Meanwhile, Yang and Bostock reiterate in the proxy statement that they have "at all times been open to a transaction with Microsoft," as long as it offers shareholders "full and certain value."

Yang and directors engaged in "serious discussions with Microsoft," including many in-person meetings, but all along felt that Microsoft wasn't willing to pay a fair price for Yahoo, according to the proxy statement.

Moreover, putting Icahn and his slate on the Yahoo board will ultimately result in the loss of shareholder value, because Icahn "has no credible plan except to sell the company to Microsoft -- despite the fact that Microsoft has publicly indicated that it has no current interest in such a transaction," Yang and Bostock wrote.

"The future of Yahoo! and the value of your investment are in your hands," they added.

On Monday of last week, the partially censored complaint in a class-action shareholder lawsuit against Yahoo was released in its unedited form following the judge's decision.

That complaint, filed in Delaware Chancery Court in February on behalf of shareholders the Police & Fire Retirement System and General Retirement System of Detroit, is full of angry allegations, copies of internal Yahoo documents, and accounts of what plaintiffs characterize as Yahoo's bad-faith maneuvers toward Microsoft.

Specifically, the document goes into great detail about the crafting of the severance plan to support the plaintiffs' allegations that the plan was put in place solely as a "poison pill" technique to drive Microsoft away. After reading the unedited complaint, Icahn fired off his first letter last Wednesday to Bostock.

Microsoft announced its unsolicited offer to buy Yahoo on Feb. 1 -- a $44.6 billion cash-and-stock deal that offered shareholders a 62 percent premium over Yahoo's stock price the day before. Yahoo's board rejected that offer, saying it undervalued the company, and Microsoft later increased it to $47.5 billion, but Microsoft eventually walked away from the negotiations on May 3 after the two sides failed to agree on a price.

After Microsoft withdrew its offer, several large Yahoo institutional investors publicly criticized Yang and the board for, in their view, not negotiating in good faith and failing to look out for shareholders' best interests.

Yang and other Yahoo executives responded by saying that they were open to negotiating further but that Microsoft unexpectedly walked away without ever putting its last offer in writing.

Then Icahn got into the picture, acquiring a significant amount of Yahoo stock and readying his proxy fight in order to reignite merger negotiations.

However, Microsoft officials have indicated that the company isn't interested in buying all of Yahoo anymore.

Microsoft did acknowledge on May 18 that it has approached Yahoo with a proposal to enter into a more limited partnership or deal, which many observers believe likely involves Yahoo's search advertising business.

This story was updated on June 9, 2008.