QUESTIONS AND ANSWERS ABOUT THE MERGER

The following section provides answers to frequently asked questions about the Merger. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.

At the effective time of the Merger, in exchange for all of the outstanding equity of Prism outstanding immediately prior to the effective time of the Merger, IPC will pay $16.5 million in cash (less certain Prism indebtedness and expenses, which are currently expected to be immaterial), and issue 3.5 million shares of IPC common stock to Prism security holders. Subject to certain conditions, IPC has also agreed to share future revenue related to Prism’s patents with Prism’s former security holders up to a maximum amount of approximately $49.5 million. For a more complete description of what Prism security holders will receive in the Merger, please see the section entitled “The Merger Agreement—Merger Consideration” in this joint proxy statement/prospectus.

As a result of the Merger, Prism’s former security holders are expected to own in the aggregate approximately 34.7% of IPC (or approximately 39.3% on a fully-diluted basis), and the IPC stockholders and optionholders are expected to own in the aggregate approximately 65.3% of IPC (or approximately 60.7% on a fully-diluted basis).

The approval of the Merger and the issuance of IPC common stock pursuant to the Merger Agreement by the stockholders of IPC requires the affirmative vote of the holders of at least a majority of the shares of IPC common stock having voting power present in person or represented by proxy at the IPC special meeting.

The approval of the Merger and the Merger Agreement by the members of Prism requires the approval of Prism members holding at least sixty-seven percent (67%) of then outstanding units held by Prism members.

In addition to the required IPC stockholder and Prism member approvals, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived.

Certain Prism members who in the aggregate own approximately 51% of the outstanding membership units of Prism are parties to support agreements with IPC, whereby such members agreed, among other things, to vote in favor of the Merger and the adoption and approval of the Merger Agreement and the terms thereof, subject to the terms of the support agreements.

For a more complete description of the closing conditions under the Merger Agreement, we urge you to read the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” in this joint proxy statement/prospectus.

For a more complete description of what Prism members will receive in the Merger, please see the section entitled “The Merger Agreement—Merger Consideration” in this joint proxy statement/prospectus.

Tax matters are very complicated, and the tax consequences of the Merger to a particular Prism member will depend on such member’s particular circumstances. Accordingly, you should consult your tax advisor for a full understanding of the tax consequences of the Merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws. For more information, please see the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger for Prism Security holders” beginning on page 53.

If you are a stockholder of IPC, you may provide your proxy instructions in one of two different ways. First, you can mail your signed proxy card in the enclosed return envelope. You may also provide your proxy instructions via the Internet by following the instructions on your proxy card or voting instruction form. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the special meeting of IPC stockholders. Even if you plan to attend the IPC special meeting in person, IPC requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the IPC special meeting if you are unable to attend.

If you are a member of Prism, you can mail your signed proxy card in the enclosed return envelope. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction and as soon as possible so that your units can be voted at the special meeting of Prism members. Even if you plan to attend the Prism special meeting in person, Prism requests that you sign and return the enclosed proxy to ensure that your units will be represented at the Prism special meeting if you are unable to attend.

If your bank, broker or nominee holds your IPC shares in its name and you do not instruct it how to vote, it will not have discretion to vote on any of the proposals at the special meeting. Brokers, banks or other nominees who hold shares in street name for their customers have the authority to vote on “routine” proposals when they have not received instructions from the beneficial owners of such shares. However, brokers, banks or other nominees do not have the authority to vote shares they hold for their customers on non-routine proposals when they have not received instructions from the beneficial owners of such shares. Each of Proposals No. 1 and 2 are non-routine proposals. As a result, absent instructions from the beneficial owner of such shares, brokers, banks and other nominees will not vote those shares. This is referred to as a “broker non-vote.” Broker non-votes are counted for purposes of determining whether there is a quorum. Broker non-votes will have the same effect as a vote “AGAINST” the approval of IPC Proposal No. 1. Broker non-votes will not have any effect on the outcome of the vote on the IPC Proposal No. 2 if it is submitted for approval when no quorum is present at the special meeting.

If you are a Prism member and you fail to deliver a proxy, the resulting non-attendance will have the same effect as a vote “AGAINST” the approval of Prism Proposal No. 1, but will have no effect on the outcome of the vote of Prism Proposal No. 2.

Prism members of record may change their vote at any time before their proxy is voted at the Prism special meeting in one of three ways. First, a member of record of Prism can send a written notice to Prism’s President, stating that it would like to revoke its proxy. Second, a member of record of Prism can submit new proxy instructions on a new proxy card. Third, a member of record of Prism can attend the Prism special meeting and vote in person. Attendance alone will not revoke a proxy.

D.F. King & Co., Inc.
48 Wall Street

New York, NY  10005

Toll-free: 866-387-7715

Banks and brokers: 212-493-3910
E-mail: ptomaszewski@dfking.com

OR

Internet Patents Corporation
101 Parkshore Drive, Suite #100
Folsom, California 95630
Tel: (916) 932-2860
Attn: General Counsel
eric@ipcwebmail.com

If you are a Prism member, and would like additional copies, without charge, of this joint proxy statement/prospectus or if you have questions about the Merger, you should contact:

Prism Technologies, LLC
2323 S. 171 ^st  Street, Suite 106
Omaha, NE 68130
Telephone: (402) 934-2020
Attn: Gregory J. Duman
greg.duman@prsmip.com

THE MERGER

This section and the section entitled “The Merger Agreement” in this joint proxy statement/prospectus describe the material aspects of the Merger, including the Merger Agreement. While IPC and Prism believe that this description covers the material terms of the Merger and the Merger Agreement, it may not contain all of the information that is important to you. You should read carefully this entire joint proxy statement/prospectus for a more complete understanding of the Merger and the Merger Agreement, including the Merger Agreement attached as Annex A, the opinion of Sanli Pastore & Hill, Inc. attached as Annex B, and the other documents to which you are referred herein. See the section entitled “Where You Can Find More Information” in this joint proxy statement/prospectus.

Background of the Merger

Historical Background for IPC

Since December 2011, IPC has operated a patent licensing business focused on its portfolio of seven e-commerce patents. Each of the patents describes technology that was developed by IPC during the operation of its insurance lead generation business. In 2012, IPC filed patent infringement lawsuits against six companies, two of which are alleged to have infringed the Event Log patent (U.S. Patent No. 6,898,587) (“Event Log”) and four of which are alleged to infringe the Dynamic Tabs for a Graphical User Interface patent (U.S. Patent No. 7,707,505) (“Dynamic Tabs”). The Event Log litigation was stayed pending a reexamination of the patent by the USPTO. The Dynamic Tabs litigation was dismissed by the district court on the basis that the patent was invalid for lack of patent eligible subject matter, and IPC appealed the dismissal to the Federal Circuit.

IPC has generated no revenues from the patent licensing business but continues to incur expenses during these challenges to its patents. Although IPC’s board of directors continues to believe that its patent portfolio has value, it periodically evaluates the patent licensing business and IPC’s strategic alternatives.

In April 2014, Gregory J. Duman, President and Chief Financial Officer of Prism Technologies, LLC contacted IPC to inquire about IPC’s interest in a potential strategic transaction. IPC had no previous communications with Mr. Duman or Prism. On May 19, 2014, Mr. Hussein A. Enan, IPC’s Chief Executive Officer, Mr. L. Eric Loewe, IPC’s General Counsel and Secretary, and Mr. Steven J. Yasuda, IPC’s Chief Financial Officer and Chief Accounting Officer, met with Mr. Duman to learn more about Prism and the potential transaction. A few days after the meeting, IPC and Prism entered into a non-disclosure agreement and exchanged information over the next two weeks, including information about Prism’s patent portfolio, Prism’s financial results, and projected operating results of a combined company.

At a meeting of the IPC board of directors held telephonically on May 30, 2014, Mr. Enan and IPC’s executive officers discussed the potential merger opportunity with the IPC board of directors, which unanimously authorized management to negotiate with Prism.

On June 9, 2014, Prism provided IPC’s executive officers with access to an electronic data room and IPC initiated its diligence process.

On June 8, 2014, Mr. Enan, Mr. Loewe, and Mr. Dennis Chookaszian, an IPC director, met with Mr. Duman, other Prism officers and several Prism managers in Omaha, Nebraska. The parties provided additional information regarding their respective patent licensing businesses and discussed the potential benefits of a merger. The Prism representatives also outlined proposed financial terms of a merger, consisting of four million shares of IPC common stock, $15 million in cash and IPC preferred stock that would pay Prism’s current equity owners eighty percent of future net revenues of the combined company, after payment of third party expenses, up to a maximum of $55 million.

Following the June 8, 2014 meeting, IPC’s executive officers held several calls with Prism representatives concerning the structure of a proposed transaction. The parties determined that the issuance of preferred stock would adversely impact the ownership change percentage under IRS rules and regulations, thereby endangering the availability of the NOLs to offset future taxable income of the combined company. As a result, the parties concluded that a contractual earnout provision may be a preferable substitute.

On June 18, 2014, the IPC board of directors held a telephonic meeting to discuss the potential merger with Prism. Mr. Enan described the financial terms presented by Prism at the meeting in Omaha. The IPC board of directors discussed the financial terms and the assumptions underlying pro forma projections provided by Prism. It also discussed: Prism’s experience in enforcing patents, potential for accelerating the utilization of IPC’s net operating loss carryforwards (“NOLs”), and the extent to which a transaction with Prism would limit future strategic alternatives available to IPC. The IPC board of directors reviewed the information and concluded that a merger appeared to offer potentially significant upside for IPC. Accordingly, the IPC board of directors authorized management to engage accounting, tax and financial advisors.

At a meeting of the IPC board of directors held telephonically on June 26, 2014, Mr. Enan and IPC’s other executive officers updated the IPC board of directors on the potential merger, including information from its advisors about the impact of a share issuance on IPC’s NOLs and IPC management’s analysis of the potential financial impact of a merger. IPC’s board of directors approved a counter proposal, which IPC management communicated to Prism the following day. Under the terms of the counter proposal, Prism’s equity holders would receive: three million shares of IPC common stock, $15 million in cash, and 65% of the future net revenues, to a maximum of $55 million, provided that IPC received the first $15 million in net revenues after Prism’s cash operating expenses and amounts due to third party expenses. IPC’s counter proposal also included employment agreements with key Prism employees, at their current salaries, and stock options for an aggregate of 375,000 shares. Finally, IPC offered to expand its board of directors to include one Prism representative.

During the June 26, 2014 IPC board meeting, IPC’s executive officers also described introductory discussions initiated by a third party concerning a potential strategic transaction or cooperative business relationship. The third party also operates a patent licensing business. IPC management and IPC’s board of directors believed that the merger with Prism was a superior opportunity for IPC and its stockholders.

On July 1, 2014, Mr. Duman e-mailed Mr. Enan and IPC’s executive officers to present a counter offer in which Prism’s equity holders would receive 3.5 million shares, $16.5 million in cash, and a 50% share on the first $16.5 million in net revenues, and a 70% share thereafter, both calculated after payment of third party expenses and Prism’s cash operating expenses. Prism agreed to a cap on earnout payments of $55 million and requested that the earnout apply to both open and future lawsuits. Prism also proposed a small increase in salaries and the grant of options for an aggregate of one million shares under the employment agreements with key Prism employees. Prism also proposed that it be entitled to appoint two representatives to IPC’s board of directors.

On July 6, 2014, IPC engaged Sanli, Pastore & Hill as its financial advisor for the transaction. Shortly thereafter, Prism granted access to the transaction data room to representatives of Sanli, Pastore & Hill.

On July 9, 2014, IPC’s executive officers held a conference call with Mr. Duman and other representatives of Prism to discuss the form of the merger transaction and the consequences of Prism settling pending litigation prior to closing.

Following a telephonic meeting of the IPC board of directors on July 23, 2014, IPC presented a counter proposal by which Prism’s equity holders would receive: 3.5 million shares, $16.5 million in cash, and a 70% share of net revenues, provided that IPC receive the first $16.5 million of net revenues and that the earnout be calculated after payments to third parties and Prism’s cash operating expenses. IPC also proposed a cap of $55 million in earnout payments to Prism, and that the earnout would only apply to open lawsuits. IPC’s proposal also included an aggregate salary increase of $150,000 and option grants for an aggregate of 500,000 shares under the employment agreements with key Prism employees. Finally, IPC reiterated its offer of a single Prism representative on the IPC board of directors.

On August 15, 2014, IPC and Prism entered into an exclusivity agreement. Pursuant to this agreement, Prism agreed not to solicit, initiate or take any action to facilitate or encourage the submission of any proposal or offer from any person or entity other than IPC relating to any possible transaction. In the event either IPC or Prism decided to abandon the negotiations, such party would be required to reimburse the transaction expenses of the other party.

On August 28, 2014, IPC sent Prism an initial draft of a merger agreement reflecting the terms last proposed by IPC. From that date through November 8, 2014, the parties exchanged drafts of the merger agreement, and IPC conducted due diligence and met with its legal, accounting and financial advisors. In addition, Sanli, Pastore & Hill held several conference calls with Prism’s officers and advisors to discuss the financial and operating information provided by Prism during due diligence.

On November 9 and November 10, 2014, IPC’s board of directors met to consider the proposed merger with Prism. The following presentations were made at this meeting:

IPC’s board of directors discussed the potential benefits and risks associated with the transaction. IPC’s board of directors believed that the proposed merger would create a patent monetization company that increases shareholder value by leveraging the relative strengths of each party, creating more value for the IPC stockholders in the long-term than IPC could create as a stand-alone business. Following these discussions, IPC’s board of directors unanimously voted to approve the proposed merger agreement and the Merger.

On November 20, 2014, the third party that previously initiated discussions concerning a strategic transaction or cooperative relationship (see June 26, 2014) sent a written unsolicited offer to acquire IPC in a negotiated transaction. On November 21, 2014, IPC’s Board of Directors held a telephonic meeting to review the offer and determined that the Merger with Prism was a superior opportunity for IPC and its stockholders.

In December 2014, after the approval of the transaction by IPC’s board of directors, IPC repurchased an aggregate of 1,178,264 shares of its common stock from several stockholders for an aggregate purchase price of $3,534,792. Sanli Pastore & Hill has confirmed to IPC’s board of directors that such stock repurchases do not alter its opinion that the merger is fair from a financial point of view.

Historical Background for Prism

Beginning in early 2013, Prism’s board of managers began evaluating the availability of capital to finance future operations and growth. In addition, Prism’s board of managers began evaluating whether Prism’s structure as a limited liability company impacted its operations and strategic alternatives. In particular, Prism’s board of managers discussed whether an initial public offering or merger with a public company would benefit Prism and its members. Accordingly, in September 2013, Prism engaged Maxim Group LLC (“Maxim”) and Crown Predator Holdings, LLC to assist management with potential financing or merger transactions.

From October 2013 to January 2014, Maxim contacted at least five companies and the parties engaged in high level discussions about potential financing or merger transactions. IPC was not contacted during this process. The results of these discussions were communicated to members of the Prism board of managers.

In February 2014, Prism’s board of managers determined that the potential transactions with the parties identified in this process were not favorable to Prism and decided to terminate the process.

From February 2014 through June 2014, Prism’s board of managers continued to discuss the strategic alternatives available to Prism and authorized management to continue to solicit indications of interest from third parties.

Beginning in April 2014, Mr. Gregory J. Duman, President of Prism, contacted IPC to inquire about IPC’s interest in a potential relationship. The discussions between Prism and IPC are detailed in the section “—Historical Background for IPC” above.

Over the course of the next several months, Mr. Duman provided Prism’s board of managers with updates on the negotiations with IPC.

At a meeting on November 7, 2014, Prism’s board of managers evaluated the potential benefits and risk relating to the Merger. Prism’s board of managers believed that the Merger would provide Prism with access to significantly more capital for future growth than as a standalone company. Following discussion on the matter, Prism’s board of managers unanimously voted to approve the Merger.

Reasons for the Merger

IPC and Prism believe that the Merger will create a patent monetization company that increases shareholder value by leveraging the relative strengths of each party, creating more value for IPC stockholders and Prism members in the long-term than IPC or Prism could create as a stand-alone business.

IPC Reasons for the Merger

The IPC board of directors believe that the Merger will create a patent monetization company that increases shareholder value by leveraging the relative strengths of each party, creating more value for the IPC stockholders in the long-term than IPC could create as a stand-alone business. The IPC board of directors made its determination to approve the Merger and the Merger Agreement after considering the factors described in this joint proxy statement/prospectus and after consulting with IPC’s senior management and IPC’s financial advisor. The positive factors considered by the IPC board of directors included, but were not limited to, the following:

The IPC board of directors also considered a number of potentially negative factors in its deliberations concerning the Merger, including:

This discussion of the information and factors considered by the IPC board of directors is not intended to be exhaustive but is intended to summarize all material factors considered by the IPC board of directors in connection with its approval and recommendation of the Merger and the other related transactions described in this joint proxy statement/prospectus. In view of the wide variety of factors considered, IPC’s board of directors has not found it practicable to quantify or otherwise assign relative weights to the specific factors considered. However, IPC’s board of directors concluded that the potential benefits of the Merger outweighed the potential negative factors and that, overall, the Merger had greater potential benefits for the IPC stockholders than other strategic alternatives, including continuing to operate IPC as a stand-alone publicly traded company and approving a cash distribution to IPC’s stockholders. Therefore, after taking into account all of the factors set forth above, IPC’s board of directors determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, IPC and its stockholders and that IPC should enter into the Merger Agreement and take all actions necessary to complete the Merger.

Prism Reasons for the Merger

The Prism board of managers, acting with the advice and assistance of the executive officers of Prism, evaluated the proposed Merger, including the terms and conditions of the Merger Agreement. At a meeting of the Prism board of managers on November 7, 2014, the Prism board of managers unanimously (a) approved the Merger and (b) directed that the executive officers take such action as required by the Merger Agreement to complete the Merger, including obtaining member consent to the Merger. In the course of reaching its determination that the Merger is in the best interests of Prism and its members, the Prism board of managers, with the advice and assistance of Prism’s executive officers considered the following material factors that it believed supported its determination:

In the course of its deliberations, with the advice and assistance of the executive officers of Prism, the Prism board of managers also considered a variety of risks and other countervailing factors related to entering into the Merger Agreement, including, without limitation, the following:

In addition, the Prism board of managers was aware of and considered the interests that certain members of the Prism board of managers and executive officers have in the Merger that are different from, or in addition to, the interests of Prism members generally, as described in “ — Interests of the Prism Managers and Executive Officers in the Merger” beginning on page 50.

The foregoing discussion of the information and factors considered by the Prism board of managers is not intended to be exhaustive, but includes material factors considered by the Prism board of managers. In view of the wide variety of factors they considered, the Prism board of managers did not find it practicable, and did not attempt, to quantify, rank, or otherwise assign relative weights to the foregoing factors in reaching its determination and recommendation. In addition, the Prism board of managers did not receive a fairness opinion regarding the fairness of the Merger consideration to Prism members from a financial point of view, or with respect to projections, estimates, and other forward-looking statements about the future earnings or other measures of the future performance of IPC should the Merger close. Individual members of the Prism board of managers may have given different weights to different factors and may have viewed some factors more positively or negatively than others. Based upon the totality of the information considered, the Prism board of managers has determined that the Merger is fair, advisable, and in the best interests of Prism and the Prism members and recommends that the members of Prism approve the Merger and the Merger Agreement.

Opinion of the IPC Financial Advisor

The board of directors of IPC retained SP&H as a financial advisor to assess the fairness, from a financial point of view, of the consideration received by the stockholders of IPC common stock from the Merger. On November 9, 2014, SP&H presented an oral and written opinion of its conclusions to the IPC board of directors. Based upon the analyses, assumptions and limiting conditions, and in light of the information obtained and the diligence procedures performed, SP&H set forth its opinion that the Merger is fair to the IPC stockholders from a financial point of view.

The entire written fairness opinion delivered by SP&H to the IPC board of directors on November 9, 2014 includes the assumptions made, analyses and procedures performed, limiting conditions associated with the analysis and conclusion reached, and is attached as Annex B. The following is a brief summary of SP&H’s analyses and conclusions and is presented as an overview for the stockholders of IPC. The brief summary below and the fairness opinion attached as Annex B should be reviewed by the IPC stockholders in their assessment of the Merger. SP&H’s opinion was delivered to the IPC board of directors to assist in their review of the Merger. SP&H does not make any recommendations to the board of directors or the stockholders of IPC regarding the adoption or approval of the Merger.

SP&H opined as to whether the Merger is fair from a financial point of view to the stockholders of IPC common stock. SP&H engaged in extensive diligence in reaching the opinion. A summary of SP&H’s diligence procedures is as follows:

SP&H is an independent business valuation, expert witness and financial opinions firm that is regularly retained to perform valuation opinions, expert testimony regarding valuation and financial analysis, and issue fairness and solvency opinions. IPC selected SP&H to act as its financial advisor in connection with the Merger based on SP&H’s reputation and relevant experience.

SP&H was retained by IPC as its financial advisor under a letter agreement dated July 6, 2014. Pursuant to the terms of this engagement letter, IPC has agreed to pay SP&H on a time billing basis (time spent multiplied by hourly billing rate). IPC has also agreed to reimburse SP&H for its reasonable expenses and to indemnify SP&H and its related parties against certain liabilities, including under the federal securities laws, arising out of its engagement. SP&H will not earn fees contingent on the close of the Merger, or any other compensation contingent upon the Merger. SP&H has no conflicting financial or other interests, actual or potential, with any of the parties to the Merger. SP&H has no material relationships with any of the parties to the Merger. The opinion of SP&H is based solely on the facts and circumstances of the Merger, subject to the limiting conditions, uninfluenced by other considerations of any kind.

In rendering its opinion, SP&H has relied upon and assumed, without independent verification, the accuracy and completeness of all financial and other information that was available from both public and private sources, including all the financial and other information provided by IPC and Prism. SP&H has relied upon IPC, Prism and their representatives that the information provided to SP&H is not incomplete or misleading. SP&H disclaims any liability resulting from inaccurate or misleading information provided by IPC or Prism.

SP&H does not express an opinion or any other form of assurance on the reasonableness of the underlying assumptions or information. Additionally, SP&H was not requested and did not opine on any other aspects of the Merger, on whether IPC and its stockholders should approve the Merger, or on the benefits of the Merger compared to any other alternative actions, transactions or investments available to IPC.

SP&H’s analysis is as of November 9, 2014 and the financial, economic and other conditions that existed as of that date. The analysis does not include consideration of any information that may have become available subsequent to this date. SP&H assumes that the Merger will be completed per the expected stated schedule expressed in the Merger Agreement and that the Merger will be in accordance with the terms set forth in the Merger Agreement. SP&H has also assumed that the Merger will be approved by governmental and regulatory agencies without material effect on IPC or the terms of the Merger.

SP&H has not assisted IPC or Prism in negotiating the terms of the Merger and has not acted as or assumed the responsibilities of an investment bank or broker/dealer. SP&H is not acting as a fiduciary for either party in the Merger, nor is SP&H providing tax, legal, or regulatory advice. The opinion expressed by SP&H was provided to IPC for information and assistance to the board of directors of IPC concerning the Merger.

The following is a brief summary of SP&H’s analysis. In forming the opinion of whether the Merger is fair from a financial point of view, SP&H performed the following analyses:

Merger Summary

Per the Merger Agreement, IPC, Merger Sub, Prism and Gregory J. Duman as Securityholders’ Agent, entered into an agreement whereupon Merger Sub shall be merged with and into Prism, and the separate existence of Merger Sub shall cease. Prism will continue as the surviving company in the Merger and a wholly owned subsidiary of IPC.

Each member of Prism immediately prior to the effective time of the Merger will receive its pro-rata share of (i) $16,500,000 in cash (less certain Prism indebtedness and expenses, which are currently expected to be immaterial), (ii) 3,500,000 shares of IPC common stock, and (iii) the right to future earnout payments, payable following the occurrence of a future Earnout Event, if any. An “Earnout Event” is defined as receipt by Prism of any amount more than $16.5 million, minus the cash balance of Prism as of closing (the “Sharing Threshold”), in “Prism patent proceeds” from lawsuits filed by Prism on or prior to the closing date of the Merger. Prism patent proceeds include total cash recoveries from litigation or settlement, royalties, license fees and proceeds from patent sales actually received by Prism in connection with its business; minus costs, expenses and fees associated with the production of such revenue (including sales commissions, attorney contingency fees, expert fees and deferred purchase amounts paid to third parties); minus Prism cash operating expenses other than amortization and other non-cash expenses for the applicable measurement period.

Upon the occurrence of an Earnout Event, an earnout payment in cash equal to 70% of the amount of Prism patent proceeds exceeding the Sharing Threshold shall be paid to the former Prism members; provided, however, that the aggregate amount of such earnout payments, including certain permitted pre-closing distributions, shall not exceed $55 million. As of the date of this joint proxy statement/prospectus, such permitted pre-closing distributions equal approximately $5.5 million, resulting in a maximum potential earnout payment of approximately $49.5 million.

IPC’s obligations to make the earnout payments terminate upon the earlier to occur of: (i) the receipt by Prism of all Prism patent proceeds to which it is entitled, if any, arising from settlement or final resolution of all lawsuits filed by Prism on or prior to the closing date of the Merger, and payment by IPC of all earnout payments arising on or prior to the date of such termination, or (ii)  receipt by IPC of a written acknowledgement by the Securityholders’ Agent that no additional earnout payments are payable.

The Merger Agreement does not include a price-based termination right, and there will be no adjustment to the total number of shares of IPC common stock that Prism members will be entitled to receive for changes in the market price of IPC common stock or changes in the number of outstanding shares of IPC common stock. Accordingly, the market value of the shares of IPC common stock issued pursuant to the Merger, and the percentage of outstanding IPC common stock to be held by Prism members immediately following the consummation of the Merger, will depend on the market value of the shares of IPC common stock and the number of shares of IPC common stock outstanding at the time the Merger closes, and could vary significantly from the market value on the date of this joint proxy statement/prospectus.

Additionally, four Prism executives will enter into employment agreements with IPC relating to their continued service with Prism. The employment agreements are for three-year terms and will be comprised of an annual base salary and employee stock options. A total of 500,000 stock options, of which 250,000 are service-based and 250,000 are performance-based, will be available to be granted by IPC to the Prism executives. The strike price for the options will be the fair market value on the date of the grant and each option will have a term of five years.

Analysis of Consideration Paid

Per the Merger Agreement, the cash portion of consideration to be paid at closing to Prism security holders is $16,500,000 (less certain Prism indebtedness and expenses). Based on information provided to SP&H, the cash payment of $16,500,000 to be paid to Prism security holders at closing less patent related debt assumed by IPC of approximately $3,530,000 as of September 30, 2014 and Prism transaction costs totaling approximately $50,000, result in an estimated cash consideration of $12,920,000 to be paid upon closing.

The Merger Agreement also included 3,500,000 shares of newly issued IPC common stock as part of the consideration. Since IPC stock traded infrequently, SP&H calculated the stock portion of the consideration to be paid by examining the average trading price of IPC stock over the prior 30 days ($3.02 per share) resulting in a stock consideration of $10,570,000. Also, since IPC stock was valued at less than book value and was thinly traded, SP&H examined the book value per share of IPC as an alternate indication of the stock component consideration amount. The book value per share was $3.82 as of SP&H’s analysis, resulting in an alternate stock consideration of $13,370,000.

The transaction also included an expected grant of 500,000 stock options to Prism management. SP&H utilized the Black-Scholes model to calculate this portion of the consideration paid. Based on the terms of the employment agreements and on SP&H’s analysis of IPC and guideline public companies (described in more detail below), SP&H determined that the stock options portion of the consideration paid totaled $871,635.

In summary, the consideration that will be paid at closing ranges from $24,360,000 (based upon the 30 day average share price) to $27,160,000 (based upon the book value per share). Total consideration paid in the Merger, including the Prism debt assumed, ranges from $27,890,000 to $30,690,000.

Analysis of Consideration Received

Prism’s revenues were primarily generated from proceeds from patent enforcement litigation, and as such, revenues, expenses and profits could be stochastic, depending on the timing and resolution of legal actions. As of the date of SP&H’s analysis, Prism had several pending lawsuits at various stages of the legal process. Prism also had plans to file additional future litigation for infringement of its patents. Given the nature of Prism’s operations, future cash flows from current ongoing litigation matters could be analyzed and discretely projected, while the amount and timing of cash flows from future litigation matters are more uncertain. This unique nature of Prism’s operations contributed to the structure of the earnout provision of the Merger Agreement, whereupon IPC and Prism agreed to split profits from current pending litigation matters (30% to IPC, 70% to the former Prism members). The earnout begins after IPC receives the first $16,500,000 of Prism patent proceeds and continues until a maximum earnout of $55,000,000 for the former Prism members is reached.

Given the nature of the business operations of Prism and the structure of the Merger Agreement, particularly the earnout portion, SP&H utilized a discounted future cash flow analysis to determine the consideration received by IPC from the Merger. Since IPC post-Merger will receive the first $16,500,000 of Prism patent proceeds and then 30% of future proceeds from pending lawsuits until the earnout maximum is met, SP&H forecasted revenues, expenses and profits for the current and expected future lawsuits to determine annual cash flows, accounting for the repayment of the Prism debt in 2016 assumed in the Merger. The present value of the portion of future cash flows that IPC stockholders would realize was then calculated utilizing discount rates developed by SP&H.

SP&H received pro forma projections from Prism for future revenues, expenses and profits based on certain assumptions for litigation outcomes. The nature of Prism’s operations, however, necessitated that SP&H perform scenario, sensitivity and stress test analyses on the projected cash flows. SP&H incorporated various assumptions for litigation success rates and probabilities of settlement to assess the impact on individual patent litigation forecasts and the resulting economic benefits to the IPC stockholders. Annual proceeds were utilized to calculate any applicable earnout payments to former Prism members and the consideration realized by IPC. SP&H developed 10 scenarios (one utilizing the Prism pro forma projections and nine sensitivity scenarios) to assess the economic benefits of consideration received. These scenarios were tested using different discount rates developed by SP&H to incorporate the risk associated with Prism’s litigation matters and realizing expected Prism patent proceeds.

Based on SP&H’s analysis, utilizing Prism’s pro forma projections, the consideration to be received by IPC stockholders from the Merger would approximate $74,860,000, with a present value range from $54,970,000 to $58,770,000. By comparison, a potential downside sensitivity analysis resulted in consideration of approximately $47,040,000, with a present value range of $34,880,000 to $37,200,000 to the IPC stockholders from the Merger.

SP&H also performed an internal rate of return (“IRR”) analysis for the benefits that would be realized by the stockholders of IPC per the Merger Agreement, given the ranges of consideration paid at closing and received post-closing. Under each scenario, SP&H calculated the IRR that the IPC stockholders would realize from the consideration received post-closing compared to the consideration paid at closing. Based on SP&H’s analysis, the resulting IRR to be realized by IPC stockholders from the Merger utilizing the Prism pro forma approximates 36%. By comparison, a potential downside sensitivity analysis resulted in IRR of 11.4% to 20.2%.

As of the date of SP&H’s analysis, IPC had not generated operating revenues or profits since 2011. There were no expectations of near term revenues or cash flows from IPC operations or legal actions, and IPC was expected to continue to utilize cash to fund operations. The negative earnings of IPC prior to the Merger as well as the expected consideration received and IRR to be realized from the Merger described above support SP&H’s opinion that the Merger is fair, from a financial point of view.

Valuation of Prism

SP&H analyzed certain financial metrics and data of Prism prior to the Merger. As mentioned earlier, the value of Prism is tied to the outcomes of current and future litigation. Additionally, per the Merger Agreement, the value of consideration received by IPC from the Merger is dependent on a share of proceeds from Prism’s current pending lawsuits, as well as future litigation. As described above, the consideration IPC will receive is comprised of the first $16,500,000 of Prism patent proceeds plus 30% of additional Prism patent proceeds until the earnout maximum of $55,000,000 is reached.

Given the nature of Prism’s operations and the consideration to be received by IPC from the Merger, the valuation of Prism pre- and post-Merger is inherently imbedded in the discounted cash flow and IRR analysis described above.

Valuation of IPC

The nature of IPC’s operations, as well as those of Prism and other companies within the industry, requires an analysis of the appropriate valuation multiples to utilize in the valuation analysis of IPC. Since revenues and earnings are driven by outcomes from litigation, annual fluctuations and variations in revenues and earnings can be frequent and significant. As such, revenue- and earnings-based multiples vary widely, often are negative or are not meaningful. As an alternative, SP&H analyzed several balance sheet metrics and multiples in the valuation analysis of IPC pre- and post-Merger.

SP&H analyzed certain financial metrics and data of IPC prior to the Merger. The table below presents a brief summary of this analysis.

Prior to the Merger, IPC was trading at a discount to cash, total assets, book value and tangible book value.

Although no public companies are directly comparable given the nature of the industry and the differences of the individual patents owned by the various companies within this industry, SP&H compared certain financial metrics and data of IPC prior to the Merger to that of selected guideline public companies within its industry. A list of the selected guideline public companies is presented below.

One-half of the options granted to each of the foregoing individuals shall vest as follows: (i) 33.33% will vest upon the first anniversary of the first date of employment, and (ii) 1/24 of the remaining 66.67% will vest at the end of each of the 24 months following such anniversary, so long as the individual remains employed pursuant to the terms of his or her employment agreement.

The remaining one-half of the options granted to each of the foregoing individuals shall vest as follows: (i) 33.33% will vest upon the first anniversary of the first date of employment based on achievements measured against financial targets for such period; (ii) 33.33% will vest upon the second anniversary of the first date of employment based on achievements measured against financial targets for the second year of employment; and (iii) 33.34% will vest upon the third anniversary of the first date of employment based on achievements measured against financial targets for the third year of employment (in each case, so long as the individual remains employed pursuant to the terms of his or her employment agreement). IPC’s Compensation Committee will meet prior to the completion of the Merger to analyze the proposed business plans of Prism and will develop the yearly performance targets described above.

Notwithstanding the foregoing, all unvested options granted to each of the foregoing individuals will immediately vest upon: (A) termination of such person’s employment without good cause; or (B) the occurrence of a change of control as defined in such person’s employment agreement.

Limitations of Liability and Indemnification

IPC directors are entitled to indemnification under the Certificate of Incorporation and Bylaws of IPC. IPC’s Certificate of Incorporation and Bylaws provide for the indemnification of officers and directors to the fullest extent permitted by Delaware law. In connection with the Merger and the expected appointment of Gregory J. Duman to IPC’s board of directors, IPC expects to enter into indemnification agreements with each of its directors and officers. IPC believes that the Certificate of Incorporation and bylaw provisions and the indemnification agreements are necessary to attract and retain qualified persons as directors and officers.

Form of the Merger

The Merger Agreement provides that at the effective time, Merger Sub will be merged with and into Prism. Upon the consummation of the Merger, Prism will continue as the surviving corporation and will be a wholly owned subsidiary of IPC.

Merger Consideration

Each member of Prism immediately prior to the effective time of the Merger will receive its pro-rata share of (i) $16,500,000 in cash (less certain Prism indebtedness and expenses, which are currently expected to be immaterial), (ii) 3,500,000 shares of IPC common stock, and (iii) the right to future earnout payments, payable following the occurrence of a future Earnout Event, if any. An “Earnout Event” is defined as receipt by Prism of any amount more than $16.5 million, minus the cash balance of Prism as of closing (the “Sharing Threshold”), in “Prism patent proceeds” from lawsuits filed by Prism on or prior to the closing date of the Merger. Prism patent proceeds include total cash recoveries from litigation or settlement, royalties, license fees and proceeds from patent sales actually received by Prism in connection with its business; minus costs, expenses and fees associated with the production of such revenue (including sales commissions, attorney contingency fees, expert fees and deferred purchase amounts paid to third parties); minus Prism cash operating expenses other than amortization and other non-cash expenses for the applicable measurement period.

Upon the occurrence of an Earnout Event, an earnout payment in cash equal to 70% of the amount of Prism patent proceeds exceeding the Sharing Threshold shall be paid to the former Prism members; provided, however, that the aggregate amount of such earnout payments, including certain permitted pre-closing distributions, shall not exceed $55 million. As of the date of this joint proxy statement/prospectus, such permitted pre-closing distributions equal approximately $5.5 million, resulting in a maximum potential earnout payment of approximately $49.5 million.

IPC’s obligations to make the earnout payments terminate upon the earlier to occur of: (i) the receipt by Prism of all Prism patent proceeds to which it is entitled, if any, arising from settlement or final resolution of all lawsuits filed by Prism on or prior to the closing date of the Merger, and payment by the IPC of all earnout payments arising on or prior to the date of such termination, or (ii)  receipt by IPC of a written acknowledgement by the Securityholders’ Agent that no additional earnout payments are payable.

The Merger Agreement does not include a price-based termination right, and there will be no adjustment to the total number of shares of IPC common stock that Prism members will be entitled to receive for changes in the market price of IPC common stock or changes in the number of outstanding shares of IPC common stock. Accordingly, the market value of the shares of IPC common stock issued pursuant to the Merger, and the percentage of outstanding IPC common stock to be held by Prism members immediately following the consummation of the Merger, will depend on the market value of the shares of IPC common stock and the number of shares of IPC common stock outstanding at the time the Merger closes, and could vary significantly from the market value on the date of this joint proxy statement/prospectus.

Effective Time of the Merger

The Merger Agreement requires the parties to consummate the Merger after all of the conditions to the consummation of the Merger contained in the Merger Agreement are satisfied or waived, including the approval of the Merger and the Merger Agreement by the Prism members and the approval by the IPC stockholders of the issuance of IPC common stock pursuant to the Merger Agreement. The Merger will become effective as of the time that the certificate of merger is filed with and accepted by the Secretary of State of the State of Delaware and the articles of merger are filed with and accepted by the Secretary of State of the State of Nebraska, or at such later date or time as may be agreed by Prism and IPC in writing and specified in the certificate of merger in accordance with the DGCL and the NULLCA. Neither IPC nor Prism can predict the exact timing of the consummation of the Merger.

Regulatory Approvals

IPC must comply with applicable U.S. federal and state securities laws and the rules and regulations of The NASDAQ Capital Market in connection with the issuance of shares of IPC common stock and the filing of this joint proxy statement/prospectus with the SEC.

Material U.S. Federal Income Tax Consequences of the Merger for Prism Securityholders