House Canary New Jersey - Chapter 11 DIP Terms

DIP Terms

Size and Structure

• Size: up to $15 million multi-draw, senior secured, superpriority term loan facility, all new money, with no roll-up of prepetition debt; the aggregate commitment may be increased with the DIP Lender's consent and court approval.
• Availability breaks down as:
  • $3 million on an interim basis, consisting of a $1 million initial draw available immediately upon entry of the interim order and a $2 million additional draw conditioned on satisfaction of the term sheet's funding conditions and on either the DIP Lender's receipt of a plan term sheet acceptable to it in its sole discretion or the debtors' filing, within seven days of the petition date, of a plan acceptable to the DIP Lender together with a request for a confirmation hearing
  • $12 million upon entry of the final order
• Draws require a borrowing request two business days before funding and may not be made in amounts of less than $500,000; a request submitted by 2:00 p.m. Central Time funds on the second business day after the request, and a later request funds on the third.
• All six debtors are liable for the DIP obligations on a joint and several basis, and the DIP Lender's commitment expires if the closing date does not occur by Oct. 1, 2026.
• The debtors filed Chapter 11 in the District of New Jersey on Sept. 22, 2026 and seek interim approval on an emergency basis; neither DIP order has been entered, and the terms below are those of the motion, the proposed interim order and the DIP term sheet, with the proposed interim order providing that it governs over the term sheet in a conflict.

Borrower(s) / Guarantor(s)

• HouseCanary, Inc. and HouseCanary New Jersey, Inc., as borrowers
• HouseCanary (CT), Inc., ComeHome, Inc., HC Certified Analytics, Inc., and HouseCanary R&D, LLC, the remaining debtors, as guarantors

Lender

• Condor FundingCo 26, LLC, or an affiliate, as sole DIP Lender. The proposed interim order names Ropes & Gray LLP as counsel to the DIP Lender and, in the adequate protection provisions, as a professional of the prepetition litigation financing parties whose fees the estates pay, and the term sheet's challenge bar covers amounts owed to the DIP Lender or its affiliates on account of the prepetition litigation financing agreements.

Prepetition Secured Debt

• Two secured groups hold prepetition liens that rank ahead of the DIP liens on their own collateral:
  • Litigation financing: Crane 2 FundingCo 23, LLC, under an amended and restated litigation funding agreement dated Jan. 8, 2026, together with HC 1 LLC and Security Finance 1 LLC under a litigation funding agreement dated June 6, 2018, hold first-priority perfected liens on the debtors' litigation claims, litigation proceeds, litigation IP, the Crane 2 proceeds account and related collateral; the motion names the Crane 2 entity as Crane 2 FundingCo 26, LLC. The obligations are measured as the "Investment Return" due under each agreement plus premiums, expenses, costs, charges and indemnities.
  • Structural: Structural Capital Investments III, LP, Series Structural DCO II series of Structural Capital DCO, LLC, and CEOF Holdings LP, under a March 25, 2021 loan and security agreement, purport to hold a first-priority lien on their collateral, including cash in the debtors' accounts to the extent Structural holds deposit account control agreements, but expressly excluding the borrower's intellectual property and the litigation collateral; the proposed interim order leaves the amount of Structural's claim blank.
• The debtors stipulate to the litigation financing parties' obligations and liens but do not extend those stipulations to Structural, whose liens the proposed order describes only as asserted and to which the DIP liens are junior solely to the extent the court determines those claims are valid, secured and perfected.

Interest Rate

• Rate: 10.0% per annum, payable in kind monthly on the first day of each calendar month as an increase in outstanding principal.
• Default rate increase: 2.0%, automatic on and during an event of default, accruing on all outstanding principal and other DIP obligations and payable on demand.

Fees

• Upfront fee: 2.0% of the total facility, payable out of the interim draw proceeds or cash on hand within two business days after entry of the interim order.
• Exit fee: 5.0% of the total facility, payable in cash on the earliest of the maturity date, payment in full of the DIP obligations, or pro rata upon any mandatory or voluntary prepayment.
• Both fees are fully earned, allowed, non-refundable and not subject to reduction or setoff upon entry of the interim order, and are payable even if the facility is never drawn; if the interim order does not approve them on a final basis and they are not paid as provided, the term sheet and DIP loan documents terminate automatically.
• The debtors also pay the DIP Lender's reasonable and documented fees, costs and expenses, including professional fees, without retention motions or fee applications. Invoices are subject to a 10-business-day review period for the debtors, any committee and the U.S. Trustee, except that amounts incurred through the closing date and through the funding of the additional draw are payable outside that procedure, with invoices delivered at least two business days before the additional draw funds.

Maturity

• Maturity: the earliest to occur of the following, at which point the facility and the debtors' right to use cash collateral terminate automatically:
  • 60 days after the petition date, the term sheet's scheduled maturity date, though the motion's summary of material terms states 63 days
  • acceleration following an event of default
  • the first business day on which the interim order expires or is terminated, unless the final order has been entered and become effective
  • conversion of any case to Chapter 7, or dismissal of any case, 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 a confirmed Chapter 11 plan
• Any extension requires the DIP Lender's prior approval in its sole discretion, and accrued interest through the scheduled maturity date comes due on that date even if maturity is extended.

Milestones

• Subject to extension with the DIP Lender's consent, Schedule 1 to the proposed interim order requires entry of the interim order within three business days of the petition date, entry of the final order within 30 calendar days, confirmation of a plan acceptable to the DIP Lender within 60 days, and the plan effective date within 75 days; the term sheet and the motion's summary chart set the effective-date milestone at 60 days.
• The motion's milestone chart and the conditions to the additional draw also require the debtors to file a plan acceptable to the DIP Lender in its sole discretion and request a confirmation hearing within seven days of the petition date, and failure to execute and deliver the DIP loan documents within 10 business days of the petition date is an event of default.
• The motion asks the court to hold the final hearing and enter the final order as soon as practicable and in no event later than 21 days after the petition date; the proposed interim order schedules the final hearing within 30 days of its entry.

Prepayments

• Voluntary prepayments are permitted in whole or in part at any time on two days' notice, without penalty other than the exit fee.
• Mandatory prepayments capture 100% of net cash proceeds from non-ordinary-course sales of DIP collateral, issuances of indebtedness or equity, and insurance or condemnation proceeds, together with accrued and unpaid interest and the exit fee on the principal prepaid.

Use of Proceeds

• Proceeds and cash collateral may be used solely in accordance with the approved budget, the DIP orders and the DIP documents, for:
  • lease payments and employee-related, maintenance and other operating expenses
  • restructuring costs and the debtors' professional fees
  • amounts owed to the DIP Lender, including its professional fees and expenses and the upfront and exit fees, with interest instead paid in kind
  • adequate protection payments to the prepetition lenders, if any
• No DIP proceeds, DIP collateral, litigation collateral or carve-out amounts may fund investigation or litigation against the DIP Lender or the litigation financing parties, any challenge to their obligations or liens, interference with their enforcement, applications for senior or pari passu liens and claims, or payment of prepetition claims not approved by the court, consented to by the DIP Lender or permitted under the budget; a committee may spend up to $25,000 investigating, but not prosecuting, the litigation financing parties' claims and liens.

Cash Collateral

• The proposed interim order defines cash collateral as the debtors' cash, wherever held, including in deposit accounts, that is cash collateral of the litigation financing parties or the DIP Lender, while the term sheet sweeps in all cash and cash equivalents and the proceeds of all DIP collateral; the debtors may use it from entry of the interim order through entry of the final order in accordance with the approved budget, subject to permitted variances.
• The debtors are not seeking authority to use Structural's cash collateral, if any, and will seek that relief separately; Structural is identified as a party with an interest in cash collateral only for purposes of the final hearing or a later motion, and only to the extent of a valid and perfected lien.

Securities and Priorities

• Under the proposed interim order, the DIP obligations constitute allowed superpriority administrative expense claims under 364(c)(1) against all DIP loan parties on a joint and several basis, payable from all prepetition and postpetition property, senior to all other administrative claims, subject only to the Carve Out, and surviving conversion or dismissal.
• The DIP liens, automatically perfected upon entry without further filings and subject to the Carve Out, consist of:
  • First-priority liens under 364(c)(2) on all tangible and intangible property not subject to a valid, perfected, non-avoidable lien, including cash, accounts, contracts, insurance, causes of action, intellectual property and the equity of all non-debtor subsidiaries, which most significantly captures the borrower's intellectual property, expressly carved out of Structural's collateral, other than the litigation IP that constitutes prepetition litigation collateral
  • Junior liens under 364(c)(3) on the prepetition structural collateral, solely to the extent the court determines Structural's claims are valid, secured and perfected, and on the prepetition litigation collateral behind the litigation financing parties' first-priority liens
• The DIP liens may not be subordinated to or made pari passu with any other lien, including liens preserved under 551, liens arising after the petition date, governmental liens and intercompany liens.
• The motion's disclosure chart reports no roll-up, cross-collateralization, recharacterization of prepetition debt as postpetition debt, priming of secured liens without the lienholder's consent, or funding of non-debtor affiliates. The proposed interim order nonetheless grants the DIP liens under 364(d) as well as 364(c)(2) and (c)(3) and grants adequate protection under 364(d)(1), and the term sheet describes a 364(c)(3)/(d)(1) lien on all DIP collateral senior to every other valid lien except the litigation financing parties' and Structural's, with adequate protection covering diminution from the subordination of existing liens to the DIP liens.
• Until the DIP obligations are paid in full, the DIP Lender is deemed loss payee and additional insured wherever the litigation financing parties are, and the cash proceeds of any 364 financing the debtors or a trustee obtain in violation of the DIP documents must, after the Carve Out, be turned over to the DIP Lender.

Avoidance Actions

• No liens are granted on avoidance actions; the DIP liens and superpriority claims reach proceeds or property recovered from avoidance actions, by judgment or settlement, only upon entry of the final order.
• The litigation financing parties' and Structural's 507(b) adequate protection claims are payable from the unencumbered collateral, which the proposed interim order defines to include avoidance proceeds upon entry of the final order.

Carve Out

• The DIP liens and superpriority claims, and the adequate protection liens and claims, are subordinate to a Carve Out consisting of the sum of:
  • statutory U.S. Trustee and clerk of court fees
  • $25,000 of fees and expenses of a trustee under 726(b)
  • unpaid allowed professional fees of the debtors' and any committee's professionals incurred before delivery of a Carve Out Trigger Notice, whether or not budgeted and whether invoiced after the trigger date
  • $175,000 of allowed professional fees of debtor and committee professionals incurred on or after the first business day following delivery of a Carve Out Trigger Notice
• The DIP Lender may deliver a Carve Out Trigger Notice on and during a continuing event of default. The notice operates as a demand that the debtors use cash on hand to fund a reserve for unpaid pre-trigger professional fees and then a second reserve equal to the post-trigger cap, and as a deemed draw request in the amount of the post-trigger cap, which the DIP Lender must fund on the next business day notwithstanding any event of default, unsatisfied funding condition, termination of commitments or occurrence of maturity. All carve-out funding becomes a DIP obligation secured by the DIP collateral, post-trigger payments of allowed professional fees reduce the Carve Out dollar for dollar, and the DIP Lender retains a superpriority lien on any unused carve-out amounts.

Budget and Permitted Variances

• Variance covenant: under the proposed interim order, weekly overall disbursements may not exceed the approved budget by more than 10%, and on a rolling four-week basis no individual line-item disbursement may exceed budget by more than 15% or $10,000, whichever is greater; the motion's summary chart describes both tests as 15% measured weekly, and the term sheet sets a 10% overall and 5% per-line-item limit for any one-week period. Any variance beyond the permitted variance is an event of default.
• The debtors may reserve budgeted professional fees weekly, reconciled to actuals upon billing and court approval, and may carry a favorable weekly variance forward within the same line item until an updated budget is approved.
• Reporting: a weekly variance report comparing actual to budgeted disbursements, due on the third business day of each week to the DIP Lender, the litigation financing parties and any committee, plus a revised cash forecast for the DIP Lender's approval beginning the seventh day after entry of the interim order and monthly thereafter.
• The motion and proposed interim order describe the initial 13-week budget as prepared and delivered to the DIP Lender, but the budget exhibit attached to the filing is marked to come.

Conditions to Funding

• Interim funding turns on commencement of the cases, an executed term sheet, entry of an interim order acceptable to the DIP Lender within three business days of the petition date and first-day orders acceptable to it, delivery of the initial budget and a borrowing request, evidence of corporate authority, perfection of the DIP liens, satisfaction of applicable milestones, accuracy of representations, absence of default, confirmation that amounts owed to governmental entities have been or will be paid in the ordinary course other than as disclosed to the DIP Lender, and payment of the DIP Lender's fees and expenses out of the interim proceeds; the plan term sheet condition, or alternatively the seven-day plan filing, applies only to the additional draw.
• The final amounts additionally require an executed definitive DIP credit agreement and related security documents, entry of an acceptable final order within 30 days of the petition date, the DIP Lender's review of first- and second-day pleadings, deposit and securities account control agreements and other perfection and insurance deliverables, and DIP Lender approval of any budget amendments; every borrowing after the interim amounts also requires that no case has been dismissed or converted, no trustee or examiner with expanded powers has been appointed, the milestones have been met and the DIP orders remain in full force.

Covenants

• The term sheet describes its affirmative and negative covenants as usual and customary, built around budget compliance, reporting and the milestones. The debtors must deliver pleadings material to the DIP Lender at least three calendar days before filing, notify the DIP Lender of any default within two business days, join any new subsidiary within seven days, and give notice of inventory returns or disputes exceeding $25,000. They may not settle material litigation without the DIP Lender's consent, dispose of assets outside permitted transfers, enter agreements requiring payments exceeding $5,000, purchase capital assets beyond $50,000, change name, jurisdiction or principal place of business without 20 days' notice, grant additional liens or negative pledges, make junior debt payments, pay dividends or distributions, enter affiliate transactions outside budgeted ordinary-course compensation, or permit transactions resulting in a change of more than 50% of ownership.
• The debtors must pursue a plan acceptable to the DIP Lender, but may pursue an alternative Chapter 11 plan provided it pays the DIP obligations and the applicable prepetition litigation financing obligations in full in cash no later than the maturity date.
• Proposing or supporting a plan or sale of all or substantially all assets that is not conditioned on indefeasible payment in full of the DIP obligations, including by credit bid, and is not supported by the litigation financing parties, constitutes an event of default absent the written consent of the DIP Lender and those parties.

Events of Default

• The term sheet's general events of default include failure to pay principal or interest when due, failure to maintain the debtors' assets, covenant breaches, failure to comply with the milestones or the budget, use of proceeds other than as budgeted, and failure to pay the DIP Lender's fees and expenses; defaults carry a five-calendar-day cure period other than payment, milestone, budget and bankruptcy defaults.
• Bankruptcy events of default include:
  • a written assertion by any debtor or affiliate that a DIP credit document or prepetition financing document is invalid or impaired
  • entry of an order dismissing or converting any case, or a filing seeking that relief
  • appointment or election of a trustee, responsible officer or examiner with powers beyond 1106(a)(3) and (4), other than a fee examiner, without the DIP Lender's consent
  • entry of an order staying, reversing, vacating or modifying either DIP order, or a filing seeking one
  • stay relief permitting a third party to foreclose on assets securing the facility on a first-priority basis
  • a final order charging the DIP collateral under 506(c) against the DIP Lender, requiring disgorgement, or resulting in marshaling of DIP collateral
  • any challenge by the debtors to the DIP liens or to liens granted under the prepetition financing documents
  • entry of an order authorizing alternative 364 financing that would not repay the facility in full in cash, or use of cash proceeds of DIP collateral without consent
  • termination of exclusivity, or the debtors' request for, consent to, or failure to oppose it
  • proposal, filing or support of a non-consensual plan or sale
  • commencement of any other insolvency proceeding
  • an order granting liens equal or senior to the DIP liens, or superpriority claims pari passu with or senior to the DIP claims
  • non-compliance with either DIP order
  • commencing, joining or participating as an adverse party in any 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 and Stay Modification

• The automatic stay is modified to the extent necessary to implement the DIP orders and documents. On an unwaived event of default the DIP Lender may deliver a termination notice, which may be by email, on not less than three business days' notice to the debtors' lead restructuring counsel, counsel to each litigation financing party, any committee and the U.S. Trustee, and then terminate the debtors' use of cash collateral, terminate the facility as to future funding without affecting the DIP liens or obligations, declare all DIP obligations immediately due, and charge the default rate.
• Under the termination-notice track in paragraph 6(d), the debtors, any committee or any party in interest may seek an emergency hearing during the notice period, to which the DIP Lender consents, to contest whether a default occurred or to seek non-consensual use of cash collateral. Under the Carve Out Trigger Notice track in paragraph 6(e), only the debtors and any committee may seek an emergency hearing, solely to contest whether a default occurred, the litigation financing parties may also restrict cash collateral use, and the debtors may keep using cash collateral solely to make payroll and fund critical expenses necessary to preserve the litigation collateral in accordance with the budget. Absent a contrary order, the 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 impairing those remedies.
• The proposed order defines the remedies notice period twice: three business days running from a termination notice in paragraph 6(d), and five business days running from a Carve Out Trigger Notice in paragraph 6(e).

Adequate Protection

Prepetition Litigation Financing Parties

• Replacement liens on the prepetition litigation collateral for any diminution in value, subordinate to the DIP liens, the existing prepetition liens and the Carve Out.
• Allowed 507(b) superpriority claims to the extent the replacement liens prove insufficient, payable from and with recourse to the unencumbered collateral and its proceeds, subordinate only to the Carve Out and the DIP superpriority claims.
• Payment in cash of all reasonable and documented fees and out-of-pocket expenses, including professional fees, subject to the invoice review procedure.
• Maintenance of insurance on the collateral and delivery of the full reporting package provided to the DIP Lender, including budget and variance reporting, which continues after the DIP obligations are paid in full.

Structural

• The same replacement liens and 507(b) superpriority claims, together with maintenance of insurance on its collateral, but solely to the extent of the validity and security of Structural's perfected interest in the prepetition structural collateral, and without the professional fee payments or reporting package extended to the litigation financing parties.

Restrictions on Prepetition Secured Parties

• While DIP obligations remain outstanding, both groups may not foreclose on or enforce against the DIP collateral, are deemed to consent to any disposition or lien release permitted under the DIP documents, may not perfect except as the order permits or applicable law requires, must deliver releases and termination statements at the debtors' expense for permitted dispositions, and must segregate and hold in trust for the DIP Lender any proceeds of unencumbered collateral they receive.

Estate Stipulations, Releases and Challenge Period

• The debtors stipulate that the prepetition litigation financing obligations and liens are valid, enforceable, perfected and unavoidable, that the estates hold no claims against those parties, and that those parties never controlled the debtors. Effective upon entry of the final order, the debtors and their estates release the litigation financing parties (Crane 2, HC 1 and Security Finance), the DIP Lender and each of their representatives from all claims arising on or before entry of the interim order that relate to the prepetition litigation financing documents, the DIP facility and loans, or their negotiation, other than claims a court of competent jurisdiction finds resulted from bad faith, fraud, gross negligence or willful misconduct. The term sheet also contemplates stipulations and releases covering a "Prepetition Bridge Note" that the filing never identifies.
• The stipulations bind the debtors irrevocably and bind all other parties in interest unless a challenge is filed within the applicable period:
  • 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 to object to plan confirmation
  • for a Chapter 7 or Chapter 11 trustee appointed before the period runs, the later of 60 calendar days after entry of the interim order or 30 calendar days after the appointment
  • in each case, any later date agreed by the DIP Lender or the litigation financing parties, or set by the court on a motion to extend
• No committee had been appointed as of the filing, so the committee clock has not started. A committee may spend up to $25,000 of DIP proceeds or collateral investigating, but not prosecuting, the litigation financing parties' claims and liens, and no estate funds may be used against the DIP Lender. Because Structural's asserted liens are described but not stipulated to, the challenge machinery reaches only the litigation financing parties' position.

Waivers

• Subject to entry of the final order:
  • Section 506(c): no costs or expenses of administering the cases or any successor case may be charged against the DIP collateral, including cash collateral, or the prepetition litigation collateral, and the debtors waive any right to surcharge.
  • Section 552(b): the equities-of-the-case exception will not apply to the litigation financing parties with respect to proceeds, products, offspring or profits of the DIP collateral, including the prepetition litigation collateral; the motion's chart and the term sheet frame the same waiver in the DIP Lender's favor.
  • The equitable doctrine of marshaling will not apply to the DIP Lender or the litigation financing parties, and the DIP Lender may exercise remedies without first exhausting its rights against any particular collateral or party.
  • The borrowers and their estates waive any claim under 552 or 726 to avoid the DIP liens on property they later acquire or to surcharge costs of preserving, protecting or realizing on the DIP collateral.

Indemnification

• The debtors indemnify the DIP Lender, its affiliates and their officers, directors, employees, agents, advisors and representatives against all claims, damages, losses, liabilities and expenses arising out of the transactions contemplated by the term sheet; the attached term sheet's indemnity carries no carve-out, while the motion's summary chart, attributing its text to the term sheet, describes a borrower indemnity that excludes the indemnified party's gross negligence, fraud or willful misconduct and applies whether or not the debtors or their creditors bring the proceeding. The proposed interim order extends the indemnity to the litigation financing parties solely with respect to a challenge and subject to the final order, provides that no indemnified person is liable to the debtors, their shareholders or creditors except for gross negligence or willful misconduct found in a final non-appealable judgment, and, subject to the final order, bars special, indirect, consequential and punitive damages claims against any indemnified person or debtor.