John Schnatter, founder and former CEO of Papa John’s International Inc., on Monday reached a settlement with the pizza company, agreeing to leave the board after he has helped to name a successor, according to a settlement filed with the SEC.
The agreement, which comes after months of legal battles and a war of words between the two parties, said Schnatter has dropped all legal claims against the Louisville, Ky.-based pizza chain, and will be replaced with his successor following the annual shareholders meeting.
Schnatter will remain the largest shareholder at Papa John’s and still retains about 31 percent of the company’s stock, according to his representative.
In February 2019, Papa John’s accepted a $200 million investment from private equity firm Starboard, and put in place the new “acting in concert” provision of a poison pill policy which would have would have compelled new members of the board — including Starboard’s executives — to vote in favor of the company’s preferred directors. In February, Schnatter had amended the original lawsuit he had filed against the company to reflect those new provisions.
As part of the settlement, Papa John’s has agreed to remove that portion of a poison pill provision, in addition to providing the “books and records” as requested by Schnatter in the January 2019 ruling by a Delaware state court judge, which found the company’s founder was entitled to internal documents.
“I founded Papa John’s, built it from the ground up and remain its largest shareholder,” Schnatter said in a statement. “I care deeply about its employees, franchisees, and investors and am thankful that I’ve been able to resolve these important issues, and that we can all focus on the company’s business without the need for additional litigation.”
A Papa John’s spokesperson declined to comment on the settlement.
Schnatter had previously resigned as chairman in July 2018 following accusations of racist language, including reports that he had used a racial slur during a media agency meeting. Previously, Schnatter had stepped down as CEO in December 2017 following a controversial earnings call in which he blamed NFL players’ protests for his company’s declining sales.
Since then, Papa John’s has been working to distance itself from the former CEO and regain public trust as it worked to stem slipping same-store sales. For the most recent quarter, ended Dec. 30, 2018, same-store sales were down 8.1% at North American stores.
As of Dec. 30, Papa John’s has 5,303 locations worldwide.
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