Jerry Yang lives to fight another day.  

Less than two weeks before a proxy showdown with activist investor Carl Icahn, Yahoo agreed to a deal that will put Icahn on Yahoo's board.

Under an agreement announced today, the board of Yahoo will be expanded to 11 from 8 directors. Icahn will get a seat, and two candidates will be selected from a list recommended by Icahn. That list will include Icahn's slate of candidates. Icahn will vote his stake in favor of the board.

"We are gratified to have reached this agreement, which serves the best interests of all Yahoo stockholders," said Roy Bostock, the chairman of Yahoo. "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."

The single idea driving Icahn's proxy challenge was that the board of Yahoo had bungled an offer from Microsoft and that only replacing the board would lead to a sale.

Now that it is clear that Icahn will no longer be an agent provocateur for Steve Ballmer of Microsoft, a deal is less likely to happen soon. That may disappoint Yahoo shareholders today.

And Yahoo shareholders will be mindful of Icahn's less-than-stellar track record as a director of another technology company, Motorola.

Still, Icahn did not have much choice but to cut a deal. His chances of succeeding at the August 1 Yahoo shareholders meeting appeared slim, especially after a large and influential investor, Bill Miller of Legg Mason, said on Friday that he would vote his shares for the current board.

Not everyone was apparently happy about the deal with Icahn. Robert Kotick, the chief executive of games company Activision, is stepping down from the board.