Section 4 - The sale agreement1.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. N.Y. Tobacco Settlement Financing Corporation Act § 4