Department of Civil Service

PA04-09

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: June 23, 2004

Enclosed are the First Quarter Empire Plan Experience Report for 2004 and the cover letter to the Chief Executive Officers. This report presents the actual 2003 Empire Plan experience, projected 2004 Empire Plan experience and projected 2005 premium rates.

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June 23, 2004

Dear Chief Executive Officer:

Attached is the Empire Plan First Quarter Experience Report for 2004. This report presents the actual 2003 Empire Plan experience, projected 2004 Empire Plan experience, based on claims paid through March 31, 2004, and projected 2005 premium rates.

The Empire Plan carriers declared a 2003 net dividend of $143.2 million or 4.1% of premium. For Plan Year 2004, the Empire Plan carriers project a net dividend of $106.7 million, 2.7% of premium. This report presents the basis for these projections and future reports will include revisions based on additional claims experience.

The projected 2005 premium rates are presented in Exhibit III and reflect a "best estimated" net increase of 13.6%. The report also presents a range of the potential 2005 rate increase for your budget development considerations.

I hope this report is informative and useful to you. If you have any questions, comments or suggestions, please don't hesitate to contact me.

Sincerely,

Robert W. DuBois, CEBS
Director
Employee Benefits Division

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PARTICIPATING AGENCIES
EMPIRE PLAN
2004 First Quarter
Experience Report

Prepared by the State of New York
Department of Civil Service

JANUARY - MARCH 2004
Produced for
PARTICIPATING AGENCIES IN THE
NEW YORK STATE
HEALTH INSURANCE PROGRAM
by
the Employee Benefits Division
New York State Department of Civil Service
George C. Sinnott
President, New York State Civil Service Commission

Exhibits

I. Actual 2003 Empire Plan Experience

II. Projected 2004 Empire Plan Experience

III. 2005 Projected PA Premium Rates

IV. Empire Plan PA 5-Tier Group Rates 1996-2005

V. Empire Plan PA 2-Tier Group Rates 1996-2005

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NYS HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
1st QUARTER REPORT

ACTUAL 2003 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers declared a composite dividend of $143.2 million (4.1% of premium), or $96.6 million more than the margin loaded in the 2003 rates. The 2003 annual experience is reported in Exhibit I.

Cigna declared $67.0 million dividend (6.3% of premium) for the Prescription Drug Program. The dividend is $1.7 million greater than the 4th Quarter projection and $44.3 million greater than what was projected at the 2003 rate renewal. This increase is reflective of the modest improvement in the 2002 claim base that occurred after the development of the 2003 rates coupled with an improvement in the 2003 trend of 20%, the level assumed in the rate development, to the actual trend of 15.4%.

UnitedHealthcare declared a $78.8 million dividend (5.9% of premium), $1.0 million more than the 4th Quarter projection and $55.4 million greater than what was projected at the 2003 rate renewal. This experience improvement is attributable to a modest reduction in the 2002 estimated claim base as well as a reduction in the 2003 trend from 11.3% projected at the time of the 2003 rate development to the current projected trend of 8.5%.

Group Health Incorporated declared a $3.2 million dividend (3.8% of premium) for the Mental Health and Substance Abuse Program, $0.3 million less than the 4th Quarter projection and $2.7 million more than the margin loaded in the 2003 rates. This improvement is largely attributable to a reduction in trend from 7%, projected at the time of the 2003 rate development, to 5.5%, the current projected trend level.

Empire BlueCross BlueShield (EBCBS) reported a $5.7 million loss (0.6% of premium). The loss represents a $4.3 million improvement from the fourth quarter loss projection and reflects a more reasonable 2002 and 2003 incurred claims projection by EBCBS, based on observed payments and historical completion factors. While the 2003 trend and tax assessments are higher than the amounts projected in the rate development, such higher amounts are partially offset by the improvement in the projected 2002 claim base. Due to the retrospective premium arrangement negotiated with EBCBS during the rate development, the loss was recovered in full by EBCBS from an additional payment made in March 2004.

PROJECTED 2004 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $106.7 million (2.7% of premium), or $11.7 million more than the margin loaded in the 2004 rates. The 2004 annual experience projected by the insurance carriers is reported in Exhibit II.

For the Prescription Drug Program, Cigna projects a gain of $27.0 million (2.2% of premium) or $7.6 million less than the margin level used in the development of the 2004 rates. This dividend reduction is more reflective of the methodology used by the carrier in projecting claims as well as the seasonality of the claims than a "true" increase in the projected experience. The carrier is still projecting a 17.9% trend level, the same level assumed in the rate development.

For the Medical Program, UnitedHealthcare projects a gain of $57.3 million (3.9% of premium) or $19.5 million more than the margin level used in the development of the 2004 rates. This experience improvement is attributable to a modest reduction in the 2003 estimated claim base as well as a slight reduction in the 2004 trend from 10.5% projected at the time of the 2004 rate development to the current projected trend of 10.4%.

Group Health Incorporated (GHI) projects a gain of $3.8 million (4.2% of premium) for the Mental Health and Substance Abuse Program or $1.3 million more than the margin level used in the development of the 2004 rates. This improvement is largely attributable to a continued improvement in the 2003 claim base.

Empire BlueCross BlueShield (EBCBS) projects a net gain of $18.6 million (1.6% of premium) for the Hospital Program. While the projected gain represents a $1.6 million reduction from rate renewal, it is viewed to be consistent with the projection made during the rate development.

2005 PROJECTED PREMIUM RATES

Exhibit III presents the projected 2005 Empire Plan gross and net premium rates assuming the application of $90.0 million in dividend to all payors. In aggregate, the Empire Plan gross premium is projected to increase approximately 13.6% while the net premium is also projected to increase 13.6%

A range of projected gross and net premium rates is also included (10.3% - 16.6%). Carrier rate projections made at this time of the year have been historically conservative with the rates ultimately approved and implemented being significantly less than projections contained in 1st Quarter Reports. In addition, the rate projections do not include the impact of any benefit changes that will likely be implemented in 2005. Given these facts, the best estimate projections contained in this report are relatively conservative. Each agency should assess its budgetary environment in using the enclosed projections.

Exhibit IV presents the individual and family rate history for the Core Plus Medical and Psychiatric Enhancements option based on the 5-tier Empire Plan billing rate history in effect since January 1, 1996. Exhibit V presents, for illustrative purposes only, the 2-tier rate history from 1996 to 2005.

KEEPING YOU INFORMED

Participating Agency Regional Meetings

The Participating Agency Regional Meetings will be held early this year. Please hold the following dates: Monday, September 20 in Saratoga, NY; Tuesday, September 28 in Suffern, NY; and Wednesday, September 29 in Long Island, NY. Details about these meetings will be distributed in early summer.

Participating Agency Benefit Statements

Empire Plan Benefit Statements will be distributed to Participating Agency enrollees' homes in the fall 2004. This statement will enable enrollees to review their official health insurance enrollment record at the Employee Benefits Division and will instruct them to notify their agency Health Benefits Administrator of any necessary additions, changes or deletions to their record. Prior to this distribution, we will send agency Health Benefits Administrators detailed information about this project.

Transmission of Reports Electronically

The Employee Benefits Division has the capability to transmit the Participating Agency Quarterly Experience Report via E-mail. Using a software product called Adobe Acrobat Reader™, the PA Quarterly Report is converted into a portable document format (PDF). This is a format that can be read by any recipient, if they have Adobe Acrobat Reader™installed on their system. Adobe Acrobat Reader™ is available free from Adobe Systems, Inc., at http://www.adobe.com.

There are many advantages to receiving the reports electronically including: reports will be received sooner; there will be less paper to handle; and the reports can be stored electronically and/or a hard copy may be printed.

If you would like to receive the report electronically, please provide your E-mail address by completing the bottom section of Attachment 1 and returning it to the Employee Benefits Division.

NYSHIP Representation at Municipal Events

NYSHIP's Empire Plan was represented at the following Municipal Events:

• 2004 Annual Local Government Conference sponsored by the NYS Tug Hill Commission on March 31, 2004, in Watertown, NY.

• 2004 Annual Conference sponsored by the NYS Government Finance Officers' Association on April 1-2, 2004, in Albany, NY.

• 2004 Annual Town Management and Finance School sponsored by the Association of Towns on May 13-14, 2004, in Saratoga Springs, NY.

• 2004 Annual Meeting sponsored by the NYS Conference of Mayors on June 7-8, 2004, in Saratoga Springs, NY.

CEO and HBA Name and Address Changes

Please be sure to notify the Employee Benefits Division of any changes in the names and/or addresses of your agency's CEO or HBA, so that we may keep our mailing lists up-to-date. This updated information may be sent to:

Ms. Mary B. Frye
Director - Employee Insurance Programs
Employee Benefits Division
NYS Department of Civil Service
State Office Campus, Building #1
Albany, NY 12239

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Attachment 1

TRANSMISSION OF REPORTS ELECTRONICALLY

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If you would like to receive the report electronically, please complete this form and return it to:

Ms. Mary Frye
Director, Employee Insurance Programs
Employee Benefits Division
NYS Department of Civil Service
State Office Campus, Building #1
Albany, NY 12239

Agency Code: _______________________

Agency Name: _____________________________________________

Contact Person: _____________________________________________

E-mail Address: _____________________________________________

Phone Number: _______________________

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Exhibit I

2003 EMPIRE PLAN EXPERIENCE
In (000's)

	EMPIRE BLUE CROSS	UnitedHealthcare MEDICAL Core	UnitedHealthcare MEDICAL NY Enhancement	UnitedHealthcare MEDICAL PA Enhancement	UnitedHealthcare MEDICAL Combined	GHI MHSA Core	GHI MHSA NY Enhancement	GHI MHSA PA Enhancement	GHI MHSA Combined	CIGNA	TOTAL
(A) Premium (1)	997,383	1,103,713	126,697	108,134	1,338,544	69,542	9,199	5,993	84,734	1,071,026	3,491,687
(B) Incurred Claims (2)	913,488	972,168	88,181	73,769	1,134,118	52,708	8,555	5,606	66,869	973,352	3,087,827
(C) Administrative Expense (3)	89,600	108,848	9,079	7,682	125,609	12,051	1,594	1,039	14,684	30,721	260,614
(D) Gain/(Loss) (A-B-C)	(5,705)	22,697	29,437	26,683	78,817	4,783	(950)	(652)	3,181	66,953	143,246

(1) Earned Premium - Premium which pays for coverage for the period reported (accrual basis).
(2) Incurred Claims - Represents the cost of covered services provided during the period reported by the insurance company (accrual basis).
(3) Administrative Expenses - All charges by the insurance carrier other than for the payment of claims. Includes carrier's cost to administer the program, interest charges, and other retention.

Source: 2003 Carrier Financial Statements

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2004 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)

	EMPIRE BLUE CROSS	UnitedHealthcare MEDICAL Core	UnitedHealthcare MEDICAL NY Enhancement	UnitedHealthcare MEDICAL PA Enhancement	UnitedHealthcare MEDICAL Combined	GHI MHSA Core	GHI MHSA NY Enhancement	GHI MHSA PA Enhancement	GHI MHSA Combined	CIGNA	TOTAL
(A) Premium (1)	1,167,195	1,229,872	122,908	106,225	1,459,005	72,821	9,858	7,638	90,317	1,218,848	3,935,365
(B) Incurred Claims (2)	1,051,709	1,074,674	100,888	86,633	1,262,195	56,349	8,463	5,643	70,455	1,148,205	3,532,564
(C) Administrative Expense (3)	96,892	122,134	9,361	8,054	139,549	12,931	1,776	1,349	16,056	43,602	296,099
(D) Gain/(Loss) (A-B-C)	18,594	33,064	12,659	11,538	57,261	3,541	(381)	646	3,806	27,041	106,702

(1) Earned Premium - Premium which pays for coverage for the period reported (accrual basis).
(2) Incurred Claims - Represents the cost of covered services provided during the period reported by the insurance company (accrual basis).
(3) Administrative Expenses - All charges by the insurance carrier other than for the payment of claims. Includes carrier's cost to administer the program, interest charges, and other retention.

Source: Carriers 2004 1st Quarter Report

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Exhibit III

Empire Plan
Participating Agency Premium Rates
Comparison of 2004 and Projected 2005 Rates

CORE ONLY

Plan Prime - Individual

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	411.56	453.20	10.1%	402.20	446.70	11.1%
Best Estimate	411.56	467.91	13.7%	402.20	461.41	14.7%
Pessimistic	411.56	480.34	16.7%	402.20	473.84	17.8%

Plan Prime - Family

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	867.11	954.42	10.1%	847.55	940.79	11.0%
Best Estimate	867.11	985.41	13.6%	847.55	971.78	14.7%
Pessimistic	867.11	1,011.64	16.7%	847.55	998.01	17.8%

MediPrime - Individual

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	330.38	376.01	13.8%	322.87	368.44	14.1%
Best Estimate	330.38	384.97	16.5%	322.87	377.40	16.9%
Pessimistic	330.38	390.67	18.2%	322.87	383.10	18.7%

MediPrime - Family-1

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	785.94	877.23	11.6%	768.24	862.55	12.3%
Best Estimate	785.94	902.46	14.8%	768.24	887.78	15.6%
Pessimistic	785.94	921.96	17.3%	768.24	907.28	18.1%

MediPrime - Family-2

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	704.75	800.02	13.5%	688.91	784.26	13.8%
Best Estimate	704.75	819.50	16.3%	688.91	803.74	16.7%
Pessimistic	704.75	832.29	18.1%	688.91	816.53	18.5%

(1) Represents premium charged by carrier.
(2) Represents cost to a participating agency.
(3) Projected rates

Empire Plan
Participating Agency Premium Rates
Comparison of 2004 and Projected 2005 Rates
CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime - Individual

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	448.00	489.10	9.2%	438.15	482.57	10.1%
Best Estimate	448.00	505.70	12.9%	438.15	494.69	12.9%
Pessimistic	448.00	520.02	16.1%	438.15	513.49	17.2%

Plan Prime - Family

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	945.29	1,031.43	9.1%	924.74	1,017.75	10.1%
Best Estimate	945.29	1,066.48	12.8%	924.74	1,043.54	12.8%
Pessimistic	945.29	1,096.75	16.0%	924.74	1,083.07	17.1%

MediPrime - Individual

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	341.87	387.37	13.3%	334.22	379.80	13.6%
Best Estimate	341.87	396.92	16.1%	334.22	387.90	16.1%
Pessimistic	341.87	403.22	17.9%	334.22	395.65	18.4%

MediPrime - Family-1

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	839.18	929.69	10.8%	820.82	914.98	11.5%
Best Estimate	839.18	957.69	14.1%	820.82	936.75	14.1%
Pessimistic	839.18	979.94	16.8%	820.82	965.23	17.6%

MediPrime - Family-2

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	733.05	827.93	12.9%	716.88	812.16	13.3%
Best Estimate	733.05	848.87	15.8%	716.88	829.90	15.8%
Pessimistic	733.05	863.13	17.7%	716.88	847.36	18.2%

(1) Represents premium charged by carrier.
(2) Represents cost to a participating agency.
(3) Projected Rates

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Exhibit IV

EMPIRE PLAN
PA 5 TIER GROUP RATES
1996-2005 Monthly Rates

Core Plus Medical & Psychiatric Enhancement

Individual Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	234.59	9.3%	207.66	7.3%
1997	261.80	11.6%	240.22	15.7%
1998	267.89	2.3%	246.07	2.4%
1999	279.56	4.4%	261.18	6.1%
2000	294.94	5.5%	286.53	9.7%
2001	325.23	10.3%	314.26	9.7%
2002	353.81	8.8%	344.66	9.7%
2003	400.00	13.1%	384.89	11.7%
2004	448.00	12.0%	438.15	13.8%
2005 (Projected)	505.70	12.9%	494.69	12.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	9.0%	9.9%

Family Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	521.96	7.2%	459.16	4.3%
1997	537.96	3.1%	489.22	6.5%
1998	552.00	2.6%	503.78	3.0%
1999	573.33	3.9%	531.89	5.6%
2000	607.33	5.9%	590.16	11.0%
2001	673.67	10.9%	651.09	10.3%
2002	742.98	10.3%	723.97	11.2%
2003	842.38	13.4%	811.41	12.1%
2004	945.29	12.2%	924.74	14.0%
2005 (Projected)	1,066.48	12.8%	1,043.54	12.8%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.2%	9.1%

 

Individual Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	158.65	-26.1%	131.72	-31.9%
1997	150.53	-5.1%	129.28	-1.9%
1998	167.91	11.5%	151.34	17.1%
1999	186.46	11.0%	175.61	16.0%
2000	217.94	16.9%	214.25	22.0%
2001	245.64	12.7%	239.94	12.0%
2002	259.96	5.8%	253.82	5.8%
2003	307.02	18.1%	297.50	17.2%
2004	341.87	11.4%	334.22	12.3%
2005 (Projected)	396.92	16.1%	387.90	16.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.2%	8.5%

 

Family - 1 Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	446.03	-8.4%	383.23	-13.0%
1997	427.23	-4.2%	378.82	-1.2%
1998	452.73	6.0%	409.76	8.2%
1999	480.95	6.2%	447.05	9.1%
2000	530.97	10.4%	518.52	16.0%
2001	595.25	12.1%	577.95	11.5%
2002	649.14	9.1%	633.13	9.5%
2003	749.40	15.4%	724.05	14.4%
2004	839.18	12.0%	820.82	13.4%
2005 (Projected)	957.69	14.1%	936.75	14.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.3%	8.2%

 

Family - 2 or More Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	369.87	-24.0%	307.07	-30.3%
1997	315.24	-14.8%	267.15	-13.0%
1998	351.98	11.7%	314.25	17.6%
1999	387.05	10.0%	360.66	14.8%
2000	453.22	17.1%	445.51	23.5%
2001	514.40	13.5%	502.37	12.8%
2002	555.29	7.9%	542.29	7.9%
2003	656.42	18.2%	636.67	17.4%
2004	733.05	11.7%	716.88	12.6%
2005 (Projected)	848.87	15.8%	829.90	15.8%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.7%	7.9%

(1) Represents premiums charged by the carriers.
(2) Represents cost to a participating agency.
(3) Inception of Medprime Rate Structure.

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Exhibit V

EMPIRE PLAN
PA 2 TIER GROUP RATES
1996-2005 Monthly Rates
(For Illustrative Purposes Only)

Core Plus Medical & Psychiatric Enhancement

Individual

Year	Gross Rate	% Change	Net Rate	% Change
1996 (1)	219.20	2.1%	192.27	-0.7%
1997	219.87	0.3%	198.37	3.2%
1998	227.35	3.4%	204.38	3.0%
1999	239.24	5.2%	222.00	8.6%
2000	260.67	9.0%	253.98	14.4%
2001	289.41	11.0%	280.25	10.3%
2002	313.58	8.4%	305.67	9.1%
2003	357.44	14.0%	345.36	13.0%
2004	402.70	12.7%	394.31	14.2%
2005 (Projected)	458.76	13.9%	448.84	13.8%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.5%	8.6%
Most Recent 10 Years	8.6%	10.0%
Most Recent 5 Years	12.0%	12.1%

Family

Year	Gross Rate	% Change	Net Rate	% Change
1996 (1)	491.07	0.8%	428.27	-2.7%
1997	495.81	1.0%	447.22	4.4%
1998	514.28	3.7%	463.62	3.7
1999	539.14	4.8%	499.75	7.8%
2000	578.26	7.3%	563.03	12.7%
2001	640.64	10.8%	619.28	10.0%
2002	703.61	9.8%	685.83	10.7%
2003	805.64	14.5%	778.82	13.6%
2004	899.98	11.7%	881.48	13.2%
2005 (Projected)	1,021.70	13.5%	999.75	13.4%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.9%	8.9%
Most Recent 10 Years	8.6%	9.9%
Most Recent 5 Years	12.1%	12.2%

(1) Represents 2 tier Empire Plan Rates; See 5 tier rate schedule effective 1/1/96.

 

Report - PDF Version

Exhibits I - PDF Version

Exhibits II - PDF Version

Exhibits III - PDF Version

Exhibits IV - PDF Version

Exhibits V - PDF Version