Sunnyvale, Calif. - Heading off a likely proxy battle, Yahoo (NASD: YHOO) said on Monday that it has reached a settlement with dissident investor Carl Icahn that will give the billionaire a seat on the company's board. Icahn, who owns a 5% stake in the company, will fill a seat, and will recommend nine candidates to fill two other seats.

Under the agreement, eight members of Yahoo's current board will stand for re-election at the company's annual meeting next month.

They include Chairman Roy Bostock, Ronald Burkle, Eric Hippeau, Vyomesh Joshi, Arthur Kern, Mary Agnes Wilderotter, Gary Wilson and CEO Jerry Yang.

Among candidates proposed by Icahn to fill two of these seats is Jonathan Miller, currently a partner in Velocity Interactive Group and formerly the chairman and CEO of AOL.

Icahn, upset about Yahoo's earlier refusal to accept a takeover bid from Microsoft, had threatened to put his own slate of nominees up for control of the board.

"I am very pleased that this settlement will allow me to work in partnership with Yahoo's board and management team to help the company achieve its full potential," said Icahn, adding that he remains in favor of a full or partial sale of the company.

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