Microsoft wants Yahoo to start negotiating to sell. If not Microsoft plans a proxy fight.
Microsoft would nominate directors for the Yahoo board and try to get the majority of Yahoo stockholders to approve.
A proxy fight would be much cheaper for Microsoft than raising their offer. It is being estimated that a proxy battle would not cost Microsoft more than 30 million dollars. It would cost Microsoft 1.5 billion dollars for every dollar a share it raised its bid.
Yahoo stock has gone up 55 percent since the Microsoft deal was first announced. Microsoft stock has gone down 13 percent, so the value of the bid is now less than the original 44.6 billion dollars.
Yahoo has just come up with new new severance plans in case of a takeover that would make the deal more expensive for Microsoft.
There is a lot more information on this and these articles have it:
Microsoft signals it's ready to fight to take over Yahoo - San Jose Mercury News
Bill Gates acts to counter talk of Microsoft raising its offer for Yahoo! - Times Online
BBC NEWS | Business | Microsoft steps up Yahoo campaign