A rancorous fight between John Schnatter, the former chairman of the Papa John’s pizza chain, and the company he founded appears to have been resolved, with Mr. Schnatter agreeing to give up his board seat after he helps choose an acceptable successor.
In a settlement laid out in a securities filing on Tuesday, Mr. Schnatter and the company moved toward ending the dispute, which has simmered since his acrimonious departure last July as the leader of one of the world’s largest pizza delivery chains.
Mr. Schnatter’s exit came after a report that he had used a racial slur in a comment about black people, a statement he subsequently said in court had been mischaracterized and was actually “anti-racist.”
The company, which Mr. Schnatter started about 35 years ago, quickly scrubbed his ubiquitous image from marketing and other corporate materials and evicted him from Papa John’s headquarters in Louisville, Ky.
Mr. Schnatter, who is Papa John’s largest shareholder, later said he had been forced to step down and called for an investigation into the circumstances surrounding his departure. The company quickly adopted defensive measures to guard against a hostile takeover attempt. The showdown prompted Mr. Schnatter, who kept his board seat after resigning as chairman, to sue the company multiple times.
In the securities filing, Papa John’s said Mr. Schnatter had effectively agreed to break his ties to the company by relinquishing his board seat after a successor is selected and to not seek re-election. He will also drop two lawsuits he filed against the company over internal documents and a sublease agreement.
The company said it would jettison a provision of the so-called poison pill it adopted last summer that limited Mr. Schnatter’s communications with shareholders. Papa John’s also agreed to give Mr. Schnatter the records he sought and left him with the right to sue the company again if the documents showed wrongdoing.
Before his resignation as chairman, Mr. Schnatter in 2017 had stepped down as chief executive after drawing fire for saying the National Football League’s handling of player protests against racism and police brutality was to blame for a slump in Papa John’s sales. The company had a sponsorship deal with league at the time, which it later gave up.
In a statement on Tuesday, Mr. Schnatter said the agreement with Papa John’s would help “avoid a costly and expensive proxy contest by identifying a mutually acceptable and independent director.”
The company’s stock was up more than 3 percent by midday. It had lost more than a third of its value since Mr. Schnatter made his comments about the N.F.L.
Sales at North American stores open at least a year fell 7.3 percent last year, Papa John’s said last week. The company has predicted that sales in the region would drop as much as 5 percent this year, in part because of negative publicity and consumer sentiment linked to Mr. Schnatter.
The activist investor Starboard Value said this month that it would invest $200 million in Papa John’s, with an option to invest $50 million more. In connection with the investment, Starboard’s chief executive, Jeffrey Smith, who is known for revitalizing Olive Garden’s parent company, Darden Restaurants, became the pizza chain’s chairman.
Mr. Schnatter said the agreement with his former company would allow Mr. Smith’s team to “help Papa John’s regain its strength and market position.”