the timeout should not have been granted however once the whistle was blown it can be granted.
i would go back to the baseline with the team able to run endline.
never seen this -- however if this WERE a real game (HS) my pregame inclued official on ball should be the one to call TO's in the event of tieups/balls being juggled etc. off ball official should only grant TO after he sees the coach/player request one and visually confirms PC.
tell the B coach to just roll the ball up again as the clock is already stopped

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