The Novation also addressed some $2.2 million in past due payments claims by
Alliacense, quarterly advances, Alliacense’s role in pending and prospective litigation, and
conduct of the MMP licensing program. The Novation provides (1) for a fixed gross percentage
fee for a license from the NorCal litigation with HTC; (2) a sliding scale for resolutions in the
NorCal litigation, litigation support for contingency counsel; (3) a new schedule for the licensing
services fee ranging from 20% to 30% gross depending upon the amount of the license, subject
to reduction if settlements resulting in $5 million in license proceeds do not occur for a period of
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61 days or more. Critically, the Novation contains a one-year milestone whereunder failure by
PDS to achieve a certain level of income from litigation and licensing constitutes a basis for
termination of the entire Alliacense Services Agreement upon written notice by PDS.
With regard to prospective litigation, the parties to the Novation agreed that Patriot would
identify a second licensing company with which PDS would enter into a commercialization
agreement pursuant to which such company will issue licenses to customers. Once identified,
Alliacense is to identify all prospective MMP licensing entities, along with other relevant
information, divide them into two substantially equal lists from which Patriot and its second
licensing company will choose which they intend to pursue, within 30 days. Alliacense will
provide its work product and intellectual property with respect to the list selected by the second
licensing entity under a nondisclosure agreement in exchange for a 1% fee. TPL and Patriot
have agreed to the employment by PDS of Dominion Harbor Group (“DHG”) as the second
licensing company, subject to certain restrictions as to which matters DHG may review and
pursue. TPL understands that Alliacense is in the process of preparing the list of prospective
MMP licensing entities but has not yet completed or delivered it. TPL further understands that
Patriot contends that the Novation is in breach owing to the failure to deliver the list.
A condition precedent to confirmation of the Plan requires a written agreement(s)
resolving all controversies existing among Alliacense, PDS and Agility IP Law (counsel
prosecuting litigation of the MMP Portfolio). The parties executed the Novation to resolve all
such controversies. Patriot contends that any controversies arising out of the Novation must be
resolved prior to and as a condition of Confirmation, and that controversies still exist arising out
of obligations under the Novation, including Alliacense’s obligation to deliver the lists of
prospective licensees to be considered (and associated work product) to PDS. The Committee
wishes to emphasize that it will assert failure of this condition to Confirmation if it is not
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satisfied that the splitting and delivery of lists has been resolved with PDS or arrangements have
been made that satisfy the Committee.
TPL will, subject only to Plan approval, assume any and all agreements related to the
Joint Venture with Patriot related in any way to the ownership of the MMP Portfolio or the rights
to license the MMP Portfolio that are executory contracts. All non-executory contracts and
agreements related in any way to the ownership of the MMP Portfolio or the rights to the MMP
Portfolio, including rights to license, will pass through the Plan and Bankruptcy Case.
