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Yahoo Settles With Carl Icahn; Icahn To Control 3 Of 11 Seats; Jonathan Miller Likely On

Joseph Weisenthal
paidContent.org
Monday, July 21, 2008 3:07 PM

So much for an exciting battle? Yahoo ( NSDQ: YHOO) has announced a settlement with Carl Icahn that will see Icahn himself elected to the company's board at the upcoming meeting. Following the August 1 shareholder meeting, the board will then be expanded to 11, with the extra two board members appointed by the board from a list recommended by Icahn. That list includes the eight remaining members of the previous Icahn slate, which includes Mark Cuban, plus Jonathan Miller of Velocity Interactive. All told, Icahn will control 3 of the 11 seats. Existing board member Robert Kotick will stand down to make way for Icahn.

In recent days, Icahn's chances for a full board victory began to grow quite dim. A never ending rally of back and forth press releases, culminating in a last-ditch deal with Microsoft ( NSDQ: MSFT) last weekend confirmed that Icahn had no plan B, and so would be fully at the mercy of Microsoft, were he to have won. Last week's announcement from Legg Mason's Bill Miller, that he would support the incumbent slate, was a major blow. Miller did, however, support the idea of a compromise board. Also, the idea of a compromise was floated by activist investor Eric Jackson, though it was seen as unlikely. It's not clear how long this deal has been in the works, but it was just Friday that Yahoo put up a new page devoted to promoting its campaign and trashing Icahn (speaking of which, how long will they keep it online?). Jerry Yang even sent a video around to employees tell them about it. Meanwhile, shares of Yahoo areticking downward slightly in pre-market actiondown over 3 percent in early action.

Icahn's statement from the release: "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. While I continue to believe that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo!'s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders. I believe this is a good outcome and that we will have a strong working relationship going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made." Full release after the jump.

Icahn Settlement Release: Yahoo! Inc. , a leading global Internet company, announced today that it has reached an agreement with Carl Icahn to settle their pending proxy contest related to the Company's 2008 annual meeting of stockholders.

Under the terms of the settlement agreement, eight members of Yahoo!'s current Board of Directors will stand for re-election at the 2008 annual meeting: Roy Bostock, Ronald Burkle, Eric Hippeau, Vyomesh Joshi, Arthur Kern, Mary Agnes Wilderotter, Gary Wilson and Jerry Yang. In view of the settlement agreement with Mr. Icahn, and the termination of the proxy contest, Robert Kotick has decided not to stand for re-election to the Board at the 2008 annual meeting.

Following the 2008 annual meeting, the Yahoo! Board will be expanded to 11 members. Carl Icahn will be appointed to the Board and the remaining two seats will be filled by the Board upon the recommendation of the Board's Nominating and Governance Committee from a list of nine candidates recommended by Mr. Icahn, which includes the eight remaining members of the Icahn slate of nominees and Jonathan Miller, currently a partner in Velocity Interactive Group and former Chairman and CEO of AOL.

As part of the settlement agreement, Mr. Icahn, who owns an aggregate of 68,786,320 shares, or 4.98% of Yahoo! common stock, has agreed to withdraw his nominees for consideration at the annual meeting and to vote his Yahoo! shares in support of the Board's nominees.

"We are gratified to have reached this agreement, which serves the best interests of all Yahoo! stockholders," said Yahoo! Chairman Roy Bostock. "We look forward to working productively with Carl and the new members of the Board on continuing to improve the Company's performance and enhancing stockholder value. Yahoo! is a world-class company with an extremely bright future, and collaborating together, I believe we can help the Company achieve its ambitious goals."

"This agreement will not only allow Yahoo! to put the distraction of the proxy contest behind us, it will allow the Company to continue pursuing its strategy of being the starting point for Internet users and a must buy for advertisers," said Yahoo! Co-founder and Chief Executive Officer Jerry Yang. "No other company in the Internet space has our unique combination of global brand, talented employees, innovative technologies and exceptional assets, attributes that will help us take advantage of the large and growing opportunity ahead of us. I look forward to working together with our new colleagues on the Board to make that happen."

Mr. Icahn said, "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. While I continue to believe that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo!'s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders. I believe this is a good outcome and that we will have a strong working relationship going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made."

In response to Mr. Kotick's decision to step down from the Board, Mr. Bostock said, "I would like to personally thank Bobby for his dedicated service to Yahoo! these past 5 years. Bobby has been a valuable resource to our Board and the Company and we are grateful for his contributions. He wanted to help see the Company through this recent chapter, but made it clear to me that once the proxy contest was resolved, he was eager to focus his efforts on his work as CEO of the newly merged Activision ( NSDQ: ATVI) Blizzard and his other business and civic pursuits."

The Company intends to file the full text of the settlement agreement later today with the Securities and Exchange Commission, and will also file and mail to its stockholders, supplemental proxy material.

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