Yahoo! has sweat its way through missteps and missed opportunities, but now the Internet portal has come up with a settlement with one of its chief antagonists.  On Monday, Yahoo! (nasdaq: YHOO - news - people ) announced it had reached an agreement with activist investor Carl Icahn that puts the billionaire and two of his nominees on an expanded board of directors, and averts a battle for control at the Aug. 1 shareholder meeting.  The settlement is the latest development in the roller coaster saga over Microsoft (nasdaq: MSFT - news - people )'s attempts to take control of the Web portal and comes only days after Yahoo! Chairman Roy Bostock and Chief Executive Jerry Yang of Yahoo! sent a letter to shareholders Thursday calling Microsoft actions "stupefying", and tearing into Icahn for his lack of knowledge of the Internet business. (See "Yahoo! Gets Annoyed")  Under the agreement, eight members of the current board will seek re-election, while Icahn, who owns about 5% of the company, will be appointed to the board. Some time after the meeting, the board will be expanded, and Icahn will then get two of his confederates selected as new board members. These two seats will be filled based on a list of nine candidates he recommends. Prior to the settlement, he had planned to place an entirely new, handpicked board before investors for a vote at the Aug. 1 meeting.  Board member Robert Kotick will not stand for re-election, though. After he steps down and the Icahn slate is added, Yahoo!'s board will end up with 11 members.  In a statement, Icahn expressed his belief that a sale of the company still merits "full consideration."  Earlier this year, Microsoft had tried to buy Yahoo!. After Yahoo! demurred, Icahn stepped in in an attempt to restart negotiations. Yahoo!'s shares dropped 2.5%, or 57 cents, to $21.88 in premarket trading.
The activist investor will become a board member, and eventually two of his picks will join him on the board, affording him more clout as he pursues a sale of the company.