Ethically I think the right thing to do is talk it over with your business cofounder, and to come to a mutually-agreed decision.
Is your business a company with two owners or a partnership? If it's the former, I think you'll have to buy out your cofounder's shares. To determine their valuation, I think you'll have to talk to an accountant. If it's a partnership, I think you'll either have to get a new partner, or start a new business.
Have your ex-partner sign a release of his interest in the LLC. He basically gives up all his rights to you for the business. You can convince him to do this by telling him that you will take on the trademark suit yourself.
Then I would wait for the C&D too, like patio11 said. Most people that have been in business have sent and received both, and many are in a position like me where I can just have my lawyer buddy change the name from the last notice he sent for me, and he does it for nothing (or a beer). So a C&D is really not that expensive either - and if he won't do that he probably doesn't think he has much of a case.
You can do a quick search at USPTO.gov for federal trademarks, but don't forget to do it at the state level too. This guy may only have a trademark at that level and thus have no case against you. If he has a non-ambiguous federal trademark for your industry, then you should bail out of the name immediately. I once spent $3000 on lawyers fees because I bought an $8 domain name with somebody's trademark on it. I had to give it to them of course, in forgiveness for them not suing me for damage. Oops. If you have to give the domain over, you may find middle ground by convincing him to let you redirect it to your site for a while so your print advertising doesn't go to waste.
One more solution comes to mind if the other company is in the exact same business as you. Team up. Figure out how you can mutually benefit from each other. It might help your business get going better, and may handle business he can't reach because of distance.
Is your business a company with two owners or a partnership? If it's the former, I think you'll have to buy out your cofounder's shares. To determine their valuation, I think you'll have to talk to an accountant. If it's a partnership, I think you'll either have to get a new partner, or start a new business.
And I might be wrong, as always.