CHICAGO — Motorola Inc. settled its proxy battle with Carl Icahn on Monday, agreeing to back two of the billionaire investor's nominees for its board of directors in exchange for his dropping litigation against the cellphone maker.
The agreement avoids a showdown at the company's upcoming annual meeting for what would have been the second straight year.
Motorola named Keith Meister, a managing director of Icahn investment funds, to its board and said it would nominate him and fellow Icahn nominee William Hambrecht for director slots. The agreement virtually ensures that both will be elected at the company's May 5 shareholder meeting.
Schaumburg, Ill.-based Motorola also will seek input from Icahn on the planned separation of its mobile devices unit and search for a chief executive for that business under the terms of the agreement.
Icahn agreed not to solicit proxies at the annual meeting, to dismiss litigation against the company and to vote his shares in support of all of the board's nominees.
Motorola still faces an uphill challenge with its troubled cellphone unit but said it was pleased to have reached the agreement with Icahn.
"We believe that this matter has been resolved in a manner that serves the best interests of our shareholders and prevents a costly and distracting proxy contest," Motorola spokeswoman Jennifer Erickson said. "We and Mr. Icahn share a common interest in positioning all of our businesses to deliver an enhanced shareholder value."
Motorola has floundered since the second half of 2006 because of flawed pricing and marketing strategies and the inability to follow up its blockbuster Razr phone with another hit.
New CEO Greg Brown, who succeeded Edward Zander in January, announced two weeks ago that the company would split its core handset unit from its other operations to form two publicly traded companies in hopes of reviving its main business.
Icahn -- who lost a proxy fight last year in which he sought a seat on the board -- forced another one this year by scooping up more shares at a depressed price and increasing his stake to 142 million shares, or 6.3% of those outstanding.