In a preemptive move to dissuade any attempt at a hostile takeover, Papa John’s board of directors enacted a stockholder rights plan and issued an announcement of such Sunday evening, following a board meeting.

The multiunit chain was down 5.6 percent at the start of the trading day and continued to slide with shares worth $46.06 at its lowest point, representing more than a 10 percent drop. Papa John’s stock has dropped nearly 40 percent over the past year.

The shareholder rights plan is a not-so-thinly veiled attempt to block an acquisition by founder, former CEO, and former chairman of the board John Schnatter. The so-called poison pill lays out conditions that will dilute the value of Papa John’s stocks should any party attempt to acquire 15 percent or more of common shares. Such an action would open the door for shareholders to purchase additional stocks at a discount, thus decreasing each individual share’s value.

Schnatter and his affiliates own 30 percent of the shares in the namesake brand and are therefore grandfathered into the stockholder rights plan. If Schnatter’s shares bump up to 31 percent or greater, he forfeits that exemption.

According to the statement issued Sunday, the rights plan is meant to “protect the interests of the company and its stockholders by reducing the likelihood that any person or group gains control of Papa John’s through open market accumulation or other tactics without paying an appropriate control premium.”

The plan will remain in place until July 22, 2019, which the statement adds, gives the board time to “make informed decisions that are in the best long-term interests of Papa John’s and its stockholders.”

Indeed, Papa John’s has its work cut out for it even without further interference from its founder, who still sits on the board. Just last week, Forbes published a report chronicling a systemically toxic culture, wherein Schnatter was the perpetuator of inappropriate conduct and installed his loyal supporters in top positions to protect him from negative repercussions.

The brand’s woes first began last November when Schnatter blamed the NFL’s leadership for Papa John’s poor performance. The next month he stepped down as CEO and in February, the brand severed ties with the NFL with Pizza Hut taking its place. After a few months of relative quiet, Schnatter once again stirred up controversy. On July 11, Forbes reported Schnatter had used a racial slur during a conference call in May and within hours he stepped down as chairman of the board.

One week following his resignation, Schnatter wrote in a letter to the board of directors, that he regretted his decision to resign as chairman. According to reporting by The New York Times, his lawyer Patricia Glaser said that Schnatter was “not going quietly into the night.”

Stockholder rights plans are regularly employed as a means to ward off unwanted acquisitions. But, per The New York Times, it is rare for a company to use the poison pill as a proactive measure.

Finance, Pizza, Story, Papa Johns