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Full title: Reply Debtors' Reply to the Objection of CIP United Co. Ltd. to Assumption Cure Amounts and Assurances of Adequate Performance (RE: related document(s)951 Notice, 1004 Objection). Filed by Debtor Wave Computing, Inc. (Miller, Jeri) (Entered: 01/08/2021)

Document posted on Jan 7, 2021 in the bankruptcy, 10 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

From the beginning of this case, CIP has aggressively maintained that it is owed $60 million fr4 each of MIPS Tech, LLC (“MIPS”) and Wave as a result of certain alleged breaches to a lice5 agreement signed on December 29, 2018.But despite attempts by the Debtors, the Debtors’ plan sponsor, and others to pin down 10 basis behind CIP’s absurd damages claim, no proof, evidence, or even itemization of the amo11 owed has been provided.On December 21, 2020, the Debtors filed their Notice of Cure Amount, listing therein 2 Master Technology License Agreement for MIPS Architecture and MIPS Cores (the “MTLA”), 3 MIPS Architecture and Core Technology Schedule for Licensed MIPS Technology (the “Architect 4 Core Technology Schedule”), the MIPS Technology Schedule for License of MIPS Architect CIP’s exclusive citation to Califor27 contract, the debtor may not assume unless it first (a) cures or provides adequate assurance that it 1 cure such default; (b) compensates or provides adequate assurance that it will compensate the cont2 counter-party for any actual pecuniary loss to such party resulting from such defaults; and (c) provi3 adequate assurance of future performance under such contract or lease.3 4 56, 57, 58, & 59 Filed by CIP United Co., Ltd. and Prestige Century Investme 6 Limited (the “Objection Reply”), each of which was filed contemporaneously herewith and7 incorporated herein by reference, the Debtors’ records show that the Debtors delivered all usa8 deliverables to CIP up until suspension of delivery was authorized under the express terms of sect9 10.4 of the MTLA.10 10

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SIDLEY AUSTIN LLP 1 Samuel A. Newman (SBN 217042) (sam.newman@sidley.com) 2 Genevieve G. Weiner (SBN 254272) (gweiner@sidley.com) 3 Julia Philips Roth (SBN 324987) (julia.roth@sidley.com) 4 555 West Fifth Street Los Angeles, CA 90013 5 Telephone: 213.896.6000 Facsimile: 213.896.6600 6 SIDLEY AUSTIN LLP 7 Charles M. Persons (admitted pro hac vice) (cpersons@sidley.com) 8 Juliana Hoffman (admitted pro hac vice) (jhoffman@sidley.com) 9 Jeri Leigh Miller (admitted pro hac vice) (jeri.miller@sidley.com) 10 2021 McKinney Avenue, Suite 2000 Dallas, TX 75201 11 Telephone: 214.981.3300 Facsimile: 214.981.3400 12 Attorneys for Debtors and Debtors in 13 Possession UNITED STATES BANKRUPTCY COURT 14 NORTHERN DISTRICT OF CALIFORNIA 15 SAN JOSE DIVISION 16 In re: ) Case No. 20-50682 (MEH) ) 17 WAVE COMPUTING, INC., et al., ) Chapter 11 (Jointly Administered) 18 ) Debtors.1 ) DEBTORS’ REPLY TO THE OBJECTI 19 ) OF CIP UNITED CO. LTD. TO ) ASSUMPTION CURE AMOUNTS AND 20 ) ASSURANCES OF ADEQUATE ) PERFORMANCE 21 ) Related To Docket Nos. 951, 1004 ) 22 ) Date: January 15, 2021 ) Time: 10:15 a.m. (Pacific Time) 23 Ctrm: Videoconference ) Judge: Honorable M. Elaine Hammond 24 ) Courtroom 11, 280 South First St. ) San Jose, CA 95113-3099 25 ) 26 1 The Debtors in these chapter 11 cases are: Wave Computing, Inc., MIPS Tech, Inc., Hellosoft, I27

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Wave Computing, Inc. (“Wave”) and its debtor affiliates, as debtors and debtors in possess1 (collectively, the “Debtors”) in the above-captioned chapter 11 cases (the “Chapter 11 Cases”) sub2 this reply (this “Reply”) in support of the Debtors’ Notice of Possible Assumption and Assignment 3 Cure Amounts with Respect to the Executory Contracts and Unexpired Leases of the Debtors [Doc 4 No. 951] (the “Notice of Cure Amount”) and in reply to the Objections of CIP United Co. Ltd 5 Assumption Cure Amounts and Assurances of Adequate Performance [Docket No. 106 (the “Objection”). 7 In support of this Reply, the Debtors also submit the Declaration of Sanjai Kohli in Suppor8 the Debtors’ Replies to CIP United Co. Ltd. and Prestige Investments Limited (the “Kohli Decl.”) 9 the Declaration of Don Smith in Support of the Debtors’ Replies to CIP United Co. Ltd. and Prest10 Investments Limited (the “Smith Decl”), each of which have been filed contemporaneously herew11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

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MEMORANDUM OF POINTS AND AUTHORITIES 1 I. PRELIMINARY STATEMENT 2 The Debtors have not breached any executory contracts with CIP, and CIP is owed no c 3 From the beginning of this case, CIP has aggressively maintained that it is owed $60 million fr4 each of MIPS Tech, LLC (“MIPS”) and Wave as a result of certain alleged breaches to a lice5 agreement signed on December 29, 2018. CIP has used this 2 year old contract like a sword, insert6 itself in the Debtors’ various negotiations and settlements and reminding all that, until dealt wit7 held $240 million in claims against the Debtors’ bankruptcy estates—an amount approximately 8 times that of the remainder of the Debtors’ general unsecured claims pool. 9 But despite attempts by the Debtors, the Debtors’ plan sponsor, and others to pin down 10 basis behind CIP’s absurd damages claim, no proof, evidence, or even itemization of the amo11 owed has been provided. Nor, for that matter, has CIP told the Debtors specifically what it alle12 constitutes a breach. Instead, CIP continues to claim without fact that some unspecified delivera13 and/or service obligations have not been provided and that such alleged failure has cost it $60 mill14 in damages. 15 It’s time for CIP’s inequitable hold on this case to end. Creditors have a right to know w16 they will receive under the proposed plan and should not be forced to continue to guess whether 17 $240 million in claims filed by CIP have any basis in fact. The Debtors have a right to determine w18 contracts they will assume and how much money they will need to have set aside for the paymen19 cure costs upon emergence. And the estates have a right to stop bleeding funds in attempt after atte20 to right-size the overstated leverage CIP currently wields. 21 The Court at this stage does not need to definitely settle all of CIP’s disputes or decide w22 damages would be upon rejection. The focus here is much narrower. Did CIP present suffici23 evidence to (1) identify and establish a default under the license agreements; and (2) establish24 evidence that some monetary claim amount is due. The answer is a resounding no. No default 25 been established. And even more importantly, no facts have been offered to support any monet26 cure amount owed. Accordingly, the Debtors should be permitted to assume their contracts with 27

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II. NOTICE OF CURE AMOUNT & OBJECTION 1 On December 21, 2020, the Debtors filed their Notice of Cure Amount, listing therein 2 Master Technology License Agreement for MIPS Architecture and MIPS Cores (the “MTLA”), 3 MIPS Architecture and Core Technology Schedule for Licensed MIPS Technology (the “Architect 4 Core Technology Schedule”), the MIPS Technology Schedule for License of MIPS Architect 5 Compatible Cores and Sublicensing Licensed MIPS Cores (the “License-Sublicense Technol 6 Schedule,” and together with the MTLA, the Architecture-Core Technology Schedule, and each of 7 amendments and amendments and restatements relating thereto, the “License Agreements”). 8 On January 4, 2021, CIP filed a three-paragraph Objection, stating only that the debtors o 9 CIP some unspecified set of deliverables, which constituted part of the cure, and that the Debt10 additionally owed CIP $60 million in a monetary cure for the “delay in providing these deliverabl11 No evidence, declaration in support, or other proof accompanied the Objection. 12 Pursuant to Section VII.D.3 of the Debtors’ Fifth Amended Disclosure Statement for the J13 Chapter 11 Plan of Reorganization for Wave Computing, Inc. and its Debtor Affiliates [Docket 14 848] (the “Disclosure Statement”), as approved by this Court’s order entered on December 3, 20215 Docket No. 859 (the “Disclosure Statement Order”), the dispute over the Notice of Cure Amount 16 CIP’s Objection thereto was set for hearing on the first omnibus hearing date following the filin17 the Objection, which is January 15, 2021 at 10:15 a.m. (Pacific Time). 18 III. REPLY 19 A. CIP Failed to Meet its Burden of Proof as to the Existence of any Defaults 20 The statutory framework of section 365 places the burden of proof of any alleged breach21 CIP. Under section 365 of the Bankruptcy Code, a debtor, subject to the court’s approval, may assu22 or reject any executory contract or unexpired lease.2 In the event of a default under the execut23 2 11 U.S.C. § 365(a). Federal law determines the definition of executory contracts and leases, but24 the issue of whether a default exists, the court should look to the applicable law of the contract. IRachels Indus., Inc., 109 B.R. 797, 803–04 (Bankr. W.D. Tenn. 1990) (citing In re Cochise Coll25 Park, Inc., 703 F.2d 1339, 1348, n.4 (9th Cir. 1983)). Although the contract here contains a Singapchoice of law provision, the parties have waived this choice of law provision by course of cond26 through (1) CIP’s filing of its complaint against the Debtors in the Northern District of Califorwith such complaint asserting California causes of action; (2) CIP’s exclusive citation to Califor27

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contract, the debtor may not assume unless it first (a) cures or provides adequate assurance that it 1 cure such default; (b) compensates or provides adequate assurance that it will compensate the cont2 counter-party for any actual pecuniary loss to such party resulting from such defaults; and (c) provi3 adequate assurance of future performance under such contract or lease.3 4 The party objecting to assumption under section 365 bears the initial burden of establish5 that a default exists under the terms of the executory contract.4 Only after such defaults are establis6 by the evidence submitted will the burden then shift back to the debtor to prove that the defaults eit7 have been or will be promptly cured.5 If the proof offered by the non-debtor party fails to estab8 that a default has occurred, then a debtor is not required to prove that the elements of section 365(b9 have been satisfied.6 10 Here, there is no question that CIP has failed to meet its burden of proof. The Objection d11 not identify or offer proof in support of any defaults under the License Agreements. Instead, CIP sk12 over this crucial step, jumping straight ahead to its go-to allegation—that somehow $60 millio13 owed. 14 In its rush to ignore facts and proof, CIP attempts to circumvent its burden of identifying s15 defaults and establishing their existence through the incorporation by reference of two of its ear16 filings in this case—the Response to Debtors’ Objection to Proofs of Claims Nos. 56 and 57 Filed17 CIP United Co. Ltd. [Docket No. 727] (the “Objection Response”) and Prestige Century Investm18 19 Investments, Ltd. v. Houser, No. 15-CV-01116-JCS, 2015 WL 5853634, at *5 (N.D. Cal. Aug. 2015), report and recommendation adopted, No. 15-CV-01116-JD, 2015 WL 5747932 (N.D. 20 Sept. 30, 2015) (applying California law despite Singapore choice of law provision where parfailed to prove the content of foreign law). California courts regularly hold that parties may wa21 contractual choice of law provisions through course of conduct. See, e.g., Nagrampa v. MailCoInc., 469 F.3d 1257, 1267 (9th Cir. 2006). 22 3 11 U.S.C. § 365(b). 23 4 See In re Arriva Pharm., 456 B.R. 419, 424 (Bankr. N.D. Cal. 2011) (citing In re Diamond Mfg. 24 164 B.R. 189, 199 (Bankr. S.D. Ga. 1994). 25 5 See In re Diamond Mfg. Co., 164 B.R. at 199 (citing In re Rachels Indus., Inc., 109 B.R. at 802 the proposition that the burden of proof for assumption issues accords with the general operatio26 the burden of proof under section 365). 27 6

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Limited and CIP United Co. Ltd.’s Motion for Temporary Allowance of Claims [Docket No. 71 (the “Temporary Allowance Motion”), the second of which has since been withdrawn.7 But 2 Objection Response does not identify any defaults by more than a vague reference to some miss3 deliverables and the Debtors decision to pull out of the MIPS Open initiative. And the Tempor 4 Allowance Motion does not discuss or identify any alleged defaults at all. Finally, neither attach 5 incorporate by reference any sort of evidence or proof in support of these allegations other than 6 conclusory declaration of Rosemary Ho. 7 The Debtors have attempted since the onset of this case to pin down CIP on the issue of alle8 defaults. The Debtors have studied the License Agreements, conferred with their engineers to conf9 delivery, scoured the communications between the parties to ensure that some list of miss10 deliverables has never been provided, and finally reached out to CIP itself in an attempt to get this 11 of missing deliverables that CIP alleges constitutes the default. But it was not until after month12 asking (and CIP’s access to and misuse of a settlement agreement with another licensee) that any 13 of list was provided.8 14 Unsurprisingly, the list did not refer back to the License Agreements or even attempt to expl15 why the items contained therein are not listed in the deliverables list attached as Exhibits A and 16 the Architecture-Core Technology Schedule. Instead, CIP took this wish list and claimed it was t17 due. This is not sufficient to put the Debtors on notice of any alleged defaults under the Lice18 Agreements and it absolutely provides no evidence to this Court that would establish a default need19 cure. 20 It’s not the Debtors’ burden to prove a negative—i.e., that it did not breach. And it’s not 21 Debtors’ burden to chase down every possible deliverable that could be required under the Lice22 23 24 7 See Notice of Withdrawal of Motion for Temporary Allowance of Claims [Docket No. 954]. 25 8 CIP signed a non-disclosure agreement in connection with their role as a potential purchaser in sale process. CIP then breached this non-disclosure agreement by downloading the Debt26 settlement agreement with an unrelated licensee and copying and pasting this settlement agreemdeliverables list into CIP’s list of alleged “missing deliverables.” The Debtors reserve all rights rela27

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Agreements and then prove that such delivery occurred. But having played CIP’s shell game l1 enough, the Debtors did take it upon themselves to do just that. 2 Unsurprisingly, the evidence showed that the Debtors did provide CIP will all delivera3 required by Exhibits A and B to the Architecture-Core Technology Schedule.9 As set forth in S 4 Declaration, the Kohli Declaration, and the Debtors’ Omnibus Reply in Support of its Objection 5 Proofs of Claim Nos. 56, 57, 58, & 59 Filed by CIP United Co., Ltd. and Prestige Century Investme 6 Limited (the “Objection Reply”), each of which was filed contemporaneously herewith and7 incorporated herein by reference, the Debtors’ records show that the Debtors delivered all usa8 deliverables to CIP up until suspension of delivery was authorized under the express terms of sect9 10.4 of the MTLA.10 10 Additionally, as the electronic “partner portal” customer support records show, the Debt11 have continuously provided CIP with ongoing support and maintenance under the License Agreem12 up to and including the present day.11 Despite this ongoing dispute, the Debtors have continue13 respond to customer requests through partner portal, and the only items that have been denied are th14 requesting additional software or hardware deliverables relating to support or maintenance. As 15 forth in more detail in the Objection Reply, the minimal denial of deliverables that has taken plac16 explicitly permitted by section 10.4 of the MTLA and is not a breach.12 17 With respect to the allegations of breach relating to the MIPS Open initiative, the Debtors 18 at a loss. The License Agreements make no reference to the MIPS Open initiative and contain19 requirement that the Debtors engage in any action relating thereto. The only tenuous connect20 21 22 23 9 See Smith Decl. ¶¶ 8–18. 24 10 Id. For unknown reasons, the Debtors did not upload for core packages for four of the core famiset forth in Exhibit B to the Architecture-Core Technology Schedule. See id. at ¶ 16 n.3. Eac25 these cores is ten to fifteen years old and functionally obsolete. See id. 26 11 See Smith Decl. ¶¶ 11–12. 27 12

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between the alleged breach and the License Agreements that CIP points to is section 6.2 of 1 MTLA.13 2 Section 6.2 of the MTLA requires the Debtors to 3 4 14 Section 6.2 does not require the Debtors enter int 5 maintain some software initiative, especially when such initiative lacks a business justification gi6 its significant cost and relatively low likelihood of producing a profit at any future point.15 E7 assuming that one could read the obligation to fund and maintain a software initiative as falling wit8 section 6.2, which already appears tenuous given the only items called out relate to a much m9 passive promotion through printed or electronic publications, the Debtors are only obligated to ac10 a commercially reasonable manner. The MIPS Open initiative was a financial drain on an alre11 struggling business and provided no reasonable expectation of profit.16 As a result, the Debt12 decision to terminate the initiative would not have been a breach of the License Agreements even 13 had been included therein. 14 In conclusion, CIP has not provided this Court or the Debtors with an identification of 15 defaults alleged or any proof in support of the same. As a result, this Court should find that no bre16 exists under the License Agreements and no cure amounts are owed to CIP. 17 B. CIP Failed to Meet its Burden of Proof as to the Existence of a Cure Amount 18 Even if CIP had established some default under the License Agreements, CIP has further fai19 to carry its evidentiary burden by presenting absolutely no proof as to the existence of the monet20 cure amount. When a debtor seeks to assume a contract under section 365, the establishment of pr21 22 13 See Objection Response at 12. The Debtors believe CIP’s reference to section 3.2 of the MT23 was in error as the language quoted actually appears in section 6.2. 24 14 Id. § 6.2 25 15 See Kohli Decl. ¶¶ 15–18. The MIPS Open initiative cost the Debtors approximately $1 million year to support and maintain. Id. It was not expected to produce revenue until 2022 at the earli26 assuming that the China market had not switched over to RISC-V by this time. Id. 27 16

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of any amount of monetary default is the ultimate responsibility of the contract counterparty.17 O1 after the contract counterparty has established the amount of monetary default will the burden shif2 the debtor to demonstrate that such default has been cured.18 3 CIP has presented no evidence regarding the alleged amount of monetary default under 4 License Agreements other than the conclusory, sworn statement of Ms. Ho. Instead it states with5 explanation, itemization, or proof that its monetary cure— like every other claim of damages made 6 CIP in this case—equals $60 million.19 7 The Debtors cannot provide evidence to dispute this imaginary number as all attempts 8 discovery have been refused or otherwise thwarted to date. Instead, the Debtors can only note for 9 Court that, oddly enough, the number claimed by CIP is actually equal to what the Debtors would10 owed upon CIP’s breach of the License Agreements, assuming the limitations on liability contai11 in the MTLA did not exist. 12 The Objection Response and Motion for Temporary Allowance additionally provide no h13 The Objection Response concedes that if the Debtors assume the License Agreements, then the pro14 of claim filed (also in the amount of $60 million) will be withdrawn as any litigation over the c15 amount will require a different determination of damages than that of the claim objection, appare16 conceding that $60 million is not the correct number.20 And the Motion for Temporary Allowa17 agrees, stating again “CIP readily admits that it filed its proof of claim out of an abundance of cauti18 and if the Debtors assume the License Agreements, then the proofs of claim will be withdrawn.”2119 17 In re Millivision, Inc., 328 B.R. 1, 6 (Bankr. D. Mass. 2005). 20 18 Id. 21 19 To date, CIP has claimed that it has a $60 million claim against each of Wave and MIPS 22 prepetition breaches, which allegedly includes $30 million in lost profits over the life of the contrSee Proof of Claim No. 56-1. A $60 million claim against each of Wave and MIPS, which allege23 includes $52.5 million in lost profits for 2020 and 2021 alone. See Declaration of Rosemary [Docket No. 729 24 20 See Objection Response at 10 (“If MIPS assumes the License and otherwise meet the requirem25 of section 365(a), then the proof of claims will be withdrawn.”); Objection Response at 10 (“Determination of a cure breach looks at breach damages as of the date of assumption while a cl26 looks at damages as of the petition date.”). 27 21

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In sum, CIP has completely abdicated its burden of proving the amount of a monetary c 1 Thus, even if this Court were to find that CIP’s breach allegations held some merit, there would be2 monetary cure amount owed. At most, the Debtors would be required to cure any nonmonet3 breaches that this Court found by delivering any deliverables specifically identified by this Cour4 owing. Such delivery would satisfy the Debtors’ cure obligations and permit assumption of 5 executory contract under the Bankruptcy Code.22 6 IV. CONCLUSION 7 CIP has failed to identify or establish any defaults under the License Agreements and has fai8 to submit any evidence with respect to a monetary cure. Accordingly, this Court should overrule 9 Objection and find that the License Agreements may be assumed with no cure amounts owed. 10 Dated: January 8, 2021 Respectfully submitted, 11 12 /s/ Jeri Leigh Miller Samuel A. Newman 13 Genevieve G. Weiner Jeri Leigh Miller 14 SIDLEY AUSTIN LLP 15 16 Attorneys for Debtors and Debtors in Possession 17 18 19 20 21 22 23 24 25 26 22 See In re Northwest Territorial Mint LLC, Case No. 16-11767-CMA, 2017 WL 3841750, at (Bankr. W.D. Wash. Sept. 1, 2017) (permitting cure of nonmonetary defaults by performance 27