ORDINANCE NO. 5.03

AN ORDINANCE TO PROVIDE FOR THE ACQUISITION, CONSTRUCTION, INSTALLATION AND EQUIPPING OF NECESSARY ADDITIONS AND IMPROVEMENTS TO THE ELECTRIC UTILITY SYSTEM OF THE CITY OF CRYSTAL FALLS, MICHIGAN; TO PROVIDE FOR THE ISSUANCE AND SALE OF REVENUE BONDS TO PAY THE COST THEREOF; TO PROVIDE FOR THE SECURITY FOR AND RETIREMENT OF THE BONDS HEREIN AUTHORIZED; TO CONFIRM THE EXISTING RATES FOR THE SYSTEM; AND TO PROVIDE FOR OTHER MATTERS RELATIVE TO THE SYSTEM AND THE BONDS.

THE CITY OF CRYSTAL FALLS ORDAINS:

Section 1. Definitions. Whenever used in this Ordinance, except when otherwise indicated by the context, the following terms shall have the following meanings:

(a) "Act 94" means Act 94, Public Acts of Michigan, 1933, as amended.

(b) "Adjusted Net Revenues" means for any operating year the excess of revenues over expenses for the System determined in accordance with generally accepted accounting principles, to which shall be added depreciation, amortization, interest expense on Bonds, and any payments to the Issuer in lieu of taxes, to which may be made the following adjustments:

(i) Revenues may be augmented by the amount of any rate increases adopted prior to the issuance of additional Bonds or to be placed into effect before the time principal or interest on the additional Bonds becomes payable from Revenues as applied to quantities of service furnished during the operating year or portion thereof that the increased rates were not in effect;

(ii) Revenues may be augmented by amounts which may be derived from rates and charges to be paid by new customers of the System.

The adjustment of revenues and expenses by the factors set forth in (i) and (ii) above shall be reported upon by professional engineers or certified public accountants or other experts not in the regular employment of the Issuer.

(c) "Bonds" means the Series 2004 Bonds and any additional bonds of equal standing hereafter issued.

(d) "Issuer" means City of Crystal Falls, County of Iron, Michigan.

(e) "Project" means the additions and improvements to the System as set forth in the plans and specifications presented by the Issuer’s consulting engineers.

(f) "Revenues" and "Net Revenues" means the revenues and net revenues of the System and shall be construed as defined in Section 3 of Act 94, including with respect to "Revenues", the earnings derived from the investment of moneys in the various funds and accounts of the System.

(g) "Sales Resolution" means the resolution to be adopted by the City Council respecting the sale of the Series 2004 Bonds.

(h) "Series 2004 Bonds" means the Electric Utility System Revenue Bonds, Series 2004, in the principal amount of not to exceed $950,000 authorized by this Ordinance.

(i) "Sufficient Government Obligations" means direct obligations of the United States of America or obligations the principal and interest on which is fully guaranteed by the United States of America, not redeemable at the option of the issuer, the principal and interest payments upon which without reinvestment of the interest, come due at such times and in such amounts as to be fully sufficient to pay the interest as it comes due on the Bonds and the principal and redemption premium, if any, on the Bonds as they come due whether on the stated maturity date or upon earlier redemption. Securities representing such obligations shall be placed in trust with a bank or trust company, and if any of the Bonds are to be called for redemption prior to maturity, irrevocable instructions to call the Bonds for redemption shall be given to the paying agent.

(j) "System" means the City of Crystal Falls Electric Utility System, together with the Project and all additions, extensions and improvements hereafter acquired.

(k) "Transfer Agent" means the bank or bank company qualified under Michigan law to serve as paying agent, but registrar and transfer agent for the Series 2004 Bonds. The Transfer Agent will be specified in the Sales Resolution.

Section 2. Necessity; Approval of Plans and Specifications. It is hereby determined to be a necessary public purpose of the Issuer to acquire and construct the Project in accordance with the plans and specifications prepared by the City’s consulting engineers, which plans and specifications are hereby approved.

Section 3. Costs; Useful Life. The cost of the Project is estimated to be not less than Nine Hundred Fifty Thousand Dollars ($950,000), including the payment of incidental expenses as specified in Section 4 of this Ordinance, which estimate of cost is hereby approved and confirmed, and the period of usefulness of the Project is estimated to be nineteen and one-half (19-1/2) years.

Section 4. Payment of Cost; Bonds Authorized. To pay part of the cost of acquiring the Project, including payment of legal, engineering, financial and other expenses incident thereto and incident to the issuance and sale of the Series 2004 Bonds, the Issuer shall borrow the sum of not to exceed Nine Hundred Fifty Thousand Dollars ($950,000) or such lesser amount as provided in the Sales Resolution and issue the Series 2004 Bonds therefor pursuant to the provisions of Act 94.

Section 5. Bond Details, Registration and Execution. The Series 2004 Bonds hereby authorized shall be designated ELECTRIC UTILITY SYSTEM REVENUE BONDS, SERIES 2004, shall be payable out of the Net Revenues, as set forth more fully in Section 7 hereof, shall consist of fully-registered bonds of the denomination of $5,000 each, or integral multiples thereof not exceeding in any one year the amount maturing in that year, dated as of September  1, 2004, or such other date as provided in the Sales Resolution, numbered in the order determined by the Transfer Agent and shall mature or be subject to mandatory redemption on November 1 in the years and amounts as follows, or such other years and amounts as provided in the Sales Resolution:

The Series 2004 Bonds shall bear interest at a rate or rates to be determined on public sale thereof, but in any event not exceeding 6% per annum or the maximum rate permitted by law, payable on May 1 and November 1 of each year, commencing May 1, 2005, or such other dates as provided in the Sales Resolution, by check or draft mailed by the Transfer Agent selected by the Issuer to the person or entity which is, as of the 15th day of the month preceding the interest payment date, the registered owner at the registered address as shown on the registration books maintained by the Transfer Agent. The date of determination of registered owner for purposes of payment of interest as provided in this paragraph may be changed by the Issuer to conform to market practice in the future. The principal of the Series 2004 Bonds shall be payable at the designated office of the Transfer Agent.

The Series 2004 Bonds shall be sold at not less than 98% of their par value. The Series 2004 Bonds maturing on or after November 1, 2014, may be subject to redemption prior to maturity at the times and prices and in the manner as set forth in the Sales Resolution. The Series 2004 Bonds may be subject to mandatory sinking fund redemption prior to maturity at the times and prices and in the manner as set forth in the Sales Resolution.

In case less than the full amount of an outstanding Bond is called for redemption, the Transfer Agent upon presentation of the Bond called in part for redemption shall register, authenticate and deliver to the registered owner a new bond in the principal amount of the portion of the original bond not called for redemption. Notice of redemption shall be given in the manner specified in the form of the Series 2004 Bonds contained in Section 13 of this Ordinance.

The Series 2004 Bonds shall be signed by the manual or facsimile signature of the Mayor and countersigned by the manual or facsimile signature of the City Clerk and shall have the corporate seal of the Issuer impressed or imprinted thereon. The Series 2004 Bonds shall be delivered to the Transfer Agent for authentication and be delivered by the Transfer Agent to the purchaser thereof in accordance with instructions from the City Treasurer or the City Manager upon payment of the purchase price for the Series 2004 Bonds in accordance with the bid therefor when accepted.

The Series 2004 Bonds may be issued in book-entry-only form through The Depository Trust Company in New York, New York ("DTC"). So long as the Bonds are in the book-entry-only form, the Transfer Agent shall comply with the terms of the Letter of Representations to be entered into among the Issuer, the Transfer Agent and DTC, which provisions shall govern registration, notices and payment, among other things, and which provisions are incorporated herein with the same effect as if fully set forth herein. The City Treasurer is hereby authorized and directed to enter into the Letter of Representations with DTC in such form as determined by the City Treasurer, in consultation with bond counsel, to be necessary and appropriate. The Transfer Agent is hereby authorized and directed to also enter into the Letter of Representations with DTC as agent for the Issuer. In the event the Issuer determines that the continuation of the system of book-entry-only transfer through DTC (or successor securities depository) is not in the best interest of the DTC participants, beneficial owners of the Series 2004 Bonds, or the Issuer, the Issuer will notify the Transfer Agent, whereupon the Transfer Agent will notify DTC of the availability through DTC of the bond certificates. In such event, the Issuer shall issue and the Transfer Agent as transfer agent shall transfer and exchange bonds as requested by DTC of like principal amount, series and maturity, in authorized denominations to the identifiable beneficial owners in replacement of the beneficial interest of such beneficial owners in the Bonds.

Section 6. Registration and Transfer. Any Bond may be transferred upon the books required to be kept pursuant to this section by the person in whose name it is registered, in person or by the registered owner’s duly authorized attorney, upon surrender of the Bond for cancellation, accompanied by delivery of a duly executed written instrument of transfer in a form approved by the transfer agent. Whenever any Bond or Bonds shall be surrendered for transfer, the Issuer shall execute and the Transfer Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate principal amount. The Transfer Agent shall require payment by the bondholder requesting the transfer of any tax or other governmental charge required to be paid with respect to the transfer. The Issuer shall not be required (i) to issue, register the transfer of or exchange any Bond during a period beginning at the opening of business 15 days before the day of the giving of a notice of redemption of Bonds selected for redemption as described in the form of Series 2004 Bonds contained in Section 13 of this Ordinance and ending at the close of business on the day of that giving of notice, or (ii) to register the transfer of or exchange any Bond so selected for redemption in whole or in part, except the unredeemed portion of Bonds being redeemed in part.

The Transfer Agent shall keep or cause to be kept, at its principal office, sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection by the Issuer; and, upon presentation for such purpose, the Transfer Agent shall, under such reasonable regulations as it may prescribe, transfer or cause to be transferred, on said books, Bonds as hereinbefore provided.

If any Bond shall become mutilated, the Issuer, at the expense of the holder of the Bond, shall execute, and the Transfer Agent shall authenticate and deliver, a new Bond of like tenor in exchange and substitution for the mutilated Bond, upon surrender to the Transfer Agent of the mutilated Bond. If any Bond issued under this Ordinance shall be lost, destroyed or stolen, evidence of the loss, destruction or theft may be submitted to the Transfer Agent and, if this evidence is satisfactory to both and indemnity satisfactory to the Transfer Agent shall be given, and if all requirements of any applicable law including Act 354, Public Acts of Michigan, 1972, as amended, ("Act 354") have been met, the Issuer, at the expense of the owner, shall execute, and the transfer agent shall thereupon authenticate and deliver, a new Bond of like tenor and bearing the statement required by Act 354, or any applicable law hereafter enacted, in lieu of and in substitution for the Bond so lost, destroyed or stolen. If any such Bond shall have matured or shall be about to mature, instead of issuing a substitute Bond the Transfer Agent may pay the same without surrender thereof.

Section 7. Payment of the Series 2004 Bonds; Defeasance. Principal of and interest on the Series 2004 Bonds shall be payable from the Net Revenues. There is hereby recognized the statutory lien upon the whole of the Net Revenues created by this Ordinance which shall be a first lien to continue until payment in full of the principal of and interest on all Series 2004 Bonds payable from the Net Revenues, or until sufficient cash or Sufficient Government Obligations have been deposited in trust for payment in full of all Series 2004 Bonds then outstanding, principal and interest on such Series 2004 Bonds to maturity, or, if called for redemption, to the date fixed for redemption together with the amount of the redemption premium, if any. Upon deposit of cash or Sufficient Government Obligations, as provided in the previous sentence, the statutory lien shall be terminated with respect to the Series 2004 Bonds, the holders of the Series 2004 Bonds shall have no further rights under this Ordinance except for payment from the deposited funds, and the Series 2004 Bonds shall no longer be considered to be outstanding under this Ordinance.

Section 8. Management; Fiscal Year; No Free Service or Use. The operation, repair and management of the System and the acquiring of the Project shall continue to be under the supervision and control of the City Council. The fiscal year of the System shall be the same as the fiscal year of the Issuer. 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, including the Issuer.

Section 9. Rates and Charges; Rate Covenant. The rates and charges for service furnished by 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 Ordinance and shall be maintained so that Net Revenues shall be not less than 120% of average annual debt service on all outstanding Series 2004 Bonds. The rates presently in effect in the Issuer are estimated to be 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 provide for the payment of the principal of and interest on the Series 2004 Bonds as the same become due and payable, and the maintenance of the reserve therefor and to provide for all other obligations, expenditures and funds for the System required by law and this Ordinance. In addition, it is agreed that the rates shall be set from time to time so that there shall be produced each fiscal year Net Revenues in an amount not less than 120% of the principal of and interest on the Series 2004 Bonds coming due in such fiscal year. The rates shall be reviewed not less than once a year and shall be fixed and revised from time to time as may be necessary to produce these amounts, and it is hereby covenanted and agreed to fix and maintain rats for services furnished by the System at all times sufficient to provide for the foregoing. In determining the sufficiency of this rate covenant Net Revenues may be deemed to include the unreserved, unrestricted fund balance of the System as of the end of the preceding fiscal year.

Section 10. Funds and Accounts; Flow of Funds. All funds belonging to the System and all Revenues of the System shall continue to be set aside as collected and credited to a fund to be designated ELECTRIC UTILITY FUND (the "Receiving Fund"). On the date of delivery of the Series 2004 Bonds, all Revenues in any accounts of the System shall be transferred to the Receiving Fund and credited to the funds and accounts as provided in this section. The Revenues credited to the Receiving Fund are pledged for the purpose of the following funds and shall be transferred or debited from the Receiving Fund periodically in the manner and at the times and in the order of priority hereinafter specified:

A. OPERATION AND MAINTENANCE ACCOUNT:

Out of the Revenues credited to the Receiving Fund there shall be first set aside in, or credited to, an account designated OPERATION AND MAINTENANCE ACCOUNT (the "Operation and Maintenance Account") monthly a sum sufficient to provide for the payment of the next month’s expenses of administration and operation of the System and such current expenses for the maintenance thereof as may be necessary to preserve the same in good repair and working order.

A budget, showing in detail the estimated costs of administration, operation and maintenance of the System for the next ensuing operating year, shall be prepared by the City Council at least 30 days prior to the commencement of each ensuing operating year.

No payments shall be made to the Issuer from moneys credited to the Operation and Maintenance Account except for services directly rendered to the System by the Issuer or its personnel.

B. BOND AND INTEREST REDEMPTION ACCOUNT:

There shall be established and maintained a separate 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, redemption premiums (if any) and interest on the Bonds. The moneys in the Redemption Account (including the Bond Reserve Account) for each series of Bonds shall be kept on deposit with the bank or trust company where the principal of and interest on the series of Bonds are payable.

Out of the Revenues remaining in the Receiving Fund, after provision for the Operation and Maintenance Account, there shall be set aside at the time of delivery of the Series 2004 Bonds and the first day of each fiscal quarter thereafter in the Redemption Account an amount equal to that fraction of the amount of interest due on the next interest payment date the numerator of which is one and the denominator of which is the number of full or partial fiscal quarters to the next interest payment date, less any amount in the Redemption Account representing accrued interest on the Series 2004 Bonds or investment income on amounts on deposit in the Redemption Account. Commencing on the first day of the first fiscal quarter following the first interest payment on the Series 2004 Bonds, the amount set aside each quarter for interest on the Series 2004 Bonds shall be 1/2 of the total amount of interest next coming due on the Series 2004 Bonds. The amount set aside each quarter for principal, commencing April 1, 2005, shall be 1/4 of the amount of principal next coming due by maturity. If there is any deficiency in the amount previously set aside, that deficiency shall be added to the next succeeding quarterly requirements. The amount to be set aside for the payment of principal and interest on any principal payment shall not exceed the amount which, when added to the money on deposit in the Redemption Account including investment income thereon, is necessary to pay principal and interest due on the Bonds to the next succeeding principal payment date.

There is established a separate account in the Redemption Account to be known as the BOND RESERVE ACCOUNT (the "Bond Reserve Account"). Upon delivery of the Series 2004 Bonds, there shall be transferred from monies of the Issuer or proceeds of the Series 2004 Bonds or both and deposited into the Bond Reserve Account an amount equal to the lesser of (1) the maximum annual debt service on the Series 2004 Bonds due in the current or any future year, (2) 125% of the average annual debt service on the Series 2004 Bonds, or (3) 10% of the principal amount of the Series 2004 Bonds (the "Reserve Amount"). If the transfer provided in the previous sentence is insufficient to satisfy the Reserve Amount, then there shall be deposited into the Bond Reserve Account from proceeds of the Series 2004 Bonds or from other funds of the System an amount sufficient to satisfy the Reserve Amount. If monies in the Bond Reserve Account exceed the Reserve Amount at the end of a fiscal year, then interest on the Bond Reserve Account must be transferred into the Redemption Account. If monies in the Bond Reserve Account are less than the Reserve Amount at the end of a fiscal year, then monies from the Redemption Account or the Receiving Fund shall be deposited into the Bond Reserve Account to satisfy the requirements of this Section.

Except as otherwise provided in this Section, the moneys credited to the Bond Reserve Account shall be used solely for the payment of the principal of, redemption premiums (if any) and interest on the Bonds as to which there would otherwise be a default. If at any time it shall be necessary to use moneys credited to the Bond Reserve Account for such payment, then the moneys so used shall be replaced from the Net Revenues first received thereafter which are not required for current principal and interest requirements until the amount on deposit equals the Reserve Amount. If additional Bonds are issued, each ordinance authorizing the additional Bonds shall provide for additional deposits to the Bond Reserve Account to be made from the proceeds of the additional Bonds or from funds on hand and legally available for such use in an amount that will result in the Bond Reserve Account being funded to (1) the lesser of the following: (a) the maximum annual principal and interest requirements on the Bonds outstanding after issuance of the additional Bonds, (b) 125% of the average annual debt service on the Bonds outstanding after issuance of the additional Bonds, or (c) an amount equal to 10% of the principal amount of the Bonds, or (2) such lesser amount as may be necessary to maintain the tax-exempt status of the Bonds.

C. ELECTRIC UTILITY RESERVE AND CONTINGENCY FUND:

There exists a fund or account, designated ELECTRIC UTILITY RESERVE AND CONTINGENCY FUND (the "Reserve and Contingency Fund") which shall be maintained. Money credited to the Reserve and Contingency Fund shall be used for the purpose of capital replacement or expansion or major repairs and improvements to the System costing more than $25,000 and necessitated by deterioration or obsolescence of existing facilities and equipment and for major repairs and replacements necessitated because of damage by the elements or any other accidental cause. Out of the Revenues of the System there shall be deposited into the Reserve and Contingency Fund the amounts specified in Section 11.07 of the Issuer’s Charter.

D. SURPLUS MONEYS:

All moneys remaining in the Receiving Fund after satisfying all the foregoing requirements of this Section 10, may, at the option of the City Council, be used for any of the following purposes:

(1) Transferred to the Reserve and Contingency Fund.

(2) Transferred to the Redemption Account and used for the purchase of Bonds on the open market at not more than the fair market value thereof or for the redemption of Bonds prior to maturity.

(3) Transferred to a fund or account of the Issuer as specified by the City Council.

E. PRIORITY OF FUNDS.

In the event the moneys in the Receiving Fund are insufficient to provide for the current requirements of the Operation and Maintenance Account or the Redemption Account, any moneys or securities in other funds of the System, except the proceeds of sale of the Bonds, shall be credited or transferred, first, to the Operation and Maintenance Account, and, second, to the Redemption Account.

Section 11. Investments. Moneys in the funds and accounts established in this Ordinance and moneys derived from the proceeds of sale of the Series 2004 Bonds, may be invested by the Issuer in accordance with the Issuer’s investment policy adopted pursuant to Act 20, Public Acts of Michigan, 1943, as amended. Profit realized or interest income earned on investment of funds in the Receiving Fund, including the Operation and Maintenance Account, and the Reserve and Contingency Fund shall be deposited in or credited to the Receiving Fund at the end of each fiscal year. Profit realized on interest income earned on investment of moneys in the Redemption Account including income derived from the Bond Reserve Account shall be credited as received to the Redemption Account.

Section 12. Bond Proceeds. Upon delivery of the Series 2004 Bonds there shall be first immediately deposited from the proceeds of the Series 2004 Bonds in a separate account in the Redemption Account an amount equal to the accrued interest and premium, if any, received on delivery of the Series 2004 Bonds. The balance of the proceeds of the sale of the Series 2004 Bonds shall be deposited in a bank or banks, designated by the City Treasurer, qualified to act as depository of the proceeds of sale under the provisions of Section 15 of Act 94, in an account designated "2004 Construction Fund." Moneys in the 2004 Construction Fund shall be applied solely in payment of the cost of the Project and any engineering, legal and other expenses incident thereto and to the financing thereof, and shall be fully expended on Project costs within three years after the date of delivery of the Series 2004 Bonds. Payments for construction, either on account or otherwise, shall not be made unless the registered engineer in charge of such work shall file with the City Council a signed statement to the effect that the work has been completed in accordance with the plans and specifications therefor; that it was done pursuant to and in accordance with the contract therefor (including properly authorized change orders), that such work is satisfactory and that such work has not been previously paid for.

Any unexpended balance of the proceeds of sale of the Series 2004 Bonds remaining after completion of the Project in the 2004 Construction Fund shall in the discretion of the City Council, be used either for further improvements, enlargements and extension to the System, if, at the time of such expenditures, such use is approved by the Michigan Department of Treasury, if such permission is then required by law, or for the purpose of purchasing Bonds on the open market at not more than the fair market value thereof, but not more than the price at which Bonds may next be called for redemption, or used for the purpose of paying principal of the Bonds upon maturity or calling Bonds for redemption.

Section 13. Bond Form. The Series 2004 Bonds shall be in substantially the following form:

Registered

UNITED STATES OF AMERICA

STATE OF MICHIGAN

COUNTY OF IRON 

CITY OF CRYSTAL FALLS

ELECTRIC UTILITY SYSTEM

REVENUE BOND

SERIES 2004

Interest Rate Maturity Date Date of Original Issue CUSIP

REGISTERED OWNER:

PRINCIPAL AMOUNT: DOLLARS

City of Crystal Falls, County of Iron, State of Michigan (the "Issuer"), for value received, hereby promises to pay the Principal Amount shown above in lawful money of the United States of America to the Registered Owner shown above, or registered assigns, on the Maturity Date shown above, unless prepaid prior thereto as hereinafter provided, with interest thereon from the Date of Original Issue shown above, or such later date to which interest has been paid, until paid, at the Interest Rate per annum shown above, payable on ____________ 1, 2004 and semiannually thereafter. Principal of this bond is payable upon surrender of this bond at the designated office of __________________, Michigan, or such other transfer agent as the Issuer may hereafter designate (the "Transfer Agent") by notice mailed to the registered owner not less than 60 days prior to the date of any change in transfer agent. Interest on this bond is payable by check or draft mailed to the person or entity who is, as of the 15th day of the month preceding the interest payment date, the registered owner of record, at the registered address as shown on the registration books of the Issuer kept by the transfer agent. For prompt payment of principal and interest on this bond, the Issuer has irrevocably pledged the revenues of the Electric Utility System of the Issuer (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"), and a statutory first lien thereon is hereby recognized and created.

This bond is one of a series of bonds of even date of original issue, aggregating the principal sum of $_______ issued pursuant to Ordinance No. _____duly adopted by the City Council of the Issuer, 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 paying the cost of acquiring and constructing additions and improvements to the System.

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 standing may hereafter be issued and the general covenants and provisions pursuant to which this bond is issued, reference is made to the above-described Ordinance.

Bonds maturing in the years 2005 to 201_, inclusive, are not subject to redemption prior to maturity.

Bonds or portions of bonds in multiples of $5000 maturing in the year 201_ and thereafter shall be subject to redemption prior to maturity at the option of the Issuer, in such order of maturity as the Issuer shall determine and within a single maturity by lot, on any date on or after __________ 1, 201_, at par and accrued interest.

[Insert term bond provisions if applicable]

Notice of redemption of any bond or portion thereof shall be given by the Transfer Agent at least thirty (30) days prior to the date fixed for redemption by mail to the registered owner at the registered address shown on the registration books kept by the Transfer Agent. Bonds shall be called for redemption in multiples of $5,000 and any bond of a denomination of more than $5,000 shall be treated as representing the number of bonds obtained by dividing the denomination of the bond by $5,000 and such bond may be redeemed in part. Notice of redemption for a bond redeemed in part shall state that upon surrender of the bond to be redeemed a new bond or bonds in aggregate principal amount equal to the unredeemed portion of the bonds surrendered shall be issued to the registered owner thereof. No further interest on a bond or portion thereof called for redemption shall accrue after the date fixed for redemption, whether presented for redemption or not, provided funds are on hand with the Transfer Agent to redeem the bond or portion thereof.

This bond is a self-liquidating bond and is not a general obligation of the Issuer and does not constitute an indebtedness of the Issuer within any constitutional, statutory or charter limitation of the Issuer, but is payable, both as to principal and interest solely from the Net Revenues of the System. The principal of and interest on this bond are secured by the statutory lien hereinbefore mentioned.

The Issuer 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 interest upon and the principal of the bonds of this issue and any additional bonds of equal standing as and when the same shall become due and payable, and to maintain a bond redemption account (including a bond reserve account) therefor, 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 said Ordinance.

This bond is transferable only upon the books of the Issuer kept for that purpose at the office of the Transfer Agent by the registered owner in person or the registered owner’s attorney duly authorized in writing, upon the surrender of this bond together with a written instrument of transfer satisfactory to the Transfer Agent, duly executed by the registered owner or the registered owner’s attorney duly authorized in writing, and thereupon a new bond or bonds in the same aggregate principal amount and of the same maturity shall be issued to the transferee in exchange therefor as provided in the Ordinance authorizing the bonds, and upon payment of the charges, if any, therein prescribed.

This bond is not valid or obligatory for any purpose until the Transfer Agent’s Certificate of Authentication on this bond has been executed by the Transfer Agent.

It is hereby certified and recited that all acts, conditions and things required by law precedent to and in the issuance of this bond and the series of bonds of which this is one have been done and performed in regular and due time and form as required by law.

IN WITNESS WHEREOF, the City of Crystal Falls, County of Iron, State of Michigan, by its City Council, has caused this bond to be executed with the facsimile signatures of its Mayor and its City Clerk and the corporate seal of the Issuer to be printed on this bond, all as of the Date of Original Issue.

CITY OF CRYSTAL FALLS

By _________________________________

Mayor

(Seal)

Countersigned:

_________________________

City Clerk

Date of Registration:

Certificate of Authentication

This bond is one of the bonds described in the within mentioned Ordinance.

Transfer Agent

By _________________________________

Authorized Signatory

Section 14. Bondholders’ Rights; Receiver. The holder or holders of the Bonds representing in the aggregate not less than twenty per cent (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 of the System, and may, by suit, action, mandamus or other proceedings, enforce and compel performance of all duties of the officers of the Issuer, 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 upon the Bonds, any court having jurisdiction in any proper action may appoint a receiver to administer and operate the System on behalf of the Issuer 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 Issuer more particularly set forth herein and in Act 94.

The holder or holders of the Bonds shall have all other rights and remedies given by Act 94 and law for the payment and enforcement of the Bonds and the security therefor.

Section 15. Covenant Regarding Tax Exempt Status of the Bonds. The Issuer shall, to the extent permitted by law, take all actions within its control necessary to maintain the exemption of the interest on the Bonds from general federal income taxation (as opposed to any alternative minimum or other indirect taxation) under the Internal Revenue Code of 1986, as amended (the "Code"), including, but not limited to, actions relating to any required rebate of arbitrage earnings and the expenditure and investment of proceeds of the Bonds and moneys deemed to be proceeds of the Bonds, and to prevent the Bonds from being or becoming "private activity bonds" as that term is used in Section 141 of the Code.

Section 16. Covenants. The Issuer covenants and agrees with the holders of the Bonds that so long as any of the Bonds remain outstanding and unpaid as to either principal or interest -

(a) The Issuer will maintain the System in good repair and working order and will operate the same efficiently and will faithfully and punctually perform all duties with reference to the System required by the Constitution and laws of the State of Michigan and this Ordinance.

(b) The Issuer will keep proper books of record and account separate from all other records and accounts of the Issuer, in which shall be made full and correct entries of all transactions relating to the System. The Issuer shall have an annual audit of the books of record and account of the System for the preceding operating year made each year by an independent certified public accountant, and a copy of the audit shall be mailed to the manager of each syndicate or account originally purchasing any issue of the Bonds. The auditor shall comment on the manner in which the Issuer is complying with the requirements of the Ordinance with respect to setting aside and investing moneys and meeting the requirements for acquiring and maintaining insurance. The audit shall be completed and so made available not later than six (6) months after the close of each operating year.

(c) The Issuer will maintain and carry, for the benefit of the holders of the Bonds, insurance on all physical properties of the System and liability insurance, of the kinds and in the amounts normally carried by municipalities engaged in the operation of similar electric utility systems, including self-insurance. All moneys received for losses under any such insurance policies shall be applied solely to the replacement and restoration of the property damaged or destroyed, and to the extent not so used, shall be used for the purpose of redeeming or purchasing Bonds.

(d) The Issuer will not sell, lease or dispose of the System, or any substantial part, until all of the Bonds have been paid in full, both as to principal and interest or provision made thereof as herein provided. The Issuer will operate the System as economically as possible, will make all repairs and replacements necessary to keep the System in good repair and working order, and will not do or suffer to be done any act which would affect the System in such a way as to have a material adverse effect on the security for the Bonds.

(e) The Issuer will not grant any franchise or other rights to any person, firm or corporation to operate a System that will compete with the System and the Issuer will not operate a system that will compete with the System.

Section 17. Additional Bonds. Except as hereinafter provided, the Issuer shall not issue additional Bonds of equal or prior standing with the Series 2004 Bonds.

The right is reserved in accordance with the provisions of Act 94 to issue additional Bonds payable from the Revenues of the System which shall be of equal standing and priority of lien on the Net Revenues of the System with the Series 2004 Bonds but only for the following purposes and under the following terms and conditions:

(a) For repairs, extensions, enlargements and improvements to the System or for the purpose of refunding part of any Bonds then outstanding or for both purposes, and for paying costs of issuing such additional Bonds including deposits which may be required to be made to the Bond Reserve Account. Bonds for such purposes shall not be issued pursuant to this subparagraph (a) unless the Adjusted Net Revenues of the System for the then last two (2) preceding twelve-month operating years or the Adjusted Net Revenues for the last preceding twelve- month operating year, if the same shall be lower than the average, shall be equal to at least one hundred twenty percent (120%) of the average annual amount of principal and interest thereafter maturing in any operating year on the then outstanding Bonds and on the additional Bonds then being issued. If the additional Bonds are to be issued in whole or in part for refunding outstanding Bonds, the annual principal and interest requirements shall be determined by deducting from the principal and interest requirements for each operating year the annual principal and interest requirements of any Bonds to be refunded from the proceeds of the additional Bonds. For purposes of this subparagraph (a) the Issuer may elect to use as the last preceding operating year any operating year ending not more than sixteen months prior to the date of delivery of the additional Bonds and as the next to the last preceding operating year, any operating year ending not more than twenty-eight months prior to the date of delivery of the additional Bonds. Determination by the Issuer as to existence of conditions permitting the issuance of additional Bonds shall be conclusive. No additional Bonds of equal standing as to the Net Revenues of the System shall be issued pursuant to the authorization contained in this subparagraph if the Issuer shall then be in default in making its required payments to the Operation and Maintenance Account or the Redemption Account.

(b) For refunding part or all of the outstanding Bonds and paying costs of issuing such additional Bonds including deposits which may be required to be made to the Bond Reserve Account. No additional Bonds shall be issued pursuant to this subsection unless the maximum amount of principal and interest maturing in any operating year after giving effect to the refunding shall be less than the maximum amount of principal and interest maturing in any operating year prior to giving effect to the refunding.

Section 18. Repeal, Savings Clause. All ordinances, resolutions or orders, or part thereof, in conflict with the provisions of this Ordinance are, to the extent of such conflict, repealed.

Section 19. Severability; Paragraph Headings; and Conflict. If any section, paragraph, clause or provision of this Ordinance shall be held invalid, the invalidity of such section, paragraph, clause or provision shall not affect any of the other provisions of this Ordinance. The paragraph headings in this Ordinance are furnished for convenience of reference only and shall not be considered to be part of this Ordinance.

Section 20. Publication and Recordation. This Ordinance shall be published in full in the Iron County Reporter, or other newspaper of general circulation in the Issuer qualified under State law to publish legal notices promptly after its adoption, and shall be recorded in the Ordinance Book of the Issuer and such recording authenticated by the signatures of the Mayor and the City Clerk.

Section 21. Effective Date. This Ordinance shall be effective upon its adoption and publication. Adopted and signed this _____ day of ____________, 2004.

I hereby certify that the foregoing constitutes a true and complete copy of an Ordinance duly adopted by the City Council of the City of Crystal Falls, County of Iron, Michigan, at a regular Meeting held on the _____ day of ____________, 2004, and that said meeting was conducted and public notice of said meeting was given pursuant to and in full compliance with the Open Meetings Act, being Act 267, Public Acts of Michigan, 1976, and that the minutes of said meeting were kept and will be or have been made available as required by said Act.

I further certify that the following Members were present at said meeting: ________________________________________________________________________________; and that the following Members were absent:_____________________________________________________________________.

I further certify that Member ____________ moved for adoption of said Ordinance, and that said motion was supported by Member ____________.

I further certify that the following Members voted for adoption of said Ordinance: _______________________________ and that the following Members voted against adoption of said Ordinance: __________________________________________.

I further certify that said Ordinance has been recorded in the Ordinance Book and that such recording has been authenticated by the signatures of the Mayor and City Clerk.