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.