The group filed a motion for an order approving an agreed-upon stipulation that would resolve Regions' motion for a Chapter 11 trustee by appointing a chief restructuring officer. Dippin' also filed a motion seeking a second debtor-in-possession loan from Regions. Judge Thomas H. Fulton of the U.S. Bankruptcy Court for the Western District of Kentucky in Paducah signed the order approving both.

Through the motion, Dippin' withdrew its borrowing motion and Regions withdrew its trustee motion, with the option of filing a second trustee motion if the CRO is incapacitated or displaced, court documents show.

Under the terms of the agreement, Dippin' will have the continued right to use its cash collateral as long as it isn't in default.

Dippin' Dots can borrow an additional $1.25 million in new money from Regions for working capital, according to debtor counsel Todd Farmer of Farmer & Wright PLLC.

It can do so under the same terms as its first DIP, which was for $201,842. The loan will have an 11.5% interest rate and will mature on the closing of a sale or if Dippin' defaults, whichever comes first.

Jones will resign as a member of the board of directors and employee of the company. The CRO will assume Jones' authority and responsibilities. Jones will also be enjoined from using his shares in the company to take action or interfere with the CRO, court documents show.

Greg Charleston of Conway MacKenzie Inc. will be the CRO.

Regions Bank filed an emergency motion to appoint a Chapter 11 trustee on Feb. 24, alleging Dippin' hadn't complied with a cash collateral budget and that Jones was not acting in the best interests of the company or its creditors. Dippin' has submitted a revised budget, Farmer said.

According to Regions Bank, the Dippin' cash collateral order contains a provision that gives the lender the right to move for a Chapter 11 trustee if the debtor does not comply with its budget. Specifically, under the terms of the cash collateral agreement, Dippin' must not deviate by more than 10% from its proposed budget. Court documents show, however, that the debtor deviated by as much as 71.3%, Regions said.

Regions, owed about $10.8 million from prepetition loans and $201,842 from the original Dippin' DIP, also said it was unwilling to advance the company any more money unless Jones was replaced by a Chapter 11 trustee.

Regions Bank asserted Jones isn't allowing court-retained broker Harpeth Capital LLC to entertain offers for an asset sale and instead has directed the broker to focus on transactions that would allow Jones to maintain his equity and executive position at the company.

The lender said it learned at a Feb. 23 deposition, where Jones was supposed to produce his shares of nondebtor affiliate Dippin' Dots Franchising Inc., that he had sold 51% of those shares to Fischer Ventures LLC, which had also proposed giving the debtor a $2 million DIP loan.

Regions alleged the sale happened after Jones was served with the subpoena to show up with the shares.

Furthermore, Jones has instructed Harpeth to structure a transaction solely with Fischer, the bank alleged.

DDF and Dippin' have a trademark agreement, which gives DDF the exclusive right to establish franchised Dippin' Dots locations, according to court documents. Rejection of the agreement would yield immense value to the estate, according to Regions, because buyers interested in expanding the business could be reluctant to bid if Jones were still involved through DDF.

DDF owed Dippin' about $286,431 in intercompany accounts receivable, which Regions alleged Jones has not tried to collect. DDF paid Dippin' $240,411 last week, court documents show.

Jones also owes Dippin' $900,000 from an "officers loan," which also hasn't been collected, according to court papers. In addition, Jones has equity in nondebtor affiliates that owe Dippin' about $847,862, court documents show.

Jones doesn't have the incentive to collect the debts, Regions alleged in court papers.

In a response filed Feb. 28, Dippin' argued for denial of the trustee motion.

Dippin' attributed the budget deviation to $175,639 in unexpected freezer repairs after its main freezer stopped working in December.

Dippin' also asserted Jones sold the DDF shares to raise working capital for the debtor and that Regions didn't cite a statute under which Jones wouldn't have been allowed to transfer the shares.

Dippin' filed for Chapter 11 protection on Nov. 3.

Under terms of the cash collateral agreement, Dippin' has to formulate a consensual plan with Regions or sell its assets.

The original timeline for the sale gave Dippin' until Tuesday to file bidding procedures approved by Regions. Bidding procedures should be filed within the next seven days, Farmer said.

Jones invented Dippin' Dots in 1988, using a cryogenic encapsulation process he pioneered that flash-freezes ice cream in small beads. The process differs from the freeze-drying of food used by NASA for astronauts. As a result, the ice cream can still melt.

Regions counsel Brian H. Meldrum of Stites & Harbison PLLC declined comment.