N.Y. Tobacco Settlement Financing Corporation Act § 4: The sale agreement

§ 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. Notwithstanding section 121 of the state finance law

or any other law to the contrary, the residual interests shall be

deposited into the Medicaid management information system (MMIS)

statewide escrow fund within thirty days upon the availability of such

residual interests to fund a portion of the cumulative non-federal share

of expenses related to the state takeover of the local share of Medicaid

growth pursuant to part F of chapter 56 of the laws of 2012. Such

deposit shall be in an amount equal to (a) the amount of residual

interests scheduled for deposit into the MMIS statewide escrow fund in

the applicable year's enacted budget financial plan as updated or (b)

the total amount of residual interests available if the total amount of

such residual interests is less than the total amount of residual

interests scheduled for deposit into the MMIS statewide escrow fund in

the applicable year's enacted budget financial plan as updated. At the

discretion of the state representative, any residual interests which

exceed the amount scheduled for deposit into the MMIS statewide escrow

fund in the applicable year's enacted budget financial plan as updated

may either be deposited into the (i) MMIS statewide escrow fund to fund

a portion, as determined by the state representative, of the cumulative

non-Federal share of expenses related to the state takeover of the local

share of Medicaid growth, pursuant to part F of chapter 56 of the laws

of 2012, or (ii) the state general fund; provided, however that any

residual interest derived from other assets shall be applied as directed

by statute. Notwithstanding any other law to the contrary, the amount

used from such deposit to fund a portion of the cumulative non-Federal

share of expenses related to the State takeover of the local share of

Medicaid growth shall be paid without appropriation. 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.

* NB Effective until March 31, 2027

* 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.

* NB Effective March 31, 2027

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.