(Reuters) - Papa John's founder John Schnatter is leaving its board of directors as part of a settlement that appeared to resolve a bitter dispute for control of the world's third-largest pizza chain.
The company said in a regulatory filing on Tuesday it would co-operate with Schnatter to find a mutually acceptable independent director, who would not be affiliated with Schnatter or hedge fund investor Starboard Value LP, which owns a nearly 10 percent stake.
Schnatter, who owns about 30 percent of the company's shares, would resign from the board if the independent director is appointed before the annual stockholder meeting slated in May, Papa John's said.
The deal comes after the founder stepped down as chairman last summer, following reports he had used a racial slur on a media training conference call.
Schnatter has filed several lawsuits against the company in a bid to regain control. In January, he claimed a victory when a court ordered the board to give him some internal documents, including text messages related to his firing, which Papa John's had until then refused to share.
As part of the agreement, Papa John's has agreed to share with Schnatter all of the company's records, giving him the option to sue if those documents revealed wrongdoing by the company, Schnatter said in a statement.
Schnatter, in return, has agreed to dismiss two lawsuits.
"(I 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," Schnatter said.
The company also said it would remove an "acting in concert" provision of a "poison pill" adopted by the board to thwart previous takeover attempts by Schnatter, suggesting that the founder could engage with bidders that had expressed interest in speaking with him.
Still, the bad press has taken a toll on the pizza chain, which said last week North America same-restaurant sales fell 7.3 percent in 2018 and that sales would lag into the first half of 2019.
Its shares were up about 3 percent in morning trade on Tuesday.