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Papa John's reached a settlement agreement with its founder John Schnatter, signaling an end to the acrimonious public battle between the pizza chain and its former chairman.
The company said it would cooperate with Schnatter to identify a mutually acceptable independent director, who would not be affiliated with activist hedge fund Starboard Value or Schnatter, according to a Tuesday regulatory filing.
Early last month, Papa John's accepted a $200 million investment from Starboard in return for a nearly 10 percent stake, while also naming the hedge fund's Chief Executive Jeffrey Smith as its chairman. Smith is credited with turning around Olive Garden's parent company Darden Restaurants.
The embattled pizza chain rejected a similar competing offer from Schnatter, who said in an SEC filing at the time that he was evaluating legal remedies.
"I'm happy that we were able to enter into this agreement and allow the new leadership being implemented by Jeff Smith and Starboard to help Papa John's regain its strength and market position," Schnatter said in a statement to CNBC.
Schnatter, who holds a roughly 31 percent stake in the company, would resign from the board if the independent director is appointed before the 2019 annual stockholder meeting, slated for April, Papa John's said. Otherwise, his term would expire at the meeting, and the terms of the settlement require that he withdraw his nomination for re-election.
For his part, Schnatter has agreed to dismiss two lawsuits that he filed against the company he founded in a bid to regain control after his ouster last summer. He resigned as chairman in July after reports he had used a racial slur on a media training conference call.
In December of 2017, he stepped down as CEO following criticism for comments he made on the quarterly conference call with analysts about the NFL's leadership. At that time, Papa John's was the official sponsor of the football league.
The public relations crises led to a sharp decline in North America sales for the company, which saw same-store sales in the region plunge 7.3 percent in 2018.
Papa John's, which is forecasting lagging sales in the first half of 2019, blamed the negative publicity for its weak performance. Last year, it spent $5.8 million on reimaging costs, which included removing Schnatter's image from its marketing materials and pizza boxes.
— Reuters contributed to this reporting.