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<br />annual audit reports shall be open to the inspection of the Bondholders and their agents and <br />representatives at all reasonable times. <br /> <br />K. Governmental Agencies. The Authority will comply with all of the terms and <br />conditions of any and all franchises, permits and authorizations applicable to or necessary with <br />respect to the System and which have been obtained from any governmental agency. The Board <br />has or will obtain and keep in full force and effect all franchises, permits authorizations and other <br />requirements applicable to or necessary with respect to the acquisition, construction, equipment, <br />operation and maintenance of the System. <br /> <br />L. No Competition. The Authority will not operate, or grant any franchise or permit <br />for the acquisition, construction or operation of, any facilities which would be in competition <br />with the System, and to the extent that it legally may, the Authority wi11 prohibit any such <br />competing facilities. <br /> <br />SECTION 6.2. Covenants to Maintain Tax Exempt Status. <br /> <br />The Authority intends that the interest on the Bonds shall be excludable from gross <br />income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 <br />through 150 of the Internal Revenue Code of 1986, as amended, (the "Code") and all applicable <br />temporary, proposed and final regulations (the "Regulations") and procedures promulgated <br />thereunder and applicable to the Bonds. For this purpose, the Authority covenants that it wi11 <br />monitor and control the receipt, investment, expenditure and use of all gross proceeds of the <br />Bonds (including all property, the acquisition, construction or improvement of which is to be <br />financed directly or indirectly with the proceeds of the Bonds) and take or omit to take such <br />other and further actions as may be required by Sections 103 and 141 through 150 of the Code <br />and the Regulations to cause the interest on the Bonds to be and remain excludable from the <br />gross income, as defined in Section 61 of the Code, of the owners of the Bonds for federal <br />income tax purposes. Without limiting the generality of the foregoing, the Authority shall <br />comply with each of the following covenants: <br /> <br />A. The Authority shall not use, permit the use of or omit to use Gross Proceeds or <br />any other amounts (or any property the acquisition, construction or improvement of which is to <br />be financed directly or indirectly with Gross Proceeds) in a manner which, if made or omitted, <br />respectively, would cause the interest on any Bond to become includable in the gross income, as <br />defined in Section 61 of the Code, of the owner thereof for federal income tax purposes. Without <br />limiting the generality of the foregoing, unless and until the Authority shall have received a <br />written opinion of counsel nationally recognized in the field of municipal bond law to the effect <br />that failure to comply with such covenant wi11 not adversely affect the exemption from federal <br />income tax of the interest on any Bond, the Authority shall comply with each of the specific <br />covenants in this Section. <br /> <br />B. Except as permitted by Section 141 of the Code and the regulations and rulings <br />thereunder, the Authority shall, at all times prior to the last stated maturity of the Bonds, <br /> <br />(1) exclusively own, operate, and possess all property the acquisition, <br />construction, or improvement of which is to be financed directly or indirectly with Gross <br /> <br />23 <br /> <br />HOU :3003369.1 <br />