UPDATE 3-Motorola settles with Icahn, accepts board nominees

(Adds analysts' comments)

By Ritsuko Ando

NEW YORK, April 7 (Reuters) - Motorola Inc (MOT.N: Quote, Profile, Research) said on Monday it will support two of billionaire investor Carl Icahn's four proposed board nominees, settling a year-long proxy battle to turn around the struggling mobile phone company.

Shares of Motorola rose as much as 3 percent on the announcement, which also said that Icahn had agreed to drop all litigation against the company ahead of its May 5 shareholders meeting. Icahn owns about 6.4 percent of Motorola shares.

Motorola said it agreed to seek input from Icahn regarding its decision to split off its cellphone business and its search for a new chief executive for the division -- a direction it took under pressure from Icahn.

It appointed Keith Meister, managing director of the Icahn investment funds, to serve on the board, effective immediately. In addition, Meister and William Hambrecht, chief executive of WR Hambrecht & Co, will be nominated for election to the board at the annual meeting.

Meister's nomination was earlier rejected by Motorola. There was no mention of Frank Biondi and Lionel Kimerling, two others previously on Icahn's proposed slate.

Icahn, who has agitated for management change since acquiring Motorola shares in early 2007 and failed to win a board seat for himself last year, dropped all litigation against the company, Motorola said.

"We believe this agreement is positive as Motorola can now focus on the job at hand rather than potentially spending time, focus, and money in a proxy battle," said UBS analyst Maynard Um.