring and constructing improvements to the sewage disposal system of the City (the System ). This bond is a self-liquidating bond and is not a general obligation of the City and does not constitute an indebtedness of the City within any constitutional, statutory or charter limitation, but is payable, both as to principal and interest, solely from the net revenues of the System, including all appurtenances, extensions and improvements thereto, after provision has been made for reasonable and necessary expenses of operation, maintenance and administration (the Net Revenues ). The principal of and interest on this bond are secured by a statutory lien on the Net Revenues. The bonds of this series shall have equal standing with any additional junior lien bonds that may be issued pursuant to the Resolution. Additional bonds of superior standing to the bonds of this series may be issued pursuant to the Resolution. For a complete statement of the revenues from which and the conditions under which this bond is payable, a statement of the conditions under which additional bonds of equal or superior standing may hereafter be issued, the rights and limitations on the owner of this bond and the general covenants and provisions pursuant to which this bond is issued, reference is made to the Resolution. The City has covenanted and agreed, and does hereby covenant and agree, to fix and maintain at all times while any bonds payable from the Net Revenues of the System shall be outstanding, such rates for service furnished by the System as shall be sufficient to provide for payment of the principal of and interest on this bond and any other bonds payable from the Net Revenues as and when the same shall become due and payable, to maintain a bond and interest redemption account, to provide for the payment of expenses of administration and operation and such expenses for maintenance of the System as are necessary to preserve the same in good repair and working order, and to provide for such other expenditures and funds for the System as are required by the Resolution. This bond is transferable, as provided in the Resolution, only upon the books of the City kept for that purpose by the bond registrar and paying agent, upon the surrender of this bond together with a written instrument of transfer satisfactory to the bond registrar and paying agent duly executed by the Registered Owner or his attorney duly authorized in writing. Upon the exchange or transfer of this bond a new bond or bonds of any authorized denomination, in the same aggregate principal amount and of the same interest rate and maturity, shall be authenticated and delivered to the transferee in exchange therefore as provided in the Resolution, and upon payment of the charges, if any, therein provided. Bonds so authenticated and delivered shall be in any increments not exceeding the aggregate principal amount for each maturity. The bond registrar and paying agent shall not be required to transfer or exchange this bond or any portion of this bond which has been selected for redemption. This bond is subject to redemption prior to maturity at the option of the City only with the prior written consent of the Authority and upon such terms as may be required by the Authority. That portion of this bond called for redemption shall not bear interest after the date fixed for redemption, provided funds are on hand with the bond registrar and paying agent to redeem the same. Notwithstanding any other provision of this bond, so long as the Authority is the owner of this bond, (a) this bond is payable as to principal, premium, if any, and interest at The Bank of New York Trust Company, N.A. or at such other place as shall be designated in writing to the City by the Authority (the Authority s Depository ); (b) the City agrees that it will deposit with the Authority s Depository payments of the principal of, premium, if any, and interest on this bond in immediately available funds by 12:00 noon at least five business days prior to the date on which any such payment is due whether by maturity, redemption or otherwise; in the event that the Authority s Depository has not received the City s deposit by 12:00 noon on the scheduled day, the City shall immediately pay to the Authority as invoiced by the Authority an amount to recover the Authority s administrative costs and lost investment earnings attributable to that late payment; and (c) written notice of any redemption of this bond shall be Legal 030A 10

given by the City and received by the Authority s Depository at least 40 days prior to the date on which such redemption is to be made. It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of this bond existed, have happened and have been performed in due time, form and manner as required by law, and that the total indebtedness of the City, including the series of bonds of which this bond is one, does not exceed any constitutional, statutory or charter limitation. IN WITNESS WHEREOF, the City of Ludington, County of Mason, State of Michigan, by its City Council, has caused this bond to be executed in its name by manual or facsimile signatures of the City Manager and the Clerk of the City and its corporate seal (or facsimile thereof) to be impressed or imprinted hereon, all as of the Date of Original Issue. This bond shall not be valid unless the Certificate of Authentication has been manually executed by the bond registrar and paying agent. Legal 030A 11

SALE, ISSUANCE, DELIVERY, TRANSFER AND EXCHANGE OF SERIES 2007 BONDS. The Series 2007 Bonds shall be sold at a private, negotiated sale to the Authority, as authorized by Act 227. The sale shall be made pursuant to the terms and conditions to be set forth in a Purchase Contract (the Purchase Contract ) and a Supplemental Agreement (the Supplemental Agreement ). The City Manager and the Clerk are authorized to execute and deliver the Supplemental Agreement and the Purchase Contract in such forms as shall be approved by the City Manager and the Clerk, with such approval to be evidenced by their signatures thereon. Notwithstanding any other provision of this Resolution, the Series 2007 Bonds shall be initially sold to the Authority as one bond, numbered 1, in the aggregate principal amount of not to exceed $1,500,000. In addition, the Mayor, the Clerk, the Treasurer, the City Manager and other City employees and officials are authorized to execute and deliver to the Authority and such certificates and documents as the Authority or bond counsel shall require and to do all other things necessary to effectuate the sale, issuance, delivery, transfer and exchange of the Series 2007 Bonds in accordance with the provisions of this Resolution. REPLACEMENT OF BONDS. Upon receipt by the Clerk of proof of ownership of an unmatured Bond, of satisfactory evidence that the Bond has been lost, apparently destroyed or wrongfully taken and of security or indemnity which complies with applicable law and is satisfactory to the Clerk, the Clerk may authorize the bond registrar and paying agent to deliver a new executed Bond to replace the Bond lost, apparently destroyed or wrongfully taken in compliance with applicable law. In the event an outstanding matured Bond is lost, apparently destroyed or wrongfully taken, the Clerk may authorize the bond registrar and paying agent to pay the Bond without presentation upon the receipt of the same documentation required for the delivery of a replacement Bond. The bond registrar and paying agent, for each new Bond delivered or paid without presentation. as provided above, shall require the payment of expenses, including counsel fees, which may be incurred by the bond registrar and paying agent and the City in the premises. Any Bond delivered pursuant the provisions of this Section in lieu of any Bond lost, apparently destroyed or wrongfully taken shall be of the same form and tenor and be secured in the same manner as the Bond in substitution for which such Bond was delivered. COVENANTS. The City hereby covenants and agrees with the registered owners, from time to time, of the Bonds herein authorized to be issued, that it will punctually perform all duties with reference to the System and the Bonds required by the Constitution and laws of the State of Michigan and by this Resolution; that it will not sell, lease, mortgage or in any manner dispose of the System or any substantial part thereof, until all Bonds shall have been paid in full; and that it will not, to the extent permitted by law, permit any person, firm or corporation to compete with it in the furnishing of sewage disposal services to premises within its corporate limits. The City further covenants and agrees with the registered owners of the Bonds that it will maintain the System in good condition and operate the same in an efficient manner and at a reasonable cost, so long as the Bonds are outstanding; that it will maintain insurance on the System for the benefit of the registered owners of the Bonds in an amount which usually would be carried by private companies engaged in a similar type of business; that it will prepare, keep and file such records, statements and accounts as may be required by Act 94; and that it will furnish a copy of the foregoing statements and the annual audit of the System prepared by a certified public accountant to the registered owners of the Bonds upon payment of the actual cost of such copy. ADDITIONAL JUNIOR LIEN BONDS. In accordance with the provisions of Act 94, the right is reserved to issue Additional Junior Lien Bonds payable from the Revenues of the System that shall be of equal standing and priority of lien on the Net Revenues of the System with the Series 2007 Bonds for the acquisition and construction of repairs, enlargements, extensions, additions and improvements to the System, for refunding all or a part of any outstanding Junior Lien Bonds or any other debt incurred by the City for any purpose for which Junior Lien Bonds may be issued hereunder, for paying costs of issuing such Additional Junior Lien Bonds and for payment of interest on such Additional Junior Lien Bonds. Additional Junior Lien Bonds for such purposes shall not be issued unless the actual or augmented (as hereinafter detailed in this Section) Net Revenues of the System for the then last preceding audited Fiscal Year shall be equal to at least 100% of the Maximum Annual Debt Service on any outstanding Junior Lien Bonds and Additional Junior Lien Bonds then being issued. If the Additional Junior Lien Bonds are to be issued in whole or in part for refunding of outstanding Junior Lien Bonds, the annual principal and interest requirements shall be determined by deducting from the principal and interest requirements for each Fiscal Year the annual principal and interest requirements of any Junior Lien Bonds to be refunded from the proceeds of the Additional Junior Lien Bonds. For purposes of this Section, the City may elect to use as the last preceding Fiscal Year any Fiscal Year ending not more than sixteen months prior to the date of delivery of the Additional Junior Lien Bonds for which an audit is available. If any change in the rates, fees or charges of the System shall be authorized at or prior to the time of the resolution authorizing the sale of any Additional Junior Lien Bonds, the Net Revenues for the preceding Fiscal Year shall be augmented by an amount reflecting the effect of such change had the System s billings during such Fiscal Year been at the adopted rates. In addition, the actual Net Revenues for the preceding Fiscal Year may be augmented by 70% of the estimated increase in Net Revenues to accrue as a result of the acquisition and construction of the repairs, enlargements, extensions, additions and improvements to the System to be paid for in whole or in part from the proceeds of the Additional Junior Lien Bonds and 100% of the increase in Net Revenues resulting from any repair, enlargement, extension, addition or improvement that was made subsequent to the end of the last audited Fiscal Year. Determination by the Council as to existence of conditions permitting the issuance of Additional Junior Lien Bonds shall be conclusive. No Additional Junior Lien Bonds of equal standing with the Series 2007 Bonds as to the Net Revenues of the System shall be issued Legal 030A 12