© 2009 CONSOR

Executory Contracts in Bankruptcy:Intellectual Property and Intangible Assets

Presented by:

Weston AnsonCONSOR Intellectual Asset Management

800.454.9091 www.consor.com

14th Annual ABI Rocky Mountain

Bankruptcy Conference

Denver, ColoradoJanuary 22, 2009

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Key Valuation and Disposition Questions

Does the IP maintain its value in bankruptcy?

Are software and patent licenses salable or not?

What sort of liquidation discount is experienced when patents, trademarks, copyrights or software licenses are sold in an orderly disposal?

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Key Valuation and Disposition Questions

How do you value these assets in a liquidation scenario?

Is there a formula to establish the descending value of these assets in liquidation?

How do you market and dispose of these assets most cost-effectively and time-effectively?

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Bundles of Intangible AssetsMarketing Bundle IT Bundle Technical Bundle

Primary trademark Enterprise solutions Key patents

Corporate name and logo Custom applications Trade secrets

Marketing umbrella Data warehouses Formulae

Sub-brand names Master licenses Packaging technology and sources

Core brand Source code Shapes and sizes

Worldwide trademark registration

Databases Process technology

Copyrights Data mining Design technology

Secondary trademarks Domain names/URLs Proprietary test results

Packaging design and copyrights

e-Commerce sites Plant and production design

Trade dress Third party software tools Product specifications

Characters Credit/payment systems Operating platforms

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Case Studies

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Collins & Aikman

Key Assets:

Instrument Panel Skin/Materials/Process Safety Systems/ Invisible Airbag Door (107 patents) Interior Trim (96 patents) Skin Materials and Processes (67 patents) Console/Door Trim (18 patents) Decorative Finishes/Laminates (14 patents) Kinematics/Air Registers/Cupholders (45 patents) Exterior Trim (40 patents)

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Collins & Aikman

Sale Process:

Direct marketing campaign to Tier 1 and Tier 2 automotive suppliers

Technology due diligence was highly labor intensive

Asset bundles sold individually to multiple buyers for nearly $5 million

Total marketing and sale process executed over 9-month period

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Tower Records

Key Assets:

Tower Records Global Trademark Portfolio www.tower.com e-Commerce Operations International Franchise Agreements

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Tower RecordsProblem:Initial auction failed to identify multiple bidders for the intellectual property

Solution:Creatively package assets for direct marketing to an expanded universe of potential buyers through vast network of resources:

Financial Buyers (e.g. Altitude Capital, Crystal Capital, Ocean Tomo) Strategic Buyers (Viacom, NBC Universal, FYE) Franchise Portals (Franchise.com, Franchise Direct, Franchise Solutions) Entertainment Law Firms (Christensen Glaser, McDermott Will & Emery) Intellectual Property Industry Resources (INTA, LES, LIMA)

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Tower Records: Valuation & Auction

Valuation Conclusion Value Comments

'No less than Value' Trademarks and Domain Names

$ 1,650,000 This is, in today's dollars, the net cost of the internally generated and acquired intellectual property.

Liquidation Value of e-Commerce Segment

Domain Names and Perpetual License to use Trademarks in e-Commerce

$ 1,320,000 In today's dollars, the net value of the intellectual property connected to the e-commerce sites

Liquidation Value of International Franchise Segment

Perpetual License to use Trademarks in connection with Franchise Contracts

$ 1,585,000 In today's dollars, the net value of the intellectual property assuming only the Franchise Contracts run to their next renewal date.

Auction Outcome:Asset Values

Trademarks, e-Commerce and International franchise agreements

$ 4,200,000 Net value of the intellectual property sale. After fierce open-cry bidding war between Caiman Holdings and RiverWest Brands.

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Direct Marketing vs. Static Auction

Intangibles are unique with few comparables in the marketplace

Intangibles require a strategic plan to identify incremental value opportunities

Target buyers typically need more information than is offered through static auction

Static auctions market the auction, not the specific assets

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Questions & Answers

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