WCI Communities' management has hammered out a peace agreement with billionaire activist shareholder Carl Icahn, who was seeking total control of the builder's board at its August 30 shareholder meeting.

The company announced Monday (August 20) that it will elect three of Icahn's proposed directors to the board, while WCI will retain three of its current members. Representatives chosen by other large shareholders will make up the other three board members.

In return, Icahn has agreed to withdraw his original slate of potential directors, which would have routed all of the existing management, and vote for the new proposed roster, ending the proxy battle that was set for a showdown next week.

In addition, WCI has agreed to amend its poison pill provision under its limited duration Shareholder Rights Plan to raise the trigger from 15 percent ownership to 25 percent. Icahn now owns more than 14 percent of the company's stock.

Under the terms of the agreement, WCI will nominate for election and approve at the meeting Don E. Ackerman, Charles E. Cobb, Jr. and Hilliard M. Eure, III, who currently serve on the WCI Board, as well as three candidates designated by The Icahn Group -- Carl C. Icahn, Keith Meister and David Schechter. In addition, WCI and The Icahn Group have agreed to nominate and approve Craig W. Thomas, a Portfolio Manager at S.A.C. Capital Advisors, LLC, Nick Graziano, a Managing Director of Sandell Asset Management Corp., and Yale Law professor Jonathan R. Macey, each of whom will be nominated and approved for election as directors by WCI for election at the Shareholders Meeting.

Both sides seem to have resolved their differences enough for Icahn to issue a statement that was included in WCI's announcement Monday.

"The significant presence of large shareholders proposed for the new Board is a win for both WCI shareholders and the Company," Icahn said. "I am confident the new Board will make the right moves to enable WCI to weather the difficult industry conditions it is facing today and position itself for a bright future."

WCI CEO Jerry Starkey was equally conciliatory: "The current economic environment for our industry and company is challenging, and we believe it will be beneficial to move ahead together with Mr. Icahn and large shareholders as we address these market challenges."

And the challenges remain considerable even with Icahn's objections silenced. Chief among them is raising cash to keep operations moving forward in the face of a real estate market that has hit the Florida-centric builder particularly hard. It has become clear that the company probably won't be hitting its target of $1- billion in revenue this year as cancellations in its towers continue at a historically high rate.

After the new board is voted in, it will look closely at figuring out how much capital it needs and how it will raise it.

"The company will explore various alternatives," said Don E. Ackerman, chairman of WCI's board, including whether it needs to raise new capital.

On Monday the company also announced it has renegotiated a number of its terms with its lenders, including waiving the provision that the company would go into default if the composition of its board changes.

The lenders also reduced the company's borrowing capacity at a rate that will continue to shrink over time, and is required to provide collateral for loans. It promised to include more details of the renegotiated agreements in a SEC filing later.

Monday's announcement should leave the company with one less monkey on its back. Icahn became an actively dissident investor early last year, boosting his shares from nothing to close to 15 percent as he persistently offered his services to help "increase shareholder value."

WCI management was cold to his advances, leaving Icahn to propose a $22 a share tender offer to all sellers last spring. WCI responded by hiring Goldman Sachs to review its options. Soon the recommendation came to put the company up for sale.

Icahn since removed his tender offer, which was a 16 percent premium at the time he made it, leaving the stock to plummet over the summer to a low of $4.95 a share in early August. It closed Monday (August 20) at $7.95 a share.