The company co-founded by Chris Kyle, the man behind Academy Award-nominated "American Sniper," seeks approval of a deal that would bar it from using his name and image.

Craft International LLC is set on Feb. 17 to request clearance to implement a settlement with Kyle's widow, Taya, as well as the dismissal of its bankruptcy case.

After much rancor between the two parties, the Dallas combative training company has reached a deal with equity holder Taya under which Craft and its other shareholders would transfer all the intellectual property and the logo of the company to Taya and her children with the late sniper.

Additionally, the debtor and its principals have agreed to stop using Chris' "name, likeness and image for any purpose," according to a Jan. 16 motion outlining the settlement.

Craft would be wound down under the deal.

Craft noteholder Hayman Partners Ltd., which also holds the mortgage on Taya's home, would allow her to live there rent-free until Oct. 30, when she could buy the house outright for $314,612, vacate the residence or remain in the home provided she paid rent and vacated on 180 days' notice.

Taya also would pay Hayman $50,000 for one of her husband's sniper rifles that Hayman owns.

The deal would resolve any pending disputes between the parties and includes an agreement to request case dismissal, which Craft did in a Jan. 15 motion.

In its motion arguing for settlement approval, the debtor said it opted to move forward with the deal rather than continuing to rack up costly attorney fees.

"Naturally, a substantial amount of time and money is saved by the settlement," the company said. "Should this adversary [proceeding with Taya] go to trial, it would likely result in a substantial amount of discovery and multiple experts due to the intellectual property nature of the claims. By entering into the settlement, the parties save a significant amount of time and effort required to prepare for trial. Additionally, the debtor's subsequent dismissal saves the substantial expense and discovery, by both parties, related to a contested confirmation hearing. Thus, the settlement is a better outcome for all parties concerned."

"The company had not shut down," debtor counsel Seymour Roberts Jr. of Neligan Foley LLP said. "The company is still alive, but you can see where the intent of the company is going."

Roberts added, "If the settlement is approved, the company will have to wind down."

Roberts said he could not speak to the business plans of CEO Steven Young or COO Bo French if and when Craft wound down.

The settlement came together around the same time a movie based on Kyle's autobiography, "American Sniper: The Autobiography of the Most Lethal Sniper in U.S. Military History," won critical acclaim. The film, directed by Clint Eastwood and starring Bradley Cooper as Kyle and Sienna Miller as his widow, recounts how Kyle became the most lethal sniper in American military history, with 160 confirmed kills.

The latest deal is a complete departure from the fighting in which Craft, equity holders Young and French and Taya have been embroiled for some time.

Since Kyle's death -- he was shot by a fellow veteran at a shooting range that Craft has since used for its gun training classes -- Taya has fought for ownership of Craft with Young and French. (At the time of his death on Feb. 2, 2013, Taya alleged, her husband owned 85% of the company.)

In a July 17 disclosure statement, the debtor said it believed it has claims against Taya for tortious interference with business and other claims related to her efforts to publicize her dispute with Young and French.

In the disclosure statement, Craft said Kyle's books and related promotion were done as part of his job with the company and that it might pursue litigation to get its share of royalties, as well as potentially make royalty demands to the producers of the "American Sniper" film. (The company has not actually pursued this litigation.)

Taya on Dec. 23, 2013, sued Craft, Young and French in U.S. district court in Dallas, asserting the two other equity holders "hijacked" the company following her husband's death. In court papers, Taya said Young and French each owned 3% equity stakes in Craft.

Taya alleged Young and French had blocked her from reviewing the company's finances and accused them of fraud, negligence and civil conspiracy. She requested the defendants be blocked from attempting to purchase or take her equity in Craft or alter any of the company's books and records.

Taya noted the company's other members only had a 130-day window to buy Kyle's ownership following his death under an existing limited liability corporation agreement. Instead, she alleged, Young waited 10 months to offer $12,500 for the interests.

In an Aug. 27 adversary complaint filed in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas, she blasted Craft again, alleging the company had used and continued to use Kyle's name, voice, signature, likeness and image to boost business without permission. She sought a permanent injunction barring the use of her husband's likeness.

In a Sept. 29 response, Craft maintained Taya lacked standing in the case, as the pictures of Chris that the debtor used in promotion materials are owned by a clothing manufacturer that licenses those pictures to the debtor.

Additionally, the company maintained Chris lived in the public domain and that the use of his pictures and name on its website were "strictly incidental."

The company added, "This adversary proceeding is a power play by Taya to deny the debtor of its very own history and to further attempt to disable the debtor's business operations going forward."

Craft said Taya was promoting using another Chris Kyle logo, one with a frog, that competed with the debtor's skull logo.

"She is using this litigation as a business ploy to enhance her new logo's economic position in the marketplace," the company said.

Judge Barbara J. Houser of the Dallas bankruptcy court ultimately sided with Taya and on Oct. 23 signed an order for preliminary injunction, temporarily banning Craft from using Chris' image on its website and marketing materials.

On May 30, Craft filed for Chapter 11 for a second time in Dallas. An earlier Chapter 11 case, filed on Feb. 24, was dismissed on May 30 due to a paperwork mixup.

Taya had, however, sought dismissal of the first case as well; in a May 2 motion, she reiterated her claims the bankruptcy had been filed in bad faith and with the sole purpose of wiping out the equity interest owned by Kyle's estate.

In its most recent disclosure statement, Craft said Taya was an assignee of her husband's rights under an existing LLC agreement and was not entitled to any management or voting power. The debtor said it addressed any consent issues by having the debtor's current members sign the new Chapter 11 petition.

In its disclosure statement, Craft blamed its bankruptcy on an inability to pay its debts as they came due, the loss of two independent contractors, the loss of training contracts, a lack of cash and a substantial decrease in merchandise sales. The company said all the troubles could be traced to the state court litigation filed by Taya.

The related reorganization plan would have handed over equity in the reorganized debtor to unsecured creditors owed $2.96 million. Existing equity interests, including those assigned to Taya, would have been canceled.

Craft provides weapons, tactical medical and driving and security training at facilities it pays to use but does not own.

In court papers, it reported $129,540 in assets and $2.96 million in liabilities.

Besides Roberts, Patrick J. Neligan Jr. at Neligan Foley is debtor counsel.

Taya Kyle's lawyer, Gerrit M. Pronske at Pronske Goolsby & Kathman PC, couldn't be reached for comment Thursday, Jan. 29.