Xyience's bankruptcy proceeding is set to come to a close April 1 with a public auction, but the dispute between dissident shareholders and the company's directors appears to be far from over.

Last December shareholders, led by Ronald Soloman, who controls 35 percent of Xyience's outstanding shares by proxy, filed suit against Xyience and its directors for breach of fiduciary duty to the company's shareholders.

On March 13 the plaintiff shareholders amended their complaint to include Fertitta Enterprises and Zyen, private companies owned by UFC co-owners Frank and Lorenzo Fertitta, as defendants. The complaint alleges that Zyen and Fertitta Enterprises aided and abetted Xyience's corporate directors in breaching their fiduciary duty to shareholders as well as engaged in a conspiracy to defraud shareholders.

The source of the allegations is the Fertittas' $12 million loan to the company last fall. According to the complaint, the loan was repayable in one year with a 15-percent interest rate and collateralized by all of Xyience's assets. The terms also allegedly included warrants for 10 percent of capitalization of the company at one cent per share and 50 percent of the company's equity if Xyience failed to repay.

Thus in the event of default, the Fertittas could purchase 60 percent of Xyience's stock for a nominal purchase price. Additionally, the default provision would also be triggered if the shareholders voted to remove any members of the board.

The complaint alleges that this loan "was neither in the best interests of the shareholders or the company. Indeed, the Fertitta funding did not fund Xyience. Rather, it provided Xyience funds that were immediately used to fund a debt owed to the Ultimate Fighting Championship, which is owned by the Fertittas."

It is also believed that Xyience directors Adam Frank and Kirk Sanford each received 4.2 million stock options under the deal that vested if there were a change in control of the company.

According the complaint, the Fertittas and Xyience's directors represented that the loan would be used "to meet [the company's] capital needs and fuel its growth."

As a result the Fertittas are accused of aiding and abetting breach of fiduciary duty because of their alleged knowledge that the loan was not for its stated purpose, not in the best interest of shareholders and would result in a breach of the fiduciary duty between the directors and shareholders.

During this period Xyience also executed a new sponsorship agreement with the UFC that the complaint alleges is "completely overpriced and less valuable [than] the prior agreement between Xyience and the UFC."

The complaint says that the UFC is to receive $32.4 million over the three-year term of the new agreement: $9 million in the first year, $11 million in the second and $12.4 million in the third.

Under the prior agreement, Xyience was the title sponsor with its marquee on the center of the mat at UFC events. The new agreement provided that after March 2008, Xyience would not be the title sponsor or appear on the center of the mat, would not be announced by the ring announcer, would not be announced as the title sponsor at commercial breaks and would no longer appear on fighters' clothing.

Adam Swift is the Editor of MMAPayout.com and a regular contributor to Sherdog.com.