CRY STATE OF RHODE ISLAND SUPERIOR COURT PROVIDENCE OPPENHEIMER ROCHESTER HIGH YIELD MUNICIPAL FUND, a series of OPPENHEIMER MULTI-STATE MUNICIPAL TRUST, AND OPPENHEIMER ROCHESTER AMT- FREE MUNICIPAL FUND, Plaintiffs v. P.C. CA. No. TOBACCO SETTLEMENT FINANCING CORPORATION, Defendant COMPLAINT Plaintiffs Oppenheimer Rochester High Yield Municipal Fund, a series of Oppenheimer- Multi?State Municipal Trust, and Oppenheimer Rochester Municipal Fund (collectively, ?OppenheimerFunds? or ?Plaintiff?), by and through its undersigned counsel, for its Complaint against the Tobacco Settlement Financing Corporation (the ?Corporation?), hereby allege as follows: NATURE OF THE CASE 1. The Corporation sold bonds to Plaintiff based on the guarantee that Plaintiff and other bond purchasers could rely on a certain stream of revenues to be received from tobacco companies pursuant to a settlement between those companies and the State of Rhode Island (the ?State?). The Corporation?an entity created by the State to raise .money by pledging that future revenue stream in exchange for an up?front paymentmis now seeking to siphon off those funds from bondholders and give them to the State. The Corporation?s actions not only violate the contract it agreed to, but also the Rhode Island statute that was enacted precisely to protect swam was] bondholders from any subsequent impairment of their rights to those funds. When the Corporation was created by the State to issue these bonds, the Corporation and the State knew that nobody would ever buy the bonds if they believed that the State and the Corporation could later use their formidable political power to re?jigger the terms of the deal to divert or take back the payments that were promised to bondholders. But now, that is exactly what the Corporation is seeking to-do with the backing of the State and a vulture ?md investor in one class of bonds who has negotiated a private (and highly preferential) deal. The proposed transaction will give the State'a minimum of $20 million dollars and the vulture fund a quick payday of approximately $60 million by breaking the Corporation?s fundamental promise to other bondholders. 2. What is worse, there appears to be no justi?cation whatsoever for this diversion of bondholder money to the State. The Corporation touts the bene?ts of entering into the transaction, but none of the bene?ts warrants a payoff to the State from money that was already promised to bondholders. As described below, the State already received payment in full up front and cannot now entangle itself with the ?nancial affairs of the Corporation, which was Speci?cally designed to be separate and distinct ?om the State?s own ?nancial condition. 3. In 2002, and again in 2007, the State wanted to monetize future streams of settlement payments it expected to receive from manufacturers of tobacco-related products sold in the State. To do this, the State created the Corporation, which had a mandate to sell bonds to investorswand the prospective buyers of these bonds were told that if they loaned money to the. State now by buying the bonds, the State would assign the future streams of payments to the bondholders and repay them, over time, using the money received from the tobacco manufacturers. 4. The statute and contracts governing the Corporation?s 2007 bonds included a fundamental promise to protect the economic interests of bondholders: the Corporation, and the State which created it, promised the buyers of the 2007 bonds that of the money received from the tobacco manufacturers would be used to pay back the 2007 bondholders, subject only to ?rst repaying the outstanding 2002 bonds. This promise was at the core of the repayment obligation because the State purported to disclaim having any further involvement with the Corporation and made clear to bondholders that their Only recourse would be the money received from the tobacco companies. A I 5 . Indeed, the State passed a law, called The Tobacco Settlement Act (or the in which the State expressly committed that it and the Corporation it created would never impair the rights of the bondholders. The Act says in clear language that neither the State nor the Corporation will ?take any action that materially and adversely affects the rights of the [bond] holders.? Similarly, Section Section 6.01(c) of the 2007 bond indenture?which contractually binds the Corporation??assured bondholders that the State will ?not in any way impair the rights and remedies of the Bondholders or other Beneficiaries or the security for the Bonds until the Bonds, together with the interest thereon and all costs and expenses in connection with any action or proceeding by or on behalf of the Bondholders, are fully paid and discharged.? But the transaction the Corporation has proposed would do precisely that. It would, among other things, siphon collateral and its critical creditor protections, from Plaintiff and other current bondholders while also subordinating the claims of Plaintiff and other bondholders on the State?s future payments to those of a new class of debt holders. Rhode Island Tobacco Settlement Financing Corporation Act, Article 8 of Chapter 65 of the Public Laws of 2002, as amended, R.I.G.L. 42-133?1 et seq. The Act is attached hereto as Exhibit 1. 6. Despite the foregoing assurances, the Corporation and the undisclosed investment fund??purporting to have acquired the majority voting power of the 2007 bonds?have negotiated several integrated transactions that would ?nancially reward the State and the fund, but break the promise made to Plaintiff and all holders of 2007 bonds. The gist of the transactions is to use the collateral previously pledged to be available for all 2007 bondholders to backstop a new 2014 tobacco bond issuance, and then use the proceeds to funnel tens of millions of dollars to the State and pay off the purported majority holder of the bonds to agree to this deal. The latter is accomplished by the Corporation having its investment banker ?buy? a chunk of the investment fund?s stake in one series of 2007 bonds at a privately negotiated price?wan offer not made in respect of any other series of bonds, including those held by Plaintiff?in exchange for the investment fund?s vote. 7. Such blatant disregard by the State and the Corporation it created of this State?s pact with bondholders not only harms Plaintiff, but it will deter investors from participating in future bond offerings of the State and its municipalities and agencies. When the State (or a Corporation it creates) sells bonds, bondholders rely on the State (or the Corporation it creates) to make good on its promise to pay back the investors according to the agreed-upon repayment terms. If the State and the Corporation are allowed to renege on this core pact, then no future potential bond investor can feel secure that State bonds are worth the paper they are written on. Nor can current holders of bonds issued by the State rest easy that the payments that have been promised to them will ever be made. 8. The Corporation and the State cannot be allowed to Violate or impair the contracts they sign, and by this action Plaintiff seeks to hold the Corporation to the important commitments it made to purchasers of bonds recited in the plain terms of the statutes and contracts that are binding upon it. PARTIES 9. Plaintiff Oppenheimer Rochester High Yield Municipal Fund, a series of Oppenheimer Multi-State Municipal Trust, and Oppenheimer Rochester Municipal Fund, each a statutory trust organized and existing under the laws of the State of Delaware, collectively own 100% of the Series 2007C Bonds issued by the Corporation and approximately 32.8% of the Series 2007B Bonds issued by the Corporation. Plaintiff Oppenheimer Rochester Municipal Fund and Oppenheimer Rochester High Yield Municipal Fund, a series of Oppenheimer Multi-State Municipal Trust, both of which own 2007 Bonds, are mutual funds with ordinary investors, many of whom are Rhode Island residents. 10. Defendant Tobacco Settlement Financing Corporation is a public corporation organized and existing under the laws of the State of Rhode Island. The Corporation is the issuer of the 2002 Bonds and the 2007 Bonds and, upon information and belief, intends to issue the 2014 Bonds. JURISDICTION AND VENUE 11. This Court has personal jurisdiction over the Corporation because Defendant is a Rhode Island public corporation with its principal place of business in Providence, Rhode Island. 12. Venue is proper because the Corporation is a resident of Providence, Rhode Island and has expressly agreed that this Court is an appropriate Venue for claims asserted against it. FACTUAL BACKGROUND The Master?Settlement Agreement And Tobacco Settlement Revenues 13. In 1998, after years of litigation in which dozens of states sought to recover billions of dollars in damages from tobacco product manufacturers relating to medical and other expenses associated with smoking-related illnesses, forty-six US. states (collectively, the ?Settling States?) entered into a global settlement with the nation?s four largest tobacco product manufacturers. In return for releasing the tobacco product manufacturers from liability for past and future claims, the settlement required the tobacco product manufacturers to make regular payments to the Settling States on a staggered basis commencing in 1998 and continuing in perpetuity. 14. The terms and conditions of the settlement were set forth in a Master Settlement Agreement, dated November 23, 1998 (the Pursuant to the MSA, participating tobacco product manufacturers are required to make payments into an escrow account for distribution by the MSA escrow agent to the Settling States. The amount of those payments is calculated based upon the volume of cigarettes shipped by the manufacturer in the United States. 15. Upon information and belief, Citibank, NA. is the MSA escrow agent. 16. The State is one of the forty?six Settling States and started receiving payments under the MSA and a related statute, R.I.G.L. 23?71?1 et seq, effective June 29, 1999 (the ?Qualifying Statute?), in 1998.2 17. In 2002, the State created the Corporation as a public corporation under State law and empowered the Corporation to acquire revenues payable by tobacco product manufacturers 2 Pursuant to the Qualifying Statute, all tobacco product manufacturers selling cigarettes to consumers in the State must either participate in the MSA and perform the ?nancial obligations contemplated by the original manufacturer signatories to that agreement or deposit compensating funds into an escrow account to off?set the cost advantages that the manufacturers would otherwise derive from not participating in the global settlement. under the MSA and Qualifying Statute (all such revenues, ?Tobacco Settlement Revenues?) and issue bonds using the Tobacco settlement Revenues as collateral. See generally Tobacco Settlement Financing Corporation Act, R.I.G.L. 42?133-1 et seq. 18. The Corporation is an independent legal entity but it is controlled by the State and, in certain circumstances, permitted to act on behalf of the State. All of the members of the Corporation?s ?ve-person board are appointed by the governor, for example, and two board members must be members of the State investment commission who must be appointed with ?due consideration to the recommendation of the chair? of that commission. R.I.G.L. 42?133? 6. Board members are also indemni?ed by the State for any proceeding in connection with or arising out of the member?s performance or alleged lack of performance of his or her duties on behalf of the Corporation, id, and must submit annual reports to the State governor, the speaker of the house of representatives, the president of the senate, and the secretary of state. Id. 42? 133?16. The Corporation is also empowered to direct the State Attorney General to, among other things, ?enforce, in the name of the master settlement agreement.? Id. 42?133- 5(14). 2 The 2002 Bonds 19. Shortly after its creation, on June 1, 2002, the Corporation entered into a purchase and sale agreement pursuant to which it acquired the State?s rights, title, and interest in the Tobacco Settlement Revenues in return for an up?front payment to the State of $685,3 90,000.3 Pursuant to the purchase and sale agreement, the State retained only a residual interest in any funds left over after all of the Corporation?s other contractual obligations, including to holders of Corporation bonds issued in connection with the transaction, were satisfied in full. The State?s 3 At that time, the Tobacco Settlement Revenues were estimated to amount to approximately $1.2 billion over the next two decades. residual interest was re?ected in a certi?cate (the ?2002 Residual Certi?cate?) issued by the Corporation to the State. 20. The Corporation ?nanced its acquisition of the State?s interests in the Tobacco Settlement Revenues by issuing term bonds secured by the Tobacco Settlement Revenues. 21. By selling its rights to the Tobacco Settlement Revenues to the Corporation, the State was able to obtain immediate access to cash. Investors, in turn, were provided with the opportunity to make money on the interest payments received on the amounts borrowed up to the ?nal maturity as the Tobacco Settlement Revenues were paid. 22. The bonds were issued by the Corporation in two classes: the Tobacco Settlement Asset-Backed BOnds, Series 2002A (the ?Series 2002A Bonds?) and the Tobacco Settlement Asset?Backed Bonds, Series 2002B (the ?Series 2002B Bonds? and, with the Series 2002A Bonds, the ?2002 Bonds?). The Corporation issued $649,730,000 of Series 2002A Bonds and $35,660,000 of Series 2002B Bonds. 23. The 2002 Bonds were issued pursuant to a governing indenture, dated as of June 1, 2002 (the ?20021ndenture?) entered into by the Corporation and Wells Fargo Bank, NA. (?Wells Fargo?) as trustee. The 2002 Indenture is attached hereto as Exhibit 2. 24. The 2002 Indenture provides that the 2002B Bonds are subordinate to the Series 2002A Bonds and holders of the Series 2002B Bonds are not entitled to receive any payments until all payments have been made on the Series 2002A Bonds. In addition, Section 601 of the 2002 Indenture prohibits the indenture trustee, Wells Fargo, from making any payments in respect of the Residual Certi?cate unless and until all payments are made on the 2002 Bondsand all of the Corporation?s operating expenses are covered. The 2007 Bonds 25. On June 1, 2007, the Corporation entered into a second purchase and sale agreement with the State, this time to acquire the State?s interest in the 2002 Residual Certi?cate for $197,005,742.20. As was the case in 2002, following consummation of that transaction, the State retained only a residual interest in any funds left over after all of the Corporation?s other financial obligations, including to holders of all Corporation bonds, were paid in full. The State?s new residual interest?its only remaining legal interest in the Tobacco Settlement Revenues~?was re?ected in a certi?cate (the ?2007 Remainder Certi?cate?) issued by the Corporation to the State. 26. As was true in 2002, the Corporation ?nanced its acquisition of the 2002 Residual Certificate from the State by issuing a series of bonds, this time with three classes: the Tobacco Settlement Asset?Backed Bonds, Series 2007A (the ?Series 2007A Bonds?); (ii) the Tobacco Settlement Asset?Backed Bonds, Series 2007B (the ?Series 2007B Bonds?); and the Tobacco Settlement Asset?Backed Bonds, Series 2007C (the ?Series 2007C Bonds? and, with the Series 2007A Bonds and Series 2007B Bonds, the ?2007 Bonds?). The Corporation issued vastly more Series 2007A Bonds than either Series 2007B Bonds or Series 2007C Bonds. The initial principal amounts of the bonds totaled $176,974,412.70 Series 2007A Bonds, $17,336,217.50 Series 2007B Bonds, and $2,695,112.00 Series 2007C Bonds. These bonds are considered capital appreciation or zero coupon bonds, accruing to their full face value at maturity of $2,520,285,000 (Series $260,695,000 (Series 2007B) and $53,200,000 (Series 2007C) by June 1, 2052. 27. According to the Offering Statement for the 2007 issuance, at the time the 2007 Bonds were issued, $663,155,000. of the 2002 Bonds remained outstanding. That Offering Statement is attached hereto as Exhibit 3. 28. The 2007 Bonds were issued pursuant to an indenture, dated as of June 1, 2007 (the ?2007 Indenture?), entered into by the Corporation and Wells Fargo as trustee. The 2007 Indenture is attached hereto as Exhibit 4. 29. The 2007 Bonds are secured entirely by revenues from the 2002 Residual Certi?cate; all 2007 Bonds are, therefore, structurally subordinate to all of the 2002 Bonds as Tobacco Settlement Revenues may only be used to make payments on the 2002 Residual Certi?cate after all payments have been made on the 2002 Bonds. ,30. Among the 2007 Bonds, Series 2007B Bonds are subordinate to the Series 2007A Bonds such that the Series 2007B Bonds are not entitled to receive any payments until all Series 2007A Bonds have been paid in full and Series 2007C Bonds are subordinate to Series 2007B Bonds such that Series 2007C Bonds are not entitled to receive any payment until all Series 2007B Bonds have been paid in full. Ex. 4 (2007 Indenture), 1.01 (de?nition of ?Payment Priorities?). In all other respects, under the 2007 Indenture, the Series 2007A Bonds, Series 2007B Bonds, and Series 2007C Bonds have similar rights as ?Senior Bonds? 'of the Corporation. 10 31. Thus, the overall transaction structure currently in effect is as follows: Tobacco Manufacturer Payments of Tobacco Settlement Revenues MSA Escrow Agent Corporation Trustee Holders of Series 2002A Bonds Holders of Series 2002B Bonds Holders of Series 2007A Bonds Holders of Series 2007B Bonds Holders of Series 2007C Bonds i Holder of the - Remainder Certificate Bondholders? Interests Are Protected By State Law 32. To protect bondholders, and ensure the integrity of municipal bonds issued by a public corporation created by a special statute and controlled by the State, the State legislature incorporated a number of significant bondholder protections into the Tobacco Settlement Act. 33. For example, the Act provides that neither the State nor the Corporation may take any action that ?materially and adversely affects the rights of the holders? of Corporation bonds. ll 34. Speci?cally, Section 42-133-14 of the Act prohibits the State from taking any action to impair the rights of and remedies available to holders of Corporation bonds by ?pledg[ing] to and agree[ing] with the holders of any bonds issued under [the Act]? that the State will not limit or alter the rights vested in the [C]orporation to fulfill the terms of i any agreements made with the holders, or otherwise take any action that materially and adversely a?ects the rights of the holders, until the bonds, together with the interest thereon, with interest on any unpaid installments of interest, and all costs and expenses in connection with any action or proceeding by or on behalf of holders, are fully met and discharged. (Emphasis added.) 35. Similarly, Section provides that long as any bonds of the [C]orporation are outstanding, the [C]orporation shall not take any action that materially and adversely affects the rights of the holders of its bonds.? 36. The Act also protects bondholders from any State action or enactment that may purport to control, or otherwise benefit from, Tobacco Settlement Revenues sold to- the Corporation by making clear that the State has no continued interest in or control over any portion of those funds. Rather, the Act codi?es the State?s relinquishment of such interests by affirming that the State retains no ?right, title, or interest in all or such portion of the [Tobacco Settlement Revenues] sold? to the Corporation and that such sold interests are the ?sole property of the be owned, received, held, and disbursed by the [C]orporation or its trustee or assignee in accordance with this chapter, and not by the state.? R.I.G.L. The State therefore may not, by unilateral legislative act, recapture any portion of the Tobacco Settlement Revenues sold to the Corporation. 37. The Act also expressly provides that ?[i]nsofar as the provisions of [the Act] are inconsistent with the provisions of any other law or ordinance, general, special or local, the provisions of this [Act] shall be controlling.? (Emphasis added.) 12 3 8. The Act therefore explicitly protects holders of Corporation bonds issued pursuant to the Act from any subsequent legislative enactments or policies that may purport to adversely affect any of their rights or interests. Bondholders? Interests In'The 2007 Bonds Are Further Protected By Express Provisions Of The 2007 Indenture 39. Consistent with this protective statutory framework, numerous provisions of the 2007 lndenture protect bondholders? economic interests and other rights, including by imposing restrictions on any amendments that would purport to impair the value of the 2007 Bonds. 40. For example, like the Act, the 2007 Indenture incorporates covenants by the State not to impair bondholders? rights and interests. In particular, it sets forth ?the covenant and agreement of the State for the bene?t of the Bondholders and the other Bene?ciaries, that the State will. . not limit or alter the rights of the Corporation to fulfill the terms of its agreements with the Bondholders and other Beneficiaries, [and] (iv) not in any way impair the rights and remedies of the Bondholders or other Bene?ciaries or the security for the Bonds.? Ex. 4 (2007 Indenture), It also af?rms that the State will not amend either the or the Qualifying Statute in a way that would materially impair the rights of bondholders. Id. 41. Similarly, the 2007 Indenture requires the written consent of a majority of holders of each class of outstanding 2007 Bonds who are affected by a proposed amendment and who hold the bonds for their own benefit (as opposed to by or for the Corporation or the State) and prohibits the Corporation from unilaterally adding any provisions that are ?materially adverse? to bondholders without such consent. EX. 4 (2007 lndenture), (permitting amendments ?materially adverse? to holders only if ?such amendment is consented to by the Holders of such Bonds?). For purposes of determining whether such consents have been granted, ?Majority in Interest? is measured by reference to the then?accreted value of 13' ?Outstanding Senior Bonds.? Ex. 4 (2007 Indenture), 1.01 (de?nition of ?Majority in Interest?). All 2007 Bonds are ?Senior Bonds.? Id. (de?nition of ?Senior Bonds?). Bonds held ?by or for the account of the Corporation, the State or any person controlling, controlled by or under common control with either of them? are not counted when calculating the number of ?Outstanding? bonds. Id. (de?nition of ?Outstanding?). Thus, any proposed amendment to the 2007 Indenture that would affect the interests of multiple classes of 2007 Bonds e. two or more of the Series 2007A Bonds, the Series 2007B Bonds, and the Series 2007C Bonds) must be separately approved by a maj orityl of holders of each affected class (excluding any bonds held by or for the Corporation or the State). 42. Finally, the lndenture provides that in no event may the 2007 Indenture be amended in a way that would ?create a preference or priority of any Bond over any other Bond of the same class.? EX. 4 (2007 Indenture), . The Proposed 2014 Bond Transactions 43. In 2013, the State, because of its own unrelated economic dif?culties, began exploring ways to extract money from the purchasers of the Corporation?s bonds. Working with bankers from Citigroup Global Markets Inc. (?Citigroup?), the State came up with the idea of extracting an ?incentive? payment from existing holders of the 2007 Bonds in connection with a re?nancing of the 2002 Bonds. The proposed transaction would mean that an immediate lump sum payment of ?not less than $20 million? is made to the State?and that other future revenue streams otherwise pledged to bondholders will be diverted to the State?despite the State having no contractual or statutory right to such payments, and despite the fact that it means depriving Plaintiff of the very income stream that it was promised. l4 44. A plan to enter into a series of integrated transactions to accomplish that objective was approved by the Corporation at its February 28, 2014 meeting. Five months later, on or about July 24, 2014, the Corporation issued a Preliminary Offering Circular (the ?2014 Offering Circular?) outlining a series of integrated ?nancing transactions (the ?Proposed 2014 Transactions?). The 2014 Offering Circular is attached hereto as Exhibit 8. 45. According to the 2014 Offering Circular and accompanying offering notices, the Corporation now intends to do the following: issue $593,655,000 of new bonds, the Tobacco Settlement Asset-Backed Bonds, Series 2014 (the ?2014 Bonds?); (ii) refund all of the $547,815,000 of outstanding 2002 Bonds, all of which are Series 2002A Bonds; acquire $700,000,000 in face value of Series 2007A Bonds currently held by an undisclosed investor (subject to permitting other holders of Series 2007A Bonds to tender their bonds on a pro rata basis), and offer to acquire Series 2007B Bonds and Series 2007C Bonds at grossly disproportionate purchase prices; (iv) make an immediate lump sum payment of ?not less than ?$20 million,? and divert other future revenue streams, to the State despite the State having no contractual or statutory right to such a payment; make deposits to the Debt Service Reserve Accounts (as defined in the 2014 Offering Circular); and (vi) solicit the necessary consents for these related actions from holders of 2007 Bonds. Among the consents to be solicited in connection with the Proposed 2014 Transactions are consent to: approve the $20 million payment to the State; divert to the State 30% of revenues currently held in escrow that have been withheld from the State?s Tobacco Settlement Revenues over time in an on?going dispute between the Settling States-and the tobacco manufacturers over, among other things, the states? failures in ?diligently? enforcing the terms of the MSA (Rhode Island?s portion is believed to be approximately $45,000,000 and is likely to increase over time) (the ?Disputed Payments?); and 15 pay the State 30% of any pledged Tobacco Settlement Revenues in excess of the amounts needed to maintain the minimum ?turbo? redemption schedule for the 2014 Bonds. The 2014 Bonds 46. According to the 2014 Offering Circular, the 2014 Bonds will include approximately $336,065,000 of Tobacco Settlement Asset?Backed Bonds, Series 2014A (the ?Series 2014A Bonds?) and $257,590,000 of Tobacco Settlement Asset?Backed Bonds, Series 2014B (the ?Series 2014B Bonds?). The Series 2014A Bonds will be senior in priority to the Series 2014B Bonds and the Series 2014B Bonds will not be paid until the Series 2014A Bonds have been paid in full. 47. As stated in the 2014 Offering Circular, the Corporation anticipates that a portion of proceeds from the sale of the 2014 Bonds will be applied to establish an escrow fund to refund the outstanding 2002A Bonds in accordance with the defeasance provisions of the 2002 Indenture. Upon information and belief, following the defeasance of the Series 2002A Bonds, there will be no bonds outstanding under the 2002 Indenture. At that point, the Corporation intends to discharge and terminate the 2002 Indenture. As the 2014 Bonds are intended to replace the 2002 Bonds, the 2014 Bonds will be primarily secured by the Tobacco Settlement Revenues acquired by the Corporation in 2002; they will therefore occupy a priority position relative to the 2007 Bonds and the 2007 Remainder Certi?cate. 48. The Corporation also anticipates using a portion of the proceeds from the 2014 Bonds to make purchases of the 2007 Bonds as negotiated with an undisclosed investor in connection with obtaining ?consents? for the integrated transaction. 16 49. In purchase offer notices for each class of 2007 Bonds published on the Municipal Securities Rulemaking Board?s Electronic Municipal Market Access (EMMA) portal (each such notice, an ?Offer Notice?), it was reported that Citigroup has already agreed to purchase a signi?cant proportion of the Series 2007A Bonds from an existing holder of those bonds (referred to as the purported ?majority in interest? holder) and offered to purchase additional 2007 Bonds in all three classes. Offer Notices for the Series 2007A Bonds, the Series 2007B Bonds and the Series 2007C Bonds are attached hereto as Exhibits 5, 6 and 7, respectively. 50. The Offer Notices state that Citigroup has agreed to purchase Series 2007A Bonds at a purchase price of $8.50 per $100 of the ?Accreted Value at the 2052 Maturity thereof? and that Citigroup anticipates that the portion of the Series 2007A Bonds expected to be purchased has an accreted face value at the 2052 maturity of approximately $700 million. The purchase price offered by Citigroup for the Series 2007A Bonds amounts to approximately 80% of the current accreted value of the Series 2007A Bonds. Upon information and belief, the amount to be purchased represents 27.7% of the current Series 2007A Bondholder?s aggregate interest. 51. Citigroup is not acquiring the Series 2007A Bonds for its own account or with its own funds; rather, Citig'roup?s obligation to purchase the Series 2007A Bonds is conditioned on the issuance of the 2014 Bonds because it is, in fact, the Corporation that is acquiring the Series I 2007A Bonds with the proceeds of the 2014 Bonds. If the purchase transaction closes, Citigroup anticipates delivering these Series 2007A Bonds to the trustee for the 2007 Bonds so that they can be cancelled, thereby materially reducing the number of Series 2007A Bonds outstanding. Following completion of the contemplated transaction, there will be approximately $1.82 billion of ?2052 Maturity Date Accreted [Face] Value? of 2007A Bonds remaining. 17 52. The Offer Notices also note Citigroup?s offer to purchase Series 2007B Bonds and Series 2007C Bonds from their existing holders. Here, too, Citigroup is not actually purchasing bonds for its own account or with its own funds; rather, Citigroup is acting as an agent for the purported ?Majority in Interest? holderwthe undisclosed vulture investor that stands to receive approximately $60 million for its Series 2007A Bonds from Citigroup acting for the Corporation. The offered purchase price for the Series 2007B Bonds and Series 2007C Bonds is signi?cantly less than that offered for the Series 2007A Bonds, both in real terms and as a percentage of the bonds? c?urrent accreted value. Citigroupmagain, acting on behalf of the undisclosed investor?offers to purchase up to all of the Corporation?s Series 2007B Bonds at a purchase price equal to $1.034 per $100 of the face value at the 2052 Maturity which, upon information and belief, amounts to no more than 10.11% of the current accreted value of those bonds. Similarly, Citigroup offers to purchase up to all of the Corporation?s Series 2007C Bonds at a purchase price equal to $0.760 per $100 of the face value at the 2052 Maturity which, upon information and belief, amounts to no more than 9.35% of the current accreted value of those bonds. 53. OppenheimerFunds? attempts to negotiate with Citigroup regarding a fair purchase price for its 2007 Bonds failed. OppenheimerFunds offered to sell its Series 2007B Bonds and Series 2007C Bonds to Citigroup, in each case at a purchase price equivalent to 80% of current accreted value?15.6. at a purchase price equivalent to the price offered to holders of the Series 2007A Bonds?amounting to 8.17 per $100 of the Accreted Value for the Series 2007B Bonds and $6.49 for Accreted Value for the Series 2007C Bonds. Citigroup (and presumably its undisclosed principal) refused OppenheimerFunds? offer. 18 The Contemplated Incentive Distributions Are Illegal Under State Law 54. The Proposed 2014 Transactions contemplate a number of cash distributions to the State. First, the Corporation anticipates using proceeds from the 2014 Bonds to make an initial payment ?of not less than $20 million to the State.? Second, the Corporation proposes diverting 30% of any Disputed Payments to the State. Third, the Corporation intends to pay the State 30% of any pledged Tobacco Settlement Revenues in excess of the amounts needed to maintain the minimum ?turbo? redemption schedule for the 2014 Bonds. If made, all three distributions would constitute impermissible violations of State law. 55. As an initial matter, having sold all but the most subordinated residual interest in the Tobacco Settlement Revenues and received payment in full for those interests in return, the State has no ?current right to any additional monies from the Corporation, particularly at the expense of bondholders. Indeed, the State?s relinquishment of its ?right, title, or interest in all or such portion oi" the Tobacco Settlement Revenues sold to the Corporation is codi?ed in the Tobacco Settlement Act. R.I.G.L. The State?s only remaining interest in the Tobacco Settlement Revenues is in the 2007 Remainder Certi?cate. 56. Moreover, the Act expressly prohibits both the Corporation and the State from taking ?any action that materially and adversely affects the rights of [bondholders].? R.I.G.L. 42~133-5 42?133?14. The Corporation is therefore not permitted to divert a minimum of tens of millions of dollars of revenue from bondholders to the State or to make lump sum priority payments that leapfrog over the subordination structure set forth in the 2002 lndenture and 2007 lndenture. 19 Solicitation Of Bondholder Consents 57. According to the 2014 Offering Circular, Citigroup is ?seeking the consents of all Series 2007A Bondholders to shorten the stated maturity of the Series 2007A Bonds? from June 1, 2052 to a date not earlier than June 1, 2049, and has already received consent from the Majority in Interest Holder of 2007 Bonds ?to certain terms of the Series 2014 Bond transaction, including receipt by the State of not less than $20 million from the net proceeds of the Series 2014 Bonds, receipt by the State of 30% of any Disputed Payments received after the Closing Date and receipt by the State, for so long as the Series 2014B Bonds are Outstanding, of 30% of any Pledged TSRs [Tobacco Settlement Revenues] received by the Trustee over and above the amounts needed to maintain the minimum ?turbo? redemption schedule established for the Series 2014B Bonds.? 58. The contemplated consents were not obtained in accordance with the consent provisions of the 2007 Indenture'discussed above4 and create a ?preference or priority of any Bond over any other Bond of the same class.? As such, they are invalid. Put simply, the Corporation cannot?through Citigroup or any third party?solicit ?consents? by buying ?yes votes? from one big bondholder with money promised to all bondholders. I The Proposed 2014 Transactions Will Have A Material Adverse Effect On Holders Of Series 2007B Bonds And Series 2007C Bonds, Including Plaintiff 59. OppenheimerFunds owns 100% of the Series 2007C Bonds and 32.8% of the Series 2007B Bonds. Its bonds are therefore structurally subordinated to both the 2002 Bonds and the Series 2007A Bonds but senior to the residual interest retained by the State as holder of 4 Upon information and belief, Citigroup, which negotiated the purchase of certain Series 2007A Bonds (the ?Purchased 2007A Bonds?) on behalf of the Corporation and will pay for this purchase from the proceeds of the 2014 Bond offering, effectively is acquiring the Purchased 2007A Bonds for the account of the Corporation. Therefore, the Purchased 2007A Bonds may not be included when calculating the Majority in Interest for purposes of obtaining consents and the Corporation lacks suf?cient votes of the 2007 Bonds to approve any consents required under the 2007 Indenture. 20 the 2007 Remainder Certi?cate. If consummated, the Preposed 2014 Transactions will divert more than $20 million of value away from the bonds held by OppenheimerFunds and'allow the State impermissiny to leapfrog ahead of OppenheimerFunds and other bondholders, thus reducing the available funds to pay bondholders, creating greater credit risk, and impairing their rights and remedies and extending the time it will takes each class of bonds to reach maturity. As all of the more senior bonds must be paid in full before revenues begin to ?ow to bonds with greater levels of subordination, this will have the greatest impact on the most deeply subordinated bonds (Lee. the Series 2007B Bonds and Series 2007C Bonds held by OppenheimerFunds) and expose those bonds to additional risk of default in violation of the Act and in contravention of the 2007 lndenture. Additional Breach Of The 2007 Indenture 60. Upon information and belief, the Proposed 2014 Transactions also will violate Section 5.07(f) of the 2007 Indenture, which requires, among other things, that as a result of the issuance of the 2014 Bonds, ?the weighted average life of each Bond then outstanding hereunder, projected in years from its date of issuance, will not exceed the sum of the weighted average life of each such Outstanding Bond issued hereunder as projected at the time such Bond was issued and set forth in the Series Supplement relating thereto (with respect to the Series 2007 Bonds, such expected weighted average lives are as set forth in the Turbo Defeasance Schedule attached to the Series 2007 Supplement) and (ii) one.? Neither the State or the Corporation or anyone else has made available information to demonstrate compliance with this requirement, despite OppenheimerFunds multiple prior requests to the Corporation, the State, the trustee, and Citigroup. 21 CAUSE OF ACTION Declaratory Judgment 61. Plaintiff repeats and re-alleges the foregoing allegations as though they were fully set forth here. 62. There is an actual and justiciable controversy between the OppenheimerFunds and the Corporation regarding the permissibility of this transaction and the rights of each party under the Rhode Island Tobacco Settlement Financing Corporation Act, Article 8 of Chapter 65 of the Public Laws of 2002, codi?ed at R.I.G.L. 42?133-1 et seq, and the 2007 Indenture entered into by'the Corporation thereunder. 63. As holder of all 100% of the Series 2007C Bonds and 32.8% of the Series 2007B 'Bonds, the OppenheimerFunds will suffer economic injury?in-fact if the Proposed 2014 Transactions are consummated, including as a result of the diversion of a minimum of $20 million of value ?om bondholders to the State. 64. The OppenheimerFunds therefore request a declaratory judgment pursuant to R.I.G.L. 9-30-1 that if consummated, the Proposed 2014 Transactions, including the proposal to divert at least $20 million of value from bondholders to the State in lump?sum and future payments, despite the State having relinquished any right to such value, would Violate the Tobacco Settlement Financing Corporation Act, including inter alia, the prohibition on any actions by either the Corporation or the State that would ?materially and adversely affect[] the rights of [bondholders].? 22 PRAYER FOR RELIEF WHEREFORE, having stated their Complaint, Plaintiffs pray for relief as follows: A declaratory judgment declaring that, if consummated, the Proposed 2014 Transactions would violate State law, including the Tobacco Settlement Financing Corporation Act; An award of Plaintiff?s reasonable and necessary costs of litigation, including their reasonable attorneys? fees, incurred in this action; (0) Prejudgment interest, as approved by the Court; and An award of such other and further relief as may be just and proper. Plaintiffs Oppenheimer Rochester High Yield Municipal Fund, a series of Oppenheimer Multi- State Municipal Trust, and Oppenheimer Rochester Municipal Fund By Their Attorneys,,/ Justin r. Shay (#2781) dd F. Bielecki (#6171) Leah L. Miraldi (#9072) . CAMERON MITTLEMAN LLP 301 Promenade Street j? Providence, RI 02903 Tel. (401) 331?5700 Fax (401) 331-5787 David Eslberg, Esq. Susheel Kilpalani, Esq. Daniel S. Holzman, Esq. Monica E. Tarazi, Esq. QUINN EMANUEL URQUHART SULLIVAN, LLP 51 Madison Avenue, 22nd Floor New York, NY 10010 Tel. (212) 849?7000 Date: August 7% 2014 23