Online Cost Per Action Advertising
Hydra, LLC was a member managed LLC which was in the business of providing, through the internet, on line cost per action advertising. A dispute arose among the three members of the LLC. The member which held a senior priority refused to allow the other members to proceed with business operations unless it was paid in excess of $2,000,000 along with other conditions. The members were willing to fund the operations of Hydra provided that the proceeds were not simply paid over to the holder of senior equity and, instead, would be used for business operations. Wells Fargo Bank, was also owed in excess of $4,000,000 which was secured by substantially all of the assets of Hydra. The holder of the senior equity interest was owed tens of millions of dollars refused. The other members then filed an action in the California Superior Court to dissolve Hydra and for the ex parte appointment of Joel B. Weinberg as the receiver. Immediately, the junior equity members sought to loan in excess of $1,000,000 to the receiver in the form of a receiver’s certificate which would be entitled to a priority junior to Wells Fargo Bank but senior to the recalcitrant holder of senior equity in Hydra. The court approved the borrowing ex parte and Hydra had the working capital it needed to remain viable. This provided a bridge during which the receiver was able to market the assets of Hydra and culminated in a court approved sale to the holders of the junior equity interests free of the interests of the senior all within 21 days of inception of the case. The net result was the company was preserved as a going concern free from the overreaching actions of the senior equity interest.