House Canary New Jersey - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• HouseCanary, Inc. and House Canary New Jersey, Inc., as borrowers, on a joint and several basis
• Each of the remaining debtors, as guarantors; all DIP loan parties are jointly and severally liable for the DIP obligations

Agent / Lender(s)

• Condor FundingCo 26, LLC, or an affiliate, as sole DIP Lender

DIP Commitments

• $15 million multi-draw senior secured superpriority term facility, all new money and with no roll-up of prepetition debt, staged as follows:
  • Up to $3 million available during the interim period, consisting of a $1 million initial draw available immediately on entry of the interim order and a $2 million additional draw conditioned on satisfaction of the term sheet conditions and delivery of a plan term sheet acceptable to the DIP Lender in its sole discretion
  • $12 million, the balance of the facility, available only upon and after entry of the final order
• The commitment amount may be increased with the DIP Lender's consent and court approval.
• Draws require a loan request certifying no default and budget-compliant use, fund on the second business day after a request made by 2:00 p.m. Central Time (the third business day if later), and may not be made in an amount of less than $500,000.
• Beyond the interim conditions, the final amounts require a definitive credit agreement and related security documents, entry of the final order within 30 days of the petition date, and deposit account control agreements and other perfection deliverables; every borrowing other than the interim amounts also requires that no case have been dismissed or converted, that no trustee or examiner with expanded powers have been appointed, that no default exist, and that each milestone have been met or waived.
• Under the term sheet, the commitments expire if the closing date, which the term sheet defines as the date all interim funding conditions are satisfied, does not occur by Oct. 1, 2026; the interim order instead defines the closing date, for fee-payment purposes, as the date the facility is first drawn.
• The interim order was entered Sept. 25, 2026, three days after the Sept. 22, 2026, petition date.

Prepetition Capital Structure

• Litigation funding: Crane 2 FundingCo 23, LLC under an amended and restated litigation funding agreement dated Jan. 8, 2026, and HC 1 LLC and Security Finance 1 LLC under a litigation funding agreement dated June 6, 2018. Subject to the challenge period, the debtors stipulate that these funders hold a first-priority lien on the litigation claims, litigation proceeds, litigation IP, the Crane 2 proceeds account and related collateral, and that they are owed not less than the respective Investment Return under each agreement, plus accrued interest, fees, premium and expenses; the term sheet describes the lien as properly perfected.
• Structural loan: Structural Capital Investments III, LP, the Series Structural DCO II series of Structural Capital DCO, LLC, and CEOF Holdings LP under a March 25, 2021, loan and security agreement. The interim order recites that Structural purports to hold a first priority lien on its defined collateral, and the term sheet adds that the asserted lien reaches cash to the extent Structural benefits from deposit account control agreements over the debtors' accounts, while expressly excluding the borrower's intellectual property and the litigation collateral. The interim order leaves the principal amount of the Structural obligations blank.

Cash Collateral

• The debtors may use cash collateral, meaning their cash, wherever located and including cash in deposit accounts, to the extent it is cash collateral of the litigation financing parties or the DIP Lender, from entry of the interim order through entry of the final order, in accordance with the approved budget and subject to permitted variances.
• The interim order does not authorize the debtors to use any cash collateral of Structural, to the extent such cash collateral exists; the debtors must deliver Structural a weekly report identifying the amount and location of any cash or proceeds Structural asserts is its cash collateral.
• Under the term sheet, cash collateral may be used only for working capital, interest and fees under the DIP facility, adequate protection payments to the prepetition lenders and allowed costs and expenses of the cases, in each case per the approved budget.
• During any remedies notice period, the debtors may continue using cash collateral solely to make payroll and fund critical expenses necessary to preserve the prepetition litigation collateral, strictly per the approved budget.

Interest Rate

• 10% per annum, payable in kind monthly through an increase in outstanding principal on the first day of each calendar month
• Default Rate Increase: 2%, accruing on all outstanding principal and other DIP obligations and payable on demand; the term sheet applies it automatically after an event of default, while the interim order lists invoking the default rate among the remedies available on five business days' notice.

Fees

• Upfront Fee: 2% of the total facility amount, payable in cash out of the proceeds of the interim amounts or cash on hand within two business days after entry of the interim order
• Exit Fee: 5% of the total facility amount, due in cash on the earliest of the maturity date, payment in full of the DIP obligations, or pro rata on any mandatory or voluntary prepayment
• Both fees are approved on a final basis, fully earned, allowed and non-refundable upon entry of the interim order, and remain payable even if no portion of the facility is ever drawn; if they are not approved on a final basis and paid as provided, the term sheet and any DIP loan documents automatically terminate.
• The debtors must pay the DIP Lender's fees, costs and expenses, including those of Ropes & Gray LLP as counsel, whether incurred pre- or postpetition, without retention motions, fee applications or detailed time breakdowns. Fees incurred through the closing date and through the funding date of the additional draw are payable without the invoice-review procedures; otherwise invoices are payable within a 10-business-day review period during which the debtors, any creditors' committee or the U.S. Trustee may object to specified amounts, with undisputed amounts paid promptly.

Maturity

• The facility and the right to use cash collateral terminate automatically, without further notice or court proceedings, on the earliest of:
  • 60 days after the petition date, the scheduled maturity date
  • Acceleration of any outstanding borrowings following an event of default
  • The first business day on which the interim order expires by its terms or is terminated, unless the final order has been entered and become effective by then
  • Conversion of any of the cases to Chapter 7, absent the DIP Lender's written consent
  • Dismissal of any of the cases, absent the DIP Lender's written consent
  • Consummation of a sale of all, substantially all or a material portion of the DIP collateral
  • The effective date of any confirmed plan of reorganization
• Any extension of maturity requires the DIP Lender's prior approval in its sole discretion; all accrued and unpaid interest and principal is due at maturity, with interest accrued through the scheduled maturity date due on that date if an extension is granted.
• The debtors may prepay in whole or in part at any time without penalty other than the exit fee, on two days' notice. Net cash proceeds of out-of-ordinary-course DIP collateral sales, debt or equity issuances, and insurance or condemnation proceeds must be applied 100% to prepay the loans together with accrued interest and the exit fee on the prepaid principal.

Milestones

• Each of the following runs from the Sept. 22, 2026, petition date and is subject to extension with the DIP Lender's consent:
  • Entry of the interim order within three business days
  • Entry of the final order within 30 calendar days
  • Confirmation of a plan of reorganization acceptable to the DIP Lender within 60 days
  • Plan effective date within 60 days
• The final hearing is set for Oct. 20, 2026, at 2:00 p.m. ET, with objections due Oct. 13, 2026, at 4:00 p.m. ET.

Carve Out

• Post Carve Out Trigger Notice Cap: $175,000 for debtor and committee professionals, for fees incurred on or after the first business day following delivery of a carve out trigger notice
• Chapter 7 Trustee Fee: $25,000 under section 726(b)
• U.S. Trustee fees and all allowed professional fees incurred before delivery of a carve out trigger notice are carved out without a cap, whether or not budgeted and whether or not invoiced after the trigger notice date.
• The carve out does not prime or rank senior to the prepetition Structural liens, the adequate protection liens or adequate protection superpriority claim granted to Structural, or Structural's interests in its collateral.
• The DIP Lender may deliver a carve out trigger notice immediately upon an event of default that is continuing and not waived, without application to the court; such notice does not by itself constitute a termination notice or start the remedies notice period. On the trigger date, the notice operates as a demand that the debtors fund a pre-trigger reserve for then-unpaid allowed professional fees and then a post-trigger reserve equal to the post-trigger cap, and as a deemed borrowing request for the post-trigger cap amount, which the DIP Lender must fund on the following business day notwithstanding any event of default, failed conditions precedent, commitment termination or occurrence of maturity.
• Any post-trigger payment of allowed professional fees permanently reduces the carve out dollar-for-dollar; all carve out funding constitutes DIP obligations secured by the DIP collateral, and the DIP Lender retains a superpriority lien on any unused carve out amounts.

Use of Proceeds

• Amounts due under certain leases and certain employee-related, maintenance and other expenses
• Restructuring costs and professional fees related to the cases
• Amounts payable to the DIP Lender under the DIP documents, including professional fees and expenses, the upfront fee and the exit fee, with interest paid in kind rather than in cash
• Adequate protection payments to the prepetition lenders, if any
• Other items, in each case strictly per the allowed disbursements in the DIP budget
• No DIP proceeds, DIP collateral, prepetition litigation collateral or carve out funds may be used to investigate or pursue claims against the DIP Lender or the litigation financing parties, including lender-liability and avoidance claims, to challenge the DIP or prepetition liens and obligations, to interfere with enforcement or realization on the collateral, to seek liens or superpriority claims senior to or pari passu with the DIP liens or the adequate protection claims, or to pay prepetition claims absent court or DIP Lender authorization; under the interim order a statutory committee may use up to $25,000 to investigate, but not to prosecute, the litigation financing parties' claims and liens, while the term sheet extends that investigation budget to all prepetition financing documents and the DIP Lender.

Credit Bid

• The DIP Lender may credit bid in any sale of the DIP collateral up to the full amount of the DIP obligations.
• Subject to the challenge-period limitations, the litigation financing parties may credit bid in any sale of the prepetition litigation collateral up to the full amount of their prepetition obligations and adequate protection claims.
• Both rights apply under section 363(k) without further court order, whether the sale runs through sections 363(k), 1123 or 1129(b), or by a Chapter 7 trustee under section 725, unless the court orders otherwise for cause.

Avoidance Actions

• Under the interim order, the DIP collateral and the DIP superpriority claims exclude avoidance actions under sections 502(d), 544, 545, 547, 548 and 550 and any other Bankruptcy Code avoidance actions, but extend to their proceeds upon entry of the final order granting such relief; the term sheet grants a lien on those proceeds without the final-order condition.

Challenge Period and Budget

• The debtors' stipulations, admissions and releases bind the estates irrevocably and bind all other parties in interest unless a party with standing files a challenge by the applicable deadline below, or any later date the DIP Lender or the litigation financing parties agree to, and obtains a final non-appealable order sustaining it:
  • For any statutory committee, 45 calendar days after its appointment or, if longer, 60 days from entry of the interim order
  • For all other parties in interest, the earlier of 60 calendar days after entry of the interim order or the deadline the court sets for plan confirmation objections
• If the cases convert and a trustee is appointed before the period lapses, that trustee's deadline extends to the later of 60 calendar days after entry of the interim order or 30 calendar days after its appointment, and the trustee is treated as a party other than the debtors, not bound by the debtors' stipulations for purposes of the proceeding.
• As of entry of the interim order, the U.S. Trustee had not appointed a creditors' committee; all parties may move, on notice, to extend the challenge period.
• Challenge pleadings must state the basis with specificity; unspecified challenges are waived, and the interim order confers no standing on any party, including a committee, to pursue estate claims.
• Budget: the initial DIP budget, a 13-week cash flow forecast of receipts and disbursements from the petition date, is attached as Exhibit A to the declaration of Jeffrey C. Perea. Updates require DIP Lender approval, which may not be unreasonably withheld, but no further court approval; the debtors must deliver a revised cash forecast beginning on the seventh day after entry of the interim order and monthly thereafter, and, on the third business day of each week, a variance report to the DIP Lender, the litigation financing parties and any committee comparing the prior week's actual disbursements to budget. The term sheet states the initial revised forecast is due on the seventh day after entry of the interim order with each subsequent forecast due every four weeks, while the interim order requires delivery by the close of business on the Wednesday following each monthly period; the term sheet's weekly variance report covers the most recent four-week period rather than the prior week.

Securities and Priorities

• The DIP obligations constitute allowed superpriority administrative expense claims under section 364(c)(1) against each DIP loan party on a joint and several basis, senior to all other administrative claims including those under sections 503(b) and 507(b) and the adequate protection obligations, subject only to the carve out, and payable from all prepetition and postpetition property and proceeds. These claims survive conversion to Chapter 7 or dismissal.
• The DIP Lender receives automatically perfected liens on substantially all of the debtors' real and personal property, now existing or later acquired, including real estate, inventory, equipment, deposit accounts, intercompany loans, commercial tort claims, general intangibles including patents, trademarks and infringement claims, and proceeds and products of the foregoing, with the following priorities:
  • First-priority liens under section 364(c)(2) on all property not subject to a valid, perfected and non-avoidable lien as of the petition date, including the equity in non-debtor subsidiaries and, upon entry of the final order, avoidance action proceeds, subject only to the carve out. The term sheet identifies the intellectual property defined under the Structural loan agreement, other than litigation IP, as unencumbered collateral of this kind.
  • Liens under section 364(c)(3) on the prepetition Structural collateral junior to the Structural liens, solely to the extent the court determines those claims are valid, secured and perfected
  • Liens on the prepetition litigation collateral junior to the litigation financing parties' first-priority liens
• The DIP liens may not be subordinated to or made pari passu with any other lien under section 363 or 364, any lien preserved under section 551, any postpetition lien including governmental liens, or any intercompany lien.
• Neither prepetition lien is primed: the interim order's operative grant rests on sections 364(c)(2) and 364(c)(3), with the DIP liens junior on both prepetition collaterals, although its opening recital and the term sheet also cite section 364(d)(1); under the term sheet, the DIP liens rank senior to every other perfected lien except the litigation and Structural liens.
• Any proceeds of unencumbered collateral received by the litigation financing parties or Structural must be segregated, held in trust for the DIP Lender and turned over, without priming Structural's setoff rights if any exist. If the debtors or any trustee incur credit under section 364 in violation of the DIP documents, the cash proceeds go to the DIP Lender after satisfaction of the carve out.
• The relative priorities between the litigation financing parties and Structural remain governed by their own agreements and applicable law, unaltered by the interim order.

Adequate Protection

Litigation Financing Parties

• Replacement liens on the prepetition litigation collateral, junior to the DIP liens, the existing litigation liens, the Structural liens and the carve out
• A section 507(b) superpriority administrative expense claim to the extent the replacement liens prove insufficient, payable from and with recourse to the unencumbered collateral and its proceeds, junior only to the carve out and the DIP superpriority claims
• Payment in cash of all reasonable and documented fees and out-of-pocket expenses incurred in the cases, including those of Ropes & Gray LLP, which also serves as DIP Lender counsel
• Maintenance and insurance of the collateral, with the DIP Lender deemed loss payee and additional insured wherever the litigation financing parties are listed as loss payee
• All financial, periodic and variance reporting provided to the DIP Lender, which survives payment in full of the DIP obligations
• While DIP obligations remain outstanding, the litigation financing parties may not foreclose on or enforce against the DIP collateral, are deemed to consent to dispositions and lien releases permitted under the DIP documents, and may not make new perfection filings except to perfect liens granted under the interim order or to continue existing perfection.

Structural

• Replacement liens on the prepetition Structural collateral, with the same junior ranking, and a section 507(b) superpriority claim, in each case solely to the extent of the validity and security of Structural's perfected interest in the prepetition Structural collateral
• The court found the adequate protection reasonable and sufficient to protect the litigation financing parties but expressly made no finding at this time as to whether it is reasonable and sufficient as to Structural; either party may seek further or different adequate protection, subject to contractual limitations, and the debtors and other parties in interest may contest such a request.
• Upon the effective date of a plan paying the DIP obligations in full in cash, the adequate protection liens and superpriority claims are satisfied and released as provided in that plan.

Events of Default and Remedies

• Events of default include failure to pay principal or interest when due, failure to maintain assets, breach of covenants, failure to comply with the milestones or the DIP budget subject to the variance covenant, misuse of loan proceeds, and failure to pay the DIP Lender's fees and expenses, with a five-calendar-day cure period except for payment defaults, milestone failures, budget failures and bankruptcy events of default.
• Bankruptcy events of default include:
  • Any debtor or affiliate asserting in writing the invalidity or impairment of a DIP credit document or a prepetition financing document, including the Structural loan agreement
  • Dismissal or conversion of any case, or a debtor filing seeking such an order
  • Appointment or election of a trustee, responsible officer, or examiner with expanded powers, or a debtor consenting to one, without the DIP Lender's consent
  • Entry of an order staying, reversing, vacating or modifying either DIP order, or a debtor filing seeking one
  • Relief from stay allowing a third party to foreclose on assets securing the facility on a first-priority basis
  • A final non-appealable order surcharging the DIP collateral under section 506(c), requiring disgorgement by the DIP Lender, or marshaling the DIP collateral
  • Any debtor challenge to the validity, extent or priority of the DIP liens or the prepetition liens, including Structural's
  • Entry of an order authorizing section 364 financing other than the facility unless it repays the facility in full in cash, or use of DIP collateral cash proceeds without consent
  • Termination of exclusivity, or a debtor requesting or failing to timely object to such relief
  • Proposal, filing or support of a non-consensual plan or sale, meaning one not conditioned on payment in full in cash, including by credit bid, of the DIP obligations, the prepetition litigation financing obligations and the adequate protection obligations by the maturity date and no later than the plan effective date or sale consummation
  • Commencement of any insolvency proceeding other than these cases
  • Entry of an order granting any lien or section 364(c)(1) superpriority claim senior to or pari passu with the DIP Lender's, other than for the facility and the carve out, or a debtor filing seeking one
  • Noncompliance with either DIP order
  • Any debtor commencing, joining or assisting as an adverse party in a suit against the DIP Lender regarding the facility
  • Failure to execute and deliver the DIP loan documents within 10 business days of the petition date
• Remedies notice period: the interim order requires the DIP Lender to give at least five business days' written notice, which may be by email, to debtors' counsel, counsel to each litigation financing party, any committee and the U.S. Trustee before it may revoke cash collateral use subject to the carve out, terminate the facility as to future funding without affecting the DIP obligations or liens, accelerate the DIP obligations and charge the default rate; the term sheet's default-remedies provision states three business days.
• During the notice period the debtors and any committee may seek an emergency hearing solely to contest whether an event of default occurred, though a separate provision of the same order lets any party in interest seek an emergency hearing, to which the DIP Lender consents, either to contest the default or to obtain non-consensual use of cash collateral, and nothing limits the court's ability to grant relief it considers appropriate; absent a contrary order, the automatic stay terminates as to the DIP Lender and the litigation financing parties at the end of the period, after which the debtors waive any right to seek relief, including under section 105, that would impair the secured parties' remedies.
• The DIP liens, superpriority claims, adequate protection liens and claims, and the carve out survive an order converting or dismissing the cases, approving a section 363(b) sale, or confirming a plan.

Waivers and Releases

• Subject to entry of the final order:
  • Section 506(c): no administrative costs or expenses of the cases or any successor cases may be charged against or recovered from the DIP collateral, including cash collateral, or the prepetition litigation collateral without the applicable secured party's prior written consent.
  • Section 552(b): the equities of the case exception does not apply to the litigation financing parties with respect to proceeds, products, offspring or profits of the DIP collateral.
  • Marshaling and similar equitable doctrines do not apply to the DIP Lender or the litigation financing parties with respect to the DIP collateral, the DIP obligations, the prepetition litigation financing obligations or the prepetition litigation collateral.
  • Release: the debtors and, subject to the challenge period, their estates release the litigation financing parties, the DIP Lender and each of their respective subsidiaries, affiliates, officers, directors, managers, principals, employees, agents, financial advisors, attorneys, accountants, investment bankers, consultants and other professionals, and their successors and assigns, from all claims arising out of or related to the prepetition litigation financing documents, the DIP facility and the DIP documents through the date of the interim order, excluding claims a court determines resulted from bad faith, fraud, gross negligence or willful misconduct.
• Indemnity: the debtors indemnify the DIP Lender, effective on entry of the interim order, and the litigation financing parties, solely with respect to a challenge and subject to entry of the final order, together with their affiliates and representatives, for costs, expenses and liabilities arising out of the transactions and any use of loan proceeds, to the extent provided in the DIP and prepetition credit documents; separately, no indemnified person is liable to the debtors, their shareholders or creditors in connection with the transactions except for liability found by final non-appealable judgment to have resulted solely from its gross negligence or willful misconduct, and, subject to entry of the final order, no indemnified person or debtor is liable for special, indirect, consequential or punitive damages.
• The debtors further stipulate, subject to the challenge period, that the prepetition litigation liens are not subject to contest, avoidance, subordination, recharacterization or other challenge; that the litigation financing parties do not and have not controlled the debtors and are not insiders or control persons by virtue of the financing; and that as of the petition date the estates held no claims or causes of action against the litigation financing parties, the DIP Lender or their representatives.

Permitted Variance

• Tested weekly, overall disbursements may not exceed the approved budget by more than 10% and no individual line-item disbursement may exceed its budgeted amount by more than 5%; the debtors may reserve budgeted professional fees weekly, reconciled to actuals upon billing, court approval and payment.
• A positive disbursement balance at the end of a weekly period may be carried forward one week, usable only within the line item that generated it, and all carry-forwards are cleared when an updated budget is approved.
• Any variance in excess of a permitted variance is an event of default, and any budget modification that would breach the variance covenant requires DIP Lender approval.

Covenants

• Under the term sheet's negative covenants, the debtors may not settle material litigation without the DIP Lender's consent; dispose of assets outside permitted ordinary-course transfers or enter agreements requiring payments exceeding $5,000; purchase capital assets in excess of $50,000 outside permitted investments; permit a change of more than 50% of ownership; make junior debt payments, dividends or distributions; or enter material affiliate transactions other than ordinary course compensation permitted in the budget.
• Affirmatively, the debtors must share pleadings material to the DIP Lender at least three calendar days before filing, notify the DIP Lender of any default within two business days, maintain insurance naming the DIP Lender as loss payee and additional insured with two business days' cancellation notice, cause any new subsidiary to join within seven days, and notify the DIP Lender of returns or disputes exceeding $25,000.

Plan Treatment

• The debtors must pursue a restructuring through a plan in form and substance satisfactory to the DIP Lender and the debtors, and under the term sheet may pursue an alternative plan only if it pays the DIP obligations and the applicable prepetition litigation financing obligations in full in cash no later than the maturity date; the interim order's non-consensual plan default also requires payment of the adequate protection obligations, absent consent of the DIP Lender and the litigation financing parties.
• The additional draw is conditioned on delivery of a plan term sheet acceptable to the DIP Lender in its sole discretion or, within seven days of the petition date, filing a plan acceptable to the DIP Lender and requesting a confirmation hearing.

Governing Law

• New York, and the Bankruptcy Code to the extent applicable, with the bankruptcy court retaining exclusive jurisdiction over implementation, interpretation and enforcement of the interim order