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Biotech / Medical : Summit Technology (BEAM) -- Ignore unavailable to you. Want to Upgrade?

To: Manny Gugliuzza who wrote (960)	7/7/1998 7:42:00 AM
From: pappy	Respond to of 1386

Manny: I don't know about deferring, but they could go back and restate previous qtrs to reflect the allocation of these monies to the correct qtrs. However, since Im not privy to the actual settlement agreement, Im not sure on how it was drawn up and what the 35 million actually represents. Maybe some of the monies are for lost revenue but since the agreement also included the dissolution of PPP and settlement of all litigation, I do not believe all monies were for revenue BEAM was entitled to. However, I question whether the residuals are earned income (just dont know how to classify it). Im going to work today and if time permits, will do some research on the tax consequences and provisions set up of for this type of tax event (settlement agreements) which by nature can have complex tax consequences.

To: Manny Gugliuzza who wrote (960)	7/7/1998 11:46:00 PM
From: pappy	Read Replies (1) \| Respond to of 1386

Manny: Discussed the tax consequences with a couple of accountants and they indicated that in any settlement agreement, the tax attorneys incorporate into the agreement how/who/when /where is going to be responsible for the tax consequences and the agreed provisions are made part of the settlement. To not do this would constitute negligence on the part of the attorneys. However, one would have to study the settlement agreement to understand the specifics. As far as how this event would be accounted for, they agreed it would probably be treated as "ordinary income" and yes, they could go back and restate prior quarters to better reflect the financial condition of the company. However, the tax consequences would probably remain the same unless there were NOLs (Net Operating Losses) that were about to expire in 1997 (to offset on the royalties withheld from BEAM in the last qtr 1997) or in the event of capital losses. They both agreed deferral of the income would be highly unlikely and today very few companies are allowed to do this and this practice is seen more in construction situations where income is received up front but for tax purposes the income is not required to be accounted for until the project is completed.. Then, there comes into play the dissolution of Pillar Point Partners which may or may not have a tax consequence on the $35 million paid over to BEAM since there were patents that had a basis allocated to them when originally given over to PPP and if any of those patents have become worthless, then this capital loss would flow thru to Summit and in theory be an offset against the 35 million if Summit chose to treat the 35 million as a capital gain. Also, VISX comes into play with the dissolution of PPP and they may allow for BEAM to utilize some tax benefit that may arise from the dissolution as compensation for any tax consequence of the $35 million. Again, unless the agreement is studied these are just possibilities. In closing, they both have studied settlement agreements in detail and that we should rest assured the tax attorneys were NOT ABOUT TO ENTER INTO any settlement agreement that allows for a lump sum payment without making sure all of their client's (Summit) best interests were not being addressed fully...Pappy