TSF - Tobacco Settlement Financing Corporation Act

                              Chapter 62 of 2003                                   PART D3     Section 1. The tobacco settlement financing corporation act is enacted  to read as follows:                 Tobacco Settlement Financing Corporation Act   Section 1.  Short title.          2.  The tobacco settlement financing corporation.          3.  Definitions.          4.  The sale agreement.          5.  Powers of the corporation.          6.  Bonds of the corporation.          7.  State not liable on bonds or any ancillary bond facility.          8.  Remedies of bondholders.          9.  Tax exemption and tax contract by the state.          10. Agreement with state.          11. Bonds as legal investments.          12. Actions against the corporation.          13. Assistance to the corporation.          14. Preference   for   actions   or   proceedings   against  the                corporation.          15. Construction.          16. Severability clause.            Section 1. Short title. This act shall be  known  and  may  be          cited as the "tobacco settlement financing corporation act".            §  2.  The  tobacco settlement financing corporation. There is          hereby created and established a subsidiary of the authority  to          be  known as the "tobacco settlement financing corporation" as a          public benefit corporation, separate and apart from  the  state.          The directors of the authority shall serve as the members of the          corporation  and  shall  receive  no  additional salary or other          compensation, either direct or indirect, for serving as  members          of  the  corporation,  other  than  reimbursement for actual and          necessary expenses incurred in the performance of such  person's          duties.  Any one or more members of the board may participate in          a meeting of such board by means of a  conference  telephone  or          similar    communications   equipment   allowing   all   persons          participating in the meeting to hear  each  other  at  the  same          time.  Participation  by such means shall constitute presence in          person at a meeting. The corporation may delegate to one or more          of its members, or officers, agents and employees,  such  powers          and  duties  as the members may deem proper. Except as otherwise          expressly provided by this act, actions by the  corporation  and          the  members  of  its  board,  and exercise of the corporation's          powers, shall be taken in the same manner  and  subject  to  the          same requirements, as are set forth or imposed under chapter 902          of   the  laws  of  1972,  as  amended,  for  such  actions  and          performance by the authority and its directors.  Notwithstanding          the  existence  of  common  management, the corporation shall be          treated as a separate legal entity with its  separate  corporate          purpose   as  set  forth  in  section  six  of  this  act;  and,          accordingly,  the  assets,  liabilities   and   funds   of   the          corporation  shall  be  neither consolidated nor commingled with          those of  the  authority.  The  corporation  and  its  corporate          existence   shall  continue  until  six  months  after  all  its          liabilities have been met  or  otherwise  discharged.  Upon  the

          termination  of  the  existence  of  the corporation, all of its          rights and property shall pass to and be vested in the state.            §  3.  Definitions.  1.  "Ancillary  bond  facility" means any          interest  rate  exchange  or  similar  agreement  or  any   bond          insurance  policy,  letter of credit or other credit enhancement          facility,   liquidity   facility,   guaranteed   investment   or          reinvestment  agreement, or other similar agreement, arrangement          or contract.            2. "Authority" means the state of New York municipal bond bank          agency established in section 2433  of  the  public  authorities          law.            3.  "Benefited  party"  means  any person, firm or corporation          that enters into an ancillary bond facility with the corporation          according to the provisions of this act.            4. "Board" means the members of the corporation.            5.  "Bonds"  means   any   bonds,   notes,   certificates   of          participation  and  other evidence of indebtedness issued by the          corporation pursuant to section six of this act.            6. "Code" means the United States  Internal  Revenue  Code  of          1986, as amended.            7. "Complementary legislation" means sections 480-b, paragraph          (c)  of  subdivision  1  of section 481 and subdivision (a-1) of          section 1846 of the tax law.            8.  "Consent  decree"  means  the  consent  decree  and  final          judgment  of  the supreme court of the state of New York, county          of New York, dated December 23, 1998, as the same has  been  and          may  be  corrected,  amended or modified, in the action entitled          State of New York, et al. v. Philip Morris Incorporated, et  al.          (Index No. 400361/97).            9.  "Contingent contractual obligation" means a contract under          which the obligation of the state is  a  contingent  contractual          obligation  as  such  term  is used in section 67-a of the state          finance law.            10. "Costs of issuance" means any item of expense directly  or          indirectly  payable  or  reimbursable  by  the  corporation  and          related to  the  authorization,  sale,  or  issuance  of  bonds,          including,  but  not  limited to, underwriting fees and fees and          expenses of professional consultants and fiduciaries.            11. "Director of the budget" means the director of the  budget          of the state of New York.            12. "Financing costs" means all costs of issuance, capitalized          interest,   capitalized  operating  expenses  and  debt  service          reserves, fees, cost of any ancillary  bond  facility,  and  any          other  fees,  discounts,  expenses and costs related to issuing,          securing and marketing the bonds including, without  limitation,          any net original issue discount.            13. "Investment securities" means, subject to or, as otherwise          provided  in, the provisions of any contract with bondholders of          the corporation, (i)  general  obligations  of,  or  obligations          guaranteed  by,  any  state  of  the United States of America or          political subdivision thereof, or the District  of  Columbia  or          any  agency  or instrumentality of any of them, receiving one of          the three highest long-term  unsecured  debt  rating  categories          available for such securities of at least one independent rating          agency,  or (ii) certificates of deposit, savings accounts, time          deposits or other obligations or  accounts  of  banks  or  trust          companies  in  the  state,  secured, if the corporation shall so          require, in such manner as the corporation may so determine,  or

          (iii)   otherwise,   in   the  discretion  of  the  corporation,          obligations in which the comptroller is  authorized  to  invest,          pursuant to either section 98 or 98-a of the state finance law.            14.  "Interest  rate  exchange  or  similar agreement" means a          written contract entered into in connection with the issuance of          bonds or with such bonds  outstanding  with  a  counterparty  to          provide  for  an  exchange  or swap of payments based upon fixed          and/or variable interest rates, and shall be  for  exchanges  in          currency of the United States of America only.            15.  "Master settlement agreement" means the master settlement          agreement, dated November 23, 1998, among the attorneys  general          of 46 states, including the state, the District of Columbia, the          Commonwealth  of  Puerto  Rico,  Guam,  the United States Virgin          Islands, American  Samoa  and  the  Territory  of  the  Northern          Mariana   Islands,   on   the  one  hand,  and  certain  tobacco          manufacturers, on the other hand, and the subject of the consent          decree.            16. "Member" means any director  of  the  authority  including          each  person  that  has  been  duly  appointed to represent such          director at meetings of the authority from which  such  director          may be absent.            17.  "Net  proceeds"  means  the  amount of proceeds remaining          following each sale of bonds  which  are  not  required  by  the          corporation to pay or provide for the financing costs.            18.  "Operating  expenses"  means  the reasonable or necessary          operating  expenses  of  the  corporation,  including,   without          limitation,   administrative  expenses  of  the  corporation  or          authority, the cost  of  preparation  of  accounting  and  other          reports,  costs  of  maintenance  of  the  ratings on the bonds,          funding of any operating expense reserve fund, if any, insurance          premiums, costs of any ancillary bond facilities, and  costs  of          annual meetings or other required activities of the corporation,          and  fees and expenses incurred for professional consultants and          fiduciaries.            19. "Other assets" means assets and/or revenues,  constituting          a  portion  of the state's share, other than the pledged tobacco          revenues, that are purchased pursuant to the sale agreement  and          pledged  by  the  corporation  for  the  payment  of bonds or an          ancillary bond facility.            20. "Other participating jurisdictions" means the  fifty-seven          (57)  counties  of  the  state  and  the city of New York, which          together with the state,  are  entitled  to  receive  settlement          payments under the consent decree.            21.  "Outstanding",  when  used  with  respect to bonds, shall          exclude bonds that shall have been paid in full at maturity,  or          shall  have  otherwise  been  refunded,  redeemed,  defeased  or          discharged, or that may be deemed not  outstanding  pursuant  to          agreements with the holders thereof.            22.  "Participating  manufacturer"  means  a  tobacco  product          manufacturer that is  or  becomes  a  signatory  to  the  master          settlement agreement.            23.  "Pledged tobacco revenues" means each such portion of the          state's share constituting tobacco settlement payments  sold  to          the corporation pursuant to section four of this act and pledged          by the corporation for the payment of bonds or an ancillary bond          facility.

            24.  "Qualifying  statute"  has the meaning given that term in          the master settlement agreement, constituting  article  13-G  of          the public health law of the state.            25.  "Residual interests" means the income of the corporation,          and bond proceeds, if any, or reserves not  previously  paid  to          the  state, that are in excess of the corporation's requirements          to pay its operating expenses, debt  service,  sinking  fund  or          other  redemption  requirements,  reserve  fund,  and  any other          contractual obligations under any resolution  or  any  ancillary          bond  facility  or  that  may be incurred in connection with the          issuance of the bonds.            26. "Sale agreement" means any agreement  authorized  pursuant          to  this section in which the state provides for the sale of all          or a portion of the state's share to the corporation.            27. "State" means the state of New York.            28. "State representative" means the  governor  of  the  state          acting through the director of the budget.            29.  "State's  share"  means  all  tobacco settlement payments          received by the state on and after January 1, 2004 and  required          to  be  made,  pursuant  to  the  terms of the master settlement          agreement, by participating manufacturers  to  the  state  which          have  not  otherwise  been  allocated to any other participating          jurisdictions pursuant to the terms of the consent  decree,  and          the  state's  rights to receive such tobacco settlement payments          and other assets of the state and other payments received by the          state on and after January 1, 2004  and  the  state's  right  to          receive  such  payments,  under  any  other agreement, contract,          statute or other provision available for sale or  authorized  to          be  sold,  and  determined  by  the  state  representative to be          included in the sale agreement.            30.  "Tobacco  settlement  financing  corporation"   or   "the          corporation"  means  the  corporation  created by section two of          this act.            § 4. The sale agreement. 1. The state representative, upon the          execution of a sale agreement on behalf of the state may sell to          the corporation, and the corporation may purchase, for  cash  or          other  consideration  and  in one or more installments, all or a          portion of the state's share. Any such agreement shall  provide,          among  other  matters,  that  the  purchase price payable by the          corporation to the state  for  such  state's  share  or  portion          thereof shall consist of the net proceeds of the bonds issued to          finance  such purchase price and the residual interests, if any.          The residual interests  shall  be  deposited  into  the  tobacco          settlement  fund  pursuant  to section 92-x of the state finance          law, unless otherwise directed  by  statute;  provided,  however          that  any  residual  interest derived from other assets shall be          applied as directed by statute. Any such sale shall be  pursuant          to  one or more sale agreements which may contain such terms and          conditions deemed necessary by the state representative to carry          out and effectuate  the  purposes  of  this  section,  including          covenants  binding the state in favor of the corporation and its          assignees, including the owners of its bonds such  as  covenants          with  respect  to the enforcement at the expense of the state of          the payment provisions of the master settlement  agreement,  the          diligent  enforcement  at  the  expense  of  the  state  of  the          qualifying statute, the application and use of the  proceeds  of          the  sale  of the state's share to preserve the tax-exemption on          the bonds, the interest on which is intended to be  exempt  from

          federal  income  tax, issued to finance the purchase thereof and          otherwise  as  provided  in  this   act.   Notwithstanding   the          foregoing,  neither the state representative nor the corporation          shall  be  authorized  to  make any covenant, pledge, promise or          agreement purporting to bind the state with respect  to  pledged          tobacco revenues, except as otherwise specifically authorized by          this act.            2.  Any  sale  of  all  or  part  of  the state's share to the          corporation shall  be  treated  as  a  true  sale  and  absolute          transfer  of  the property so transferred and not as a pledge or          other security interest for any borrowing. The  characterization          of such a sale as an absolute transfer by the participants shall          not  be  negated  or  adversely affected by the fact that only a          portion  of  the  state's  share  is  transferred,  nor  by  the          acquisition  or  retention  by the state of a residual interest,          nor  by  any  characterization  of  the   corporation   or   its          obligations  for  purposes of accounting, taxation or securities          regulation, nor by the pledge of any other funds  or  assets  of          the  corporation  to  secure  bonds,  nor  by  any  other factor          whatsoever.            3. On and after the effective date of each sale of any portion          (including all) of the state's share, the state  shall  have  no          right,  title  or  interest  in or to the portion of the state's          share sold, and the portion of the state's share so  sold  shall          be  the  property  of  the corporation and not of the state, and          shall be owned, received, held and disbursed by the  corporation          and  not the state treasury. Notwithstanding section 92-x of the          state finance law, on the effective date of any such  sale  with          respect  to  tobacco  settlement payments, the state through the          attorney general shall notify the independent  auditor  and  the          escrow  agent  under  the  master settlement agreement that such          portion of the state's share has been sold  to  the  corporation          and  irrevocably  instruct  such  independent auditor and escrow          agent that, subsequent to such date, such portion of the state's          share is to be paid directly to the indenture  trustee  for  the          benefit  of the owners of the bonds of the corporation which are          secured by a pledge of such amounts, until  such  bonds  are  no          longer   outstanding  pursuant  to  the  resolution  or  related          indenture under which such bonds are issued.            4. The net proceeds of the  bonds  and  any  earnings  thereon          shall  never  be  pledged to, nor made available for, payment of          the bonds or any interest or redemption  price  thereon  or  any          other debt or obligation of the corporation. The net proceeds of          the  bonds shall be deposited in the general fund as directed by          the state representative as specified in, or otherwise  provided          for  by,  the  sale  agreement,  and  shall be used by the state          (either directly or by reimbursement of the  general  fund)  for          any  of  the following purposes: (i) for health care purposes in          accordance  with  section  2807-v  of  the  public  health  law,          including  but  not  limited to the treatment of smoking-related          illnesses and for smoking cessation efforts, (ii) for any of its          capital purposes or for any of its capital programs,  (iii)  for          payment  of  debt  service on any of its outstanding bonds or on          any state supported bonds, notes  or  other  obligations  or  in          respect of debt service on any outstanding bonds, notes or other          obligations  of  local  governments,  school districts or public          benefit corporations  for  which  state  aid  is  applicable  or          required  to be paid or for which there is a contract subject to

          state appropriation provided that such  bonds,  notes  or  other          obligations  funded capital projects or programs, (iv) for other          grants to local governments, school districts or public  benefit          corporations,  or (v) to provide a revenue resource for personal          service expenses of the state and general  state  charges.  With          respect  to  any bonds of the corporation, the interest on which          is  intended  to  be  exempt  from  federal  income   tax,   the          corporation   and   the   state   representative   may   provide          restrictions on the use of net proceeds of the bonds  and  other          amounts  in  the sale agreement or otherwise in a tax regulatory          agreement only as necessary to assure such exempt status.            5. The director of the budget  shall  notify  in  writing  the          chairs of the senate finance committee and the assembly ways and          means  committee  of  any  plans to sell all or a portion of the          state's share of tobacco settlement payments prior  to  entering          any  sale  agreement  with  the  corporation.  At  the time this          notification is  given,  the  chief  executive  officer  of  the          corporation  and  the  director  of  the  budget shall provide a          report to the chairs of the senate  finance  committee  and  the          assembly  ways and means committee on a planned bond sale of the          corporation and such report shall include, but  not  be  limited          to:  (A)  the maximum amount of bonds expected to be sold by the          corporation  in  connection  with  a  sale  agreement;  (B)  the          expected  maximum interest rate and maturity date of such bonds;          (C) the expected amount of the bonds that will be  fixed  and/or          variable interest rate; (D) the estimated costs of issuance; (E)          the  estimated level or levels of reserve fund or funds, if any;          (F) the estimated cost  of  bond  insurance,  if  any;  (G)  the          anticipated  use  or  uses  of the proceeds; and (H) the maximum          expected net proceeds that will be paid to the state as a result          of the  issuance  of  such  bonds.  Any  such  expectations  and          estimates  in  the  report  shall  not  be  deemed a substantive          limitation on the authority of the corporation contained in this          act.            § 5. Powers of the corporation.  The  corporation  also  shall          have the power to:            1. sue and be sued;            2. have a seal and alter the same at pleasure;            3.  make  and  alter by-laws for its organization and internal          management and make rules and regulations governing the  use  of          its property and facilities;            4.  make  and  execute  contracts  and  all  other instruments          necessary or convenient for  the  exercise  of  its  powers  and          functions  under  this  section  and  to  commence any action to          protect or enforce any right  conferred  upon  it  by  any  law,          contract or other agreement;            5.  appoint  officers,  agents  and employees, prescribe their          duties and qualifications, fix their compensation and engage the          services of private consultants and counsel on a contract  basis          for  rendering  professional and technical assistance and advice          provided that the chief executive  officer  of  the  corporation          shall  be  the  chief executive officer of the authority and any          other officers or employees, if appointed, shall be those having          similar positions with the authority, provided, however, that no          such  officer  or  employee   shall   receive   any   additional          compensation as a result of such appointment;            6. pay its operating expenses and its financing costs;

            7.  borrow  money  in  its name and issue negotiable bonds and          provide for the rights of the holders thereof;            8.  procure  insurance against any loss in connection with its          activities, properties and assets in such amount and  from  such          insurers as it deems desirable;            9.  invest  any  funds  or  other moneys under its custody and          control in investment securities or  under  any  ancillary  bond          facility;            10.  as  security  for  the  payment  of  the principal of and          interest on any bonds issued by it pursuant to this act and  any          agreement  made  in connection therewith and for its obligations          under any ancillary bond facility, pledge all or any part of its          revenues or assets;            11. with the approval of the state representative, enter into,          modify, amend, replace or renew any ancillary bond facility with          any person under such terms and conditions  as  the  corporation          may  determine  including,  without limitation, provisions as to          default  or  early  termination  and  indemnification   by   the          corporation or any other party thereto for loss of benefits as a          result  thereof  and  with  respect to execution of any interest          rate exchange or similar  agreement  and  prior  thereto,  adopt          guidelines  and make the determinations set forth in subdivision          seven or eight of section six of this act; and            12. do any and all things necessary or convenient to carry out          its purposes and exercise the powers expressly given and granted          in this section.            § 6. Bonds of the corporation. 1. (i)  The  corporation  shall          have  power  and is hereby authorized from time to time to issue          its bonds in an aggregate principal amount  not  exceeding  four          billion,  two  hundred million dollars ($4,200,000,000) plus the          amount of any financing costs, to provide sufficient  funds  for          achieving  its  corporate purpose, consisting of the purchase of          all or a portion of the state's share pursuant to  section  four          of  this  act  and the payment or provision for financing costs.          The foregoing limitation shall not  apply  to  bonds  issued  to          refund  bonds.  Provided,  however,  that no bonds may be issued          pursuant to the authority and power  granted  by  this  section,          except  an  issue  of  bonds  in  an  amount not to exceed seven          hundred million dollars ($700,000,000) plus the  amount  of  any          applicable  financing  costs,  until the state comptroller shall          determine that legislative passage of the  budget  has  occurred          for  the  current  state  fiscal  year  in  accordance  with the          provisions of subdivision 3 of section 5 of the legislative law.          Provided, further, no bonds, other than refunding  bonds,  shall          be  issued pursuant to such authority and power on or after July          1, 2004.            (ii)  Each  issuance  of  bonds  shall  be  authorized  by   a          resolution  of  the  corporation,  adopted  by a majority of the          members  of  the  board   then   in   office   without   further          authorization  or  approval,  provided,  however,  that any such          resolution authorizing the issuance of bonds may delegate to  an          officer  of  the  corporation the power to issue such bonds from          time to time and to fix the details of any such issues of  bonds          by  an appropriate certificate of such authorized officer. Every          issue of the bonds of the corporation shall be  special  revenue          obligations  payable  from  and  secured  by a pledge of pledged          tobacco revenues and other assets, including those  proceeds  of          such  bonds  deposited  in  a  reserve  fund  for the benefit of

          bondholders, earnings on funds of the corporation and such other          funds and assets as may become available, upon  such  terms  and          conditions  as  approved  by  the  state  representative  and as          specified  by  the corporation in the resolution under which the          bonds are issued or in a related trust indenture.            (iii) The corporation shall  have  the  power  and  is  hereby          authorized  from  time to time to issue bonds, whenever it deems          refunding expedient, to refund any bonds by the issuance of  new          bonds,  whether  the  bonds  to  be  refunded  have  or have not          matured,  and  to  issue  bonds  partly  to  refund  bonds  then          outstanding  and partly for any of its other corporate purposes.          The refunding bonds  may  be  exchanged  for  the  bonds  to  be          refunded  or  sold  and  the  proceeds  applied to the purchase,          redemption or payment of such bonds.            2. The bonds of the corporation of each issue shall be  dated,          shall  bear  interest  (which, under the code, in the opinion of          transaction counsel to the corporation, may be includable in  or          excludable  from  the  gross  income  of  the owners for federal          income tax purposes) at such fixed or variable rates, payable at          or prior to maturity, and shall mature at such time or times, as          may be determined by the corporation and may be made  redeemable          before maturity, at the option of the corporation, at such price          or prices and under such terms and conditions as may be fixed by          the corporation. The principal and interest of such bonds may be          made  payable  in  any  lawful  medium.  The  resolution  or the          certificate of the authorized officer shall determine  the  form          of  the  bonds,  either  registered  or book-entry form, and the          manner of execution of the bonds and shall fix the  denomination          or denominations of the bonds and the place or places of payment          of  principal  and interest thereof, which may be at any bank or          trust company within or outside the state. If any officer  whose          signature  or  a  facsimile  thereof  appears on any bonds shall          cease to be such officer before the delivery of such bonds, such          signature  or  facsimile  shall  nevertheless   be   valid   and          sufficient  for  all  purposes the same as if he had remained in          office until such delivery. The corporation may also provide for          temporary bonds and for the replacement of any bond  that  shall          become mutilated or shall be destroyed or lost.            3.   The   corporation   with   the   approval  of  the  state          representative may sell such bonds in such manner, either  at  a          public or private sale and either on a competitive or negotiated          basis.  Provided,  however,  no  such  bonds  may be sold by the          corporation at private sale  unless  such  sale  and  the  terms          thereof  have  been approved in writing by the comptroller.  The          proceeds of such bonds shall be disbursed for the  purposes  for          which such bonds were issued under such restrictions as the sale          agreement  and  the  resolution authorizing the issuance of such          bonds or the related trust indenture  may  provide.  Such  bonds          shall  be  issued upon approval of both the state representative          and the corporation and without any  other  approvals,  filings,          proceedings  or  the happening of any other conditions or things          other than the approvals, findings, proceedings, conditions, and          things that are specified and required by this act.            4. Any pledge made by  the  corporation  shall  be  valid  and          binding  at  the  time the pledge is made. The assets, property,          revenues, reserves or earnings so pledged shall  immediately  be          subject to the lien of such pledge without any physical delivery          thereof  or further act and the lien of any such pledge shall be

          valid and binding as against all parties having  claims  of  any          kind  in  tort,  contract  or otherwise against the corporation,          irrespective  of  whether  such  parties  have  notice  thereof.          Notwithstanding  any  other  provision  of  law to the contrary,          neither  the  bond  resolution  nor  any  indenture   or   other          instrument  by  which  a  pledge  is  created  or  by  which the          corporation's interest in pledged  assets,  property,  revenues,          reserves   or  earnings  thereon  is  assigned  need  be  filed,          perfected or recorded in any public records in order to  protect          the  pledge thereof or perfect the lien thereof as against third          parties, except that a  copy  thereof  shall  be  filed  in  the          records of the corporation.            5.  Whether  or  not  the bonds of the corporation are of such          form and character as to be  negotiable  instruments  under  the          terms  of the uniform commercial code, the bonds are hereby made          negotiable instruments for all purposes,  subject  only  to  the          provisions of the bonds for registration.            6. At the sole discretion of the corporation, any bonds issued          by  the  corporation  and any ancillary bond facility made under          the provisions of this act may be secured  by  a  resolution  or          trust  indenture  by  and  between the corporation and the trust          indenture trustee, which may be any trust company or bank having          the powers of a trust company, whether located within or outside          the state. Such trust indenture or resolution providing for  the          issuance  of  such  bonds  may  provide  for  the  creation  and          maintenance of such reserves as the board shall determine to  be          proper and may include covenants setting forth the duties of the          corporation  in  relation  to  the  bonds,  the  income  of  the          corporation, the related sale agreement with respect to the sale          of the state's share and the pledged tobacco revenues and  other          assets.   Such   trust   indenture  or  resolution  may  contain          provisions respecting the custody, safeguarding and  application          of  all  moneys  and securities, may contain such provisions for          protecting and  enforcing  the  rights  and  remedies  (pursuant          thereto  and  to  the sale agreement) of the owners of the bonds          and any other benefitted party as may be reasonable  and  proper          and  not  in  violation of law and may include any or all of the          rights,  powers  and  duties  of  the   trustee   appointed   by          bondholders  pursuant  to section eight of this act and limiting          or abrogating the right of the bondholders to appoint a  trustee          under  such  section.  It  shall be lawful for any bank or trust          company incorporated under the laws of the state which  may  act          as  depository of the proceeds of bonds or of any other funds or          obligations received on behalf of  the  corporation  to  furnish          such  indemnifying  bonds or to pledge such securities as may be          required  by  the  corporation.  Any  such  trust  indenture  or          resolution  may contain such other provisions as the corporation          may deem reasonable and proper for priorities and  subordination          among  the  owners  of  the  bonds  and other beneficiaries. Any          reference in this act to a resolution of the board shall include          any trust indenture authorized thereby.            7. The corporation may enter into, amend or terminate,  as  it          determines  to  be  necessary or appropriate, any ancillary bond          facility (i) to facilitate the issuance, sale, resale, purchase,          repurchase or payment of bonds, interest rate savings or  market          diversification  or the making or performance of swap contracts,          including without limitation bond insurance, letters  of  credit          and  liquidity facilities, or (ii) to attempt to manage or hedge

          risk or achieve a desirable  effective  interest  rate  or  cash          flow.  Such facility shall be made upon the terms and conditions          established  by  the   board,   including   without   limitation          provisions as to security, default, termination, payment, remedy          and consent to service of process.            8.  The  corporation  may  enter into, amend or terminate, any          ancillary bond facility that it determines to  be  necessary  or          appropriate  to  place  the  obligations  or  investments of the          corporation, as represented by the bonds or  the  investment  of          reserved  bond  proceeds  or  other  pledged tobacco revenues or          other assets, in whole or in part, on the  interest  rate,  cash          flow  or other basis approved by the corporation, which facility          may include  without  limitation  contracts  commonly  known  as          interest  rate  swap  agreements,  forward purchase contracts or          guaranteed  investment  contracts  and  futures   or   contracts          providing  for  payments  based  on  levels  of,  or changes in,          interest rates. These contracts or arrangements may  be  entered          into  by  the  corporation in connection with, or incidental to,          entering into, or maintaining any (i)  agreement  which  secures          bonds  of  the  corporation  or  (ii)  investment,  or  contract          providing  for  investment  of  reserves  or  similar   facility          guaranteeing  an  investment  rate  for a period of years not to          exceed the underlying term of the bonds.  The  determination  by          the corporation that an ancillary bond facility or the amendment          or  termination thereof is necessary or appropriate as aforesaid          shall be conclusive. Any ancillary  bond  facility  may  contain          such  payment, security, default, remedy, termination provisions          and payments and other terms and conditions as determined by the          corporation,   after   giving   due   consideration    to    the          creditworthiness  of  the counterparty or other obligated party,          including any rating by any nationally recognized rating agency,          and any other criteria as may be appropriate.            9. Bonds or any ancillary bond facility may contain a  recital          that they are issued or executed, respectively, pursuant to this          act,  which  recital  shall  be  conclusive  evidence  of  their          validity, respectively, and the regularity  of  the  proceedings          relating thereto.            10.   The   corporation,   subject  to  such  agreements  with          bondholders  as  may  then  exist  (including  provisions  which          restrict  the  power  of  the corporation to purchase bonds), or          with the providers of any applicable  ancillary  bond  facility,          shall  have  the  power  out  of any funds available therefor to          purchase  bonds  of  the  corporation,  which  may  or  may  not          thereupon be cancelled, at a price not substantially exceeding:            (i)  if  the  bonds  are then redeemable, the redemption price          then applicable, including any accrued interest; and            (ii) if the bonds are  not  then  redeemable,  the  redemption          price  and  accrued  interest applicable on the first date after          such purchase upon which the bonds become subject to redemption.            11. (i) Notwithstanding  the  provisions  of  any  general  or          special law to the contrary, and subject to the making of annual          appropriations  therefor by the state, in order to assist in the          undertaking and financing by the corporation under this act, the          state representative is authorized to and shall enter  into  one          or  more  contingency  contracts  with the corporation upon such          terms as the corporation  and  the  state  representative  shall          agree,  so as to provide annually to the corporation the amount,          if any, as necessary to meet the debt  service  requirements  on

          one  or  more series of bonds, including refunding bonds, in any          year if the receipts from pledged tobacco revenues  or  from  an          ancillary  bond  facility,  if  any,  are  inadequate  and after          application  of  all  collateral pledged therefor, including any          debt service and debt  service  reserve  fund.  Any  contingency          contract  shall  terminate  when there are no bonds benefited by          the contract outstanding in accordance with the trust  indenture          under  which such bonds are issued. The contract may provide for          (A) the corporation to request annually, not  later  than  sixty          days  prior  to  the commencement of the state's next succeeding          fiscal year, from the state the amount, as shall be certified by          an authorized officer of the corporation to the director of  the          budget,  to  be provided by the state during its next succeeding          fiscal year pursuant to each contingency contract, and  (B)  for          the director of the budget on behalf of the state to include, as          a   requested  appropriation  item,  an  amount  equal  to  such          certified amount. Each contingency contract shall  include  text          to the effect that the obligations of the state thereunder shall          be  deemed  executory only to the extent of the moneys available          to the state and no liability on account of any  such  agreement          shall  be  incurred by the state beyond the moneys available and          appropriated for the purpose thereof.            (ii) The state, through the state  representative,  is  hereby          authorized to enter into a contingency contract on the terms and          conditions  and  subject  to the limitations of this section, it          being hereby determined that the additional net proceeds  to  be          received  as  a  result  thereof  by  the state are an important          public purpose to be achieved. The obligation of  the  state  to          fund  or  to  pay  the  amounts  provided for in the contingency          contract, as  in  this  section  provided,  shall  constitute  a          contingent  contractual  obligation  and  shall not constitute a          debt or state supported debt of the state within the meaning  of          any  constitutional  or  statutory provision and shall be deemed          executory only to the extent of moneys available;  no  liability          shall  be  incurred by the state beyond the moneys available for          such  purpose  and  such  obligation  is   subject   to   annual          appropriation  by  the  legislature.  The  amounts  paid  to the          corporation pursuant to any such contract shall be  used  by  it          solely  to pay or provide for the payment of debt service on the          bonds of the corporation, including refunding bonds, if any.            12. Neither the members  of  the  corporation  nor  any  other          person  executing the bonds or an ancillary bond facility of the          corporation shall  be  subject  to  any  personal  liability  or          accountability  by  reason  of  the  issuance  or  execution and          delivery thereof.            § 7. State not liable on bonds or any ancillary bond facility.          Neither  any  bond  nor  any  ancillary  bond  facility  of  the          corporation  shall  constitute a debt or moral obligation of the          state or a state supported obligation within the meaning of  any          constitutional  or  statutory provision or a pledge of the faith          and credit of the state or of the taxing power of the state, and          the state shall not be liable to make any payments  thereon  nor          shall  any bond or any ancillary bond facility be payable out of          any funds or assets other  than  pledged  tobacco  revenues  and          other  assets,  if  any, sold to the corporation and other funds          and assets of or available to the corporation pledged  therefor,          and the bonds and any ancillary bond facility of the corporation

          shall  contain  on  the  face  thereof  or other prominent place          thereon a statement to the foregoing effect.            §  8. Remedies of bondholders. 1. Subject to the provisions of          section six of this act, in the event that the corporation shall          default in the payment of  principal  of,  or  interest  on,  or          sinking fund payment on, any issue of bonds after the same shall          become  due, whether at maturity or upon call for redemption, or          in the event that the corporation or the state shall default  in          any  agreement  made with the holders of any issue of bonds, the          holders of twenty-five per centum in aggregate principal  amount          of  the  bonds  of such issue then outstanding, by instrument or          instruments filed in the office of the clerk of  the  county  of          Albany  and  proved or acknowledged in the same manner as a deed          to be recorded, may appoint a trustee to represent  the  holders          of such bonds for the purposes herein provided.            2. Such trustee, or any trustee appointed under this act, may,          and  upon  written  request  of  the  holders of twenty-five per          centum in principal amount of such bonds then outstanding shall,          in his or its own name:            (i) by suit, action or proceeding in accordance with the civil          practice law and rules, enforce all rights of  the  bondholders,          including  the right to require the corporation to carry out any          agreement with such holders and to perform its duties under this          act;            (ii) bring suit upon such bonds;            (iii) by action or suit, require the corporation to account as          if it were the trustee of an express trust for  the  holders  of          such bonds;            (iv) by action or suit, enjoin any acts or things which may be          unlawful  or  in  violation of the rights of the holders of such          bonds; and            (v) declare all  such  bonds  due  and  payable,  and  if  all          defaults  shall  be  made  good,  then,  with the consent of the          holders of twenty-five per centum of  the  principal  amount  of          such  bonds  then  outstanding,  annul  such declaration and its          consequences,  provided,  however,  that  nothing  herein  shall          preclude  the  corporation  from  agreeing  that  consent of the          provider of an  ancillary  bond  facility  is  required  for  an          acceleration  of  related  bonds in the event of a default other          than a failure to pay principal of or interest on the bonds when          due.            3. The supreme court shall  have  jurisdiction  of  any  suit,          action   or   proceeding  by  the  trustee  on  behalf  of  such          bondholders. The venue of any such suit,  action  or  proceeding          shall be laid in the county of Albany.            4.  Before  declaring  the principal of bonds due and payable,          the trustee shall first give thirty days notice  in  writing  to          the corporation.            §  9.  Tax  exemption  and tax contract by the state. 1. It is          hereby determined that the creation of the corporation  and  the          carrying  out  of its corporate purposes are in all respects for          the benefit of the people of the  state  of  New  York  and  are          public  purposes. Accordingly, the corporation shall be regarded          as performing an essential governmental function in the exercise          of the powers conferred upon it by this act.   The  property  of          the  corporation,  its income and its operations shall be exempt          from taxation, assessments, special assessments and  ad  valorem          levies.  The  corporation shall not be required to pay any fees,

          taxes, special ad valorem levies or  assessments  of  any  kind,          whether  state  or  local,  including, but not limited to, fees,          taxes,  special  ad  valorem  levies  or  assessments  on   real          property,  franchise  taxes, sales taxes or other taxes, upon or          with  respect  to  any  property  owned  by  it  or  under   its          jurisdiction,  control or supervision, or upon the uses thereof,          or upon or with respect  to  its  activities  or  operations  in          furtherance of the powers conferred upon it by this act, or upon          or  with  respect  to any fares, tolls, rentals, rates, charges,          fees, revenues or other income received by the corporation.            2. Any bonds issued pursuant to this act, their  transfer  and          the  income  therefrom  shall,  at  all  times,  be  exempt from          taxation.            3. The state hereby covenants with the purchasers and with all          subsequent holders  and  transferees  of  bonds  issued  by  the          corporation  pursuant  to  this  act,  in  consideration  of the          acceptance of and payment for the bonds, that the bonds  of  the          corporation issued pursuant to this act and the income therefrom          and  all  revenues, moneys, and other property pledged to pay or          to secure the payment of such bonds shall at all times be exempt          from taxation.            4. In the case of any bonds of the  corporation,  interest  on          which  is  intended  to  be  exempt from federal income tax, the          corporation shall prescribe  restrictions  on  the  use  of  the          proceeds  thereof  and  related matters only as are necessary to          assure such exemption, and the recipients of such proceeds shall          be bound thereby to the extent such restrictions shall  be  made          applicable  to  them.  Any  such  recipient,  including, but not          limited to, the state, a public benefit  corporation,  a  school          district   or  municipality  is  authorized  to  execute  a  tax          regulatory agreement with the corporation or the state,  as  the          case  may  be,  and  the  execution  of such an agreement may be          treated by the corporation  or  the  state  as  a  condition  to          receiving any such proceeds.            §  10.  Agreement  with state. 1. The state pledges and agrees          with the corporation,  and  the  owners  of  the  bonds  of  the          corporation  in  which  the corporation has included such pledge          and agreement, that the  state  shall  (i)  irrevocably  direct,          through  the  attorney  general, the independent auditor and the          escrow agent under the master settlement agreement  to  transfer          all  pledged tobacco revenues directly to the corporation or its          assignee, (ii) enforce its right to collect all moneys due  from          the  participating  manufacturers  under  the  master settlement          agreement  and,  in  addition,  shall  diligently  enforce   the          qualifying statute as contemplated in section IX(d)(2)(B) of the          master   settlement   agreement   against  all  tobacco  product          manufacturers selling tobacco products in the state and that are          not in compliance with the qualifying statute, in each  case  in          the manner and to the extent deemed necessary in the judgment of          the attorney general, provided, however, that the sale agreement          may  provide  (a) that the remedies available to the corporation          and the bondholders for any breach of the pledges and agreements          of the state set forth  in  this  clause  shall  be  limited  to          injunctive  relief,  and  (b)  that the state shall be deemed to          have diligently enforced the qualifying statute so long as there          has been no judicial  determination  by  a  court  of  competent          jurisdiction  in  this  state,  in  an  action  commenced  by  a          participating tobacco manufacturer under the  master  settlement

          agreement,  that  the state has failed to diligently enforce the          qualifying statute for the purposes of  section  IX(d)(2)(B)  of          the  master settlement agreement, (iii) neither amend the master          settlement  agreement  nor  the consent decree or take any other          action in any way that would  materially  adversely  (a)  alter,          limit  or  impair  the  corporation's  right  to receive pledged          tobacco revenues, or (b) limit or alter the rights hereby vested          in the corporation to fulfill the terms of its  agreements  with          such  bondowners,  or  (c)  in  any  way  impair  the rights and          remedies of such bondowners or the security for such bonds until          such bonds, together with the interest thereon and all costs and          expenses in connection with any action or proceedings by  or  on          behalf  of  such  bondowners,  are  fully  paid  and  discharged          (provided, that nothing herein shall be  construed  to  preclude          the state's regulation of smoking and taxation and regulation of          the  sale  of cigarettes or the like or to restrict the right of          the state to amend, modify, repeal or otherwise  alter  statutes          imposing  or  relating  to  the  taxes),  and  (iv)  not  amend,          supersede or repeal the qualifying statute and the complementary          legislation, in any way that would materially  adversely  affect          the amount of any payment to, or materially adversely affect the          rights  of,  the  corporation  or  such  bondholders.  The state          representative is authorized and directed to include this pledge          and agreement in the sale agreement and authorizes  and  directs          the  corporation,  as  agent of the state to include this pledge          and agreement in  any  contract  with  the  bondholders  of  the          corporation. Notwithstanding these pledges and agreements by the          state, the attorney general may in his or her discretion enforce          any  and  all  provisions  of  the  master settlement agreement,          without limitation.            2. Prior to the date which is one year and one day  after  the          corporation no longer has any bonds outstanding, the corporation          shall  have  no  authority  to  file  a voluntary petition under          chapter 9 of the federal bankruptcy code or  such  corresponding          chapter or sections as may, from time to time, be in effect, and          neither any public officer nor any organization, entity or other          person  shall authorize the corporation to be or become a debtor          under chapter 9 or any successor  or  corresponding  chapter  or          sections during such period. The state hereby covenants with the          owners  of  the bonds of the corporation that the state will not          limit or alter the denial of authority  under  this  subdivision          during  the  period  referred  to in the preceding sentence. The          corporation is authorized and directed as agent of the state  to          include  this  covenant  as  an  agreement  of  the state in any          contract with the bondholders of the corporation.            3. To the extent deemed appropriate  by  the  corporation  and          with  the  approval  of the state representative, any pledge and          agreement of the state with respect to the bonds as provided  in          this  section may be extended to, and included in, any ancillary          bond facility as a pledge and agreement of the  state  with  the          corporation and the benefited party.            4.   The   state   acknowledges  and  agrees  that  the  other          participating jurisdictions have rights  and  interests  in  the          consent  decree.  In  recognition  of  the  rights  of the other          participating jurisdictions contained in the consent decree, the          state pledges that the sale of the state's share  authorized  by          this  act  shall  in no way include or be deemed to include, and          the state shall not  otherwise  alter,  limit,  or  impair,  the

          rights  of  the other participating jurisdictions including, but          not limited to, rights to receive payments,  set  forth  in  the          consent  decree. Nothing in this act shall be construed to alter          the right of each of the other participating jurisdictions under          the consent decree to receive payments or to sell or assign some          or all of its interest in the manner deemed appropriate pursuant          to law by its governing body.            § 11. Bonds as legal investments. The bonds of the corporation          are  hereby  made  securities  in  which all public officers and          bodies of  this  state  and  all  municipalities  and  political          subdivisions, all insurance companies and associations and other          persons  carrying  on an insurance business, all banks, bankers,          trust  companies,  savings  banks  and   savings   associations,          including  savings  and  loan  associations,  building  and loan          associations, investment companies and other persons carrying on          a banking business, all  administrators,  guardians,  executors,          trustees and other fiduciaries, and all other persons whatsoever          who are now or may hereafter be authorized to invest in bonds or          in  other  obligations  of  the  state, may properly and legally          invest funds, including capital, in their control  or  belonging          to  them. The bonds are also hereby made securities which may be          deposited with and may be received by all  public  officers  and          bodies   of   the   state   and  all  municipalities,  political          subdivisions and public corporations for any purpose  for  which          the deposit of bonds or other obligations of the state is now or          may hereafter be authorized.            §  12.  Actions  against the corporation. 1. An action against          the corporation for death, personal injury or property damage or          founded on tort shall not be commenced more than  one  year  and          ninety days after the cause of action thereof shall have accrued          nor  unless a notice of claim shall have been served on a member          of the corporation or officer or employee thereof designated  by          the  corporation  for  such purpose, within the time limited by,          and in compliance with the requirements of section 50-e  of  the          general municipal law.            2.  The  venue  of  every  action,  suit or special proceeding          brought against the corporation shall be laid in the  county  of          Albany.            3.  Neither  any  member  of  the corporation nor any officer,          employee, or agent of the corporation, while acting  within  the          scope  of  their  authority,  shall  be  subject to any personal          liability resulting from exercising or carrying out  of  any  of          the corporation's purposes or powers.            §  13.  Assistance to the corporation. The corporation may use          agents, employees and facilities of the authority and, with  the          consent  of the governor, comptroller or attorney general as the          case may be, the  corporation  may  use  agents,  employees  and          facilities of the state, paying to the authority or the affected          agency,  office  or  department  its  agreed  proportion  of the          compensation or costs.            § 14.  Preference  for  actions  or  proceedings  against  the          corporation.  Any  action or proceeding to which the corporation          or the people of the state may be parties, in which any question          arises as to the validity of this act, shall be  preferred  over          all  other  civil  causes  of  action  or cases, except election          causes of action or cases, in all courts of the state and  shall          be  heard  and  determined  in  preference  to  all  other civil          business pending therein, except election  causes,  irrespective

          of  position  on  the  calendar.  The  same  preference shall be          granted upon application of the corporation or  its  counsel  in          any action or proceeding questioning the validity of this act in          which  the corporation may be allowed to intervene. The venue of          any such action or proceeding shall be laid in the supreme court          of the county of Albany.            § 15. Construction. This act and  all  powers  granted  hereby          shall  be liberally construed to effectuate its intent and their          purposes, without implied limitations thereon.  This  act  shall          constitute  full  and  complete  authority for all things herein          contemplated to be done. All rights and  powers  herein  granted          shall  be  cumulative  with those derived from other sources and          shall not, except as expressly stated herein,  be  construed  in          limitation  thereof.  Insofar  as the provisions of this act are          inconsistent with the provisions of any other  act,  general  or          special, the provisions of this act shall be controlling.            § 16. Severability clause. If any clause, sentence, paragraph,          section  or  part  of  this  act  be  adjudged  by  any court of          competent jurisdiction to be invalid, such  judgment  shall  not          affect,  impair  or invalidate the remainder hereof but shall be          applied in its operation to  the  clause,  sentence,  paragraph,          section  or  part hereof directly involved in the controversy in          which such judgment shall have been rendered.