Motorola to Back Two Icahn Board Nominees

Shares of Motorola are rising more than 3%.
By Robert Holmes ,

Motorola

(MOT)

and billionaire investor Carl Icahn are finally playing nice, having reached an agreement that could put two of Icahn's four nominees on the troubled handset maker's board of directors.

Motorola and Icahn said Monday that they have reached a deal that will see William Hambrecht and Icahn Enterprises' Keith Meister nominated for election to the company's board at the next annual shareholder meeting. Meister will begin serving on the board immediately.

Shares of Motorola were rising 37 cents, or 3.8%, to $10.04 on the news.

The surprise announcement comes two weeks after Icahn filed a lawsuit against Motorola as part of his continuing proxy battle. At the time, Icahn urged shareholders to elect Frank Biondi Jr. and Lionel Kimerling, in addition to Hambrecht and Meister, to the company's board. Icahn said stockholders need to elect all four candidates "to send a message to Motorola's management and remaining directors that the 'status quo' at Motorola and inside its boardroom is no longer acceptable."

Icahn has been trying to force change at Motorola for some time, particularly as the company has seen its share of the mobile-phone market eroded by rivals such as

Nokia

(NOK) - Get Report

and

Samsung

, and more recently by

Apple

(AAPL) - Get Report

and the iPhone.

Motorola is currently working to split its operations into two separate publicly traded companies. On March 26, the company announced it would seek to splinter off its handset unit. The remainder of the company will consist of a cable set-top box operation, a wireless networking infrastructure business and a security and government services venture.

As part of the settlement, all pending litigation between Motorola and Icahn will be dismissed. Motorola has also agreed to seek input from Icahn in connection with significant matters regarding the intended separation of the mobile devices business, including the search for a new CEO to head the operation.

Hambrecht and Meister will be allowed to communicate with Icahn, subject to certain confidentiality restrictions.

"We are pleased to have reached this agreement with Carl Icahn," said Motorola CEO Greg Brown. "We look forward to continuing the process we announced on March 26 to create two independent publicly traded companies and we are pleased to avoid a costly and distracting proxy contest."

"This is a very positive step for Motorola in that shareholder representatives will have strong input into board decisions affecting the future of our company," said Carl Icahn. "In addition, the Motorola board has also taken an important step forward for corporate governance in that the separated company which includes mobile devices will be essentially free from poison pills and staggered boards, both of which, in my opinion, serve to make democracy a travesty in corporate America."

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