Yahoo sets shareholders meeting for August 1

Updated at 8:09 p.m. PDT with more information on the proxy contest.

Yahoo announced Tuesday it will hold its annual shareholders meeting on August 1, setting the stage for a contentious proxy battle with billionaire shareholder Carl Icahn.

The shareholders meeting will be held at 10 a.m. PDT at The Fairmont hotel in San Jose, Calif.

Yahoo will be asking its shareholders to re-elect its current board of nine directors, while Icahn is challenging the board with his own slate of dissident directors.

Icahn, at the time he filed his preliminary proxy, said he felt the current Yahoo board acted "irrationally" when it did not accept Microsoft's sweetened buyout bid of $33 a share. Microsoft later withdrew its buyout bid and Icahn filed his proxy slate days later.

Yahoo, in the following week, announced it would delay its July 3 shareholders meeting to late July, in an effort to give the Securities and Exchange Commission time to review its preliminary proxy materials. The company also announced that one of its directors, Edward Kozel, would resign, in preparation of moving his family to Europe.

Once Yahoo and Icahn file their definitive proxies with the SEC and distribute them to investors, they'll hit the road, meeting with investors to make their best pitch for voting for their respective slate of directors.

Investors in the coming weeks will be deluged with competing proxy cards from Yahoo and Icahn, asking shareholders to disregard each other's material, along with some likely barbs tossed over the fence.

Some of the later has already begun, with Icahn calling for the ouster of Yahoo co-founder and CEO Jerry Yang, according to a report in the Wall Street Journal.

If Icahn is successful with his proxy fight and he wins a majority of the board seats, it could trigger Yahoo's controversial employee severance plans, which may potentially cost the Internet search pioneer as much as $2.13 billion in payouts, according to documents in a shareholders lawsuit against Yahoo.

The shareholders are asking a Delaware Chancery Court to invalidate the severance plans, but no date has been set for a court hearing.