Icahn, who owns 4.98% of Yahoo common stock, had been looking to unseat Yahoo’s board and CEO Jerry Yang.
Under the terms of the settlement, eight of nine current members of Yahoo’s board will stand for re-election at the annual meeting. Following the meeting, the Yahoo board will be expanded to 11 members. Icahn will be appointed to the board, and the remaining two seats will be filled by the board, chosen from a list of nine candidates recommended by Icahn. Jonathan Miller, currently a partner in Velocity Interactive Group and former chairman-CEO of AOL, is among those candidates.