What happened: Lululemon (LULU) stock popped 5% on Wednesday morning.

What’s behind the move: Lululemon and its founder, Chip Wilson, reached an agreement to settle a long-running dispute over the company’s board leadership.

The deal removes a potential obstacle ahead of the company’s shareholder meeting in June. One of the points of contention in the proxy battle between Wilson and Lululemon’s board was the selection of Nike (NKE) veteran Heidi O’Neill to take the CEO helm later this year.

“Lululemon now has a clear path forward for our incoming CEO, Heidi O’Neill, and our leadership team, as we continue to advance our strategies to foster strong brand health, reaccelerate growth, and deliver enhanced value for our shareholders,” Lululemon’s executive chair Marti Morfitt said on Wednesday morning.

As part of the agreement, the athleisure company will add two of Wilson’s nominees to its board: Laura Gentile, formerly of ESPN, and Marc Maurer, the former co-chief executive of sneaker maker On. A third new director is expected to be appointed by Oct. 1.

In exchange, Wilson has agreed not to disparage the company for 18 months.

What else you need to know: Earlier this month, Lululemon’s board issued a sharply worded statement pushing back against founder Chip Wilson’s proxy battle, escalating the feud into a public fight over the company’s future direction.

Lululemon has struggled to turn around amid changing consumer fashion tastes and stiff competition. The stock is down roughly 38% year to date. Shares sank in April after the company announced O’Neill as its next CEO.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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