Two dissident shareholders of Walt Disney Co. came to terms with the entertainment giant, dropping a lawsuit that challenged the process that led to Robert Iger's promotion to chief executive.


Former Disney directors Roy Disney and Stanley Gold sued the company in May, alleging that the board had misled shareholders over the selection of Iger, who will succeed Michael Eisner later this year. Disney and Gold also sued Eisner and Iger over alleged fraud and breach of contract in the selection process.


As part of the settlement, Roy Disney and Gold agreed to refrain from proxy battles for five years. The company also agreed to nominate Roy Disney to the post of director emeritus.


The public dispute clouded Iger's ascent to the top post at Disney. Gold once publicly disparaged Iger as "a modest man with a lot to be modest about."


On Friday, however, Disney and Gold expressed confidence in Iger's selection and also acknowledged Eisner's 21 years at Disney.


Disney and the two shareholders released a joint statement announcing the settlement of the lawsuit.


"In putting aside their differences, the company noted Mr. Disney's long time devotion to the company and welcomed the re-establishment of a relationship with him and his family," the statement said.


Prior to 2004's shareholder meeting, Disney and Gold had campaigned for the ouster of Eisner, who they said had orchestrated their removal from the board. Eisner held on as chief executive but relinquished his position as chairman.


The truce is likely to be seen as another effort by Iger to improve business relationships that had soured during the last few years of Eisner's rein. There have been reports about Iger and Steve Jobs, chairman of Pixar Animation, renewing talks about the two companies extending their 10-year relationship in which distributes Pixas films. Pixar, maker of such blockbusters as "Toy Story," had broken off discussions with Disney last year, reportedly based on bad blood between Eisner and Jobs.


Disney shares increased 2.25 percent to $25 at the close of the market Friday.

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