According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2005, the Court heard oral argument on the Company's motion to dismiss on November 15,
2004. On May 24, 2005, the Court dismissed the litigation with prejudice.
As disclosed by the same SEC filing, on April 29, 2004, the Honorable John E. Sprizzo ordered among other things that (1) the two class action cases be consolidated, (2) Peak6 Capital Management LLC shall serve as the lead plaintiff in the consolidated action, and (3) the lead plaintiff shall file a consolidated amended complaint on or before June 15, 2004. The lead plaintiff filed a consolidated amended complaint on June 15, 2004. In addition to the allegations asserted in the Gerber Asset Management and Fried complaints, the consolidated amended complaint alleges that the Company failed to disclose that excess fuel credits could not be carried over from one tax year into later years. On July 30, 2004, the Company filed a motion to dismiss the complaint; plaintiff submitted its opposition brief on September 14, 2004.
The original complaint alleges that pursuant to the merger of CP&L Energy and the Florida Progress Corporation, Progress Energy, the merged Company, issued a proxy statement that contained material omissions concerning the value of the CVOs, which had been used by the two companies to entice shareholders to approve the merger.
The complaint alleges that defendants, with full knowledge that the Fuel Credits underlying the CVOs would be subject to the alternative minimum tax (AMT), failed to inform prospective CVO holders that the tax benefits represented as being made available to synthetic fuel producers, which were critical to the imputed value of the CVOs, would be adversely affected by the application of the AMT. In addition, Defendants failed to inform prospective CVO holders that as a result of the application of the AMT, the fuel credits would not eliminate the federal income tax liability and the Company could not use the fuel credits to reduce its effective tax rate below 20%.
Specifically, the complaint alleges that the value of the CVOs was about $54 million and lost about 80 percent of their value since Progress Energy made its disclosure in 2002.
Note: This action was brought on behalf of persons who obtained Contingent Value Obligations (CVOs) in exchange for their Florida Progress common stock pursuant to the closing of the merger of CP&L Energy and Florida Progress Corporation and who purchased the CVOs in the period indicate below.