SAN FRANCISCO (Reuters) - Microsoft Corp (MSFT.O: Quote, Profile, Research) has considered earmarking $1.5 billion to retain Yahoo Inc (YHOO.O: Quote, Profile, Research) employees if it acquires the company, according to court documents in a shareholder suit filed against Yahoo.

The $1.5 billion figure was discussed in a communication between the general counsels of Microsoft and Yahoo, and came to light when a lawyer representing Yahoo mentioned the amount in a March 24 hearing in a lawsuit in Delaware Chancery Court.

Edward Welch, the lawyer representing Yahoo, also said during the hearing that 1,000 layoffs Yahoo made in February were the only job cuts the company planned to make. "There are no more reductions in force planned for the future," he said.

Two Detroit pension funds have filed the shareholder action against Yahoo and its board of directors asserting that the Silicon Valley company has failed Yahoo shareholders by not responding in good faith to Microsoft's takeover offer.

Plaintiffs firm Bernstein Litowitz Berger & Grossmann LLP released a transcript of the hearing on its site here

The details were first reported by the Wall Street Journal on Tuesday.

Separately, Microsoft is weighing nominating its own slate of directors for Yahoo's board while keeping its options open on putting a merger offer directly to shareholders, the Journal reported, citing unnamed people familiar with the matter. The proxy slate move could come as early as Wednesday, it said.

Microsoft had set a deadline of last Saturday for Yahoo to agree to its unsolicited $31 per share cash-and-stock offer but the two appear to have entered a standoff over deal terms.

Yahoo has said Microsoft's $31-per-share initial takeover offer "substantially undervalues" the pioneering Web company and that it is considering a variety of alternatives. Microsoft's deal is currently valued at around $42 billion.

Microsoft said last week it would declare its next moves in the takeover battle this week but has been quiet so far.

Plaintiffs' attorney David Margules argued that a Yahoo staff retention plan of its own should be seen as an anti-takeover device rather than, as the company stated, an attempt to calm Yahoo employees who fear a Microsoft merger.

Two weeks after Microsoft began its unsolicited bid for Yahoo, Yahoo put in place a change of control severance plan for any full-time employees laid off following a deal that would pay salaries for up to two years as severance pay.

A poll published by Reuters over the weekend found an overwhelming majority of Wall Street analysts expect Microsoft to launch a hostile bid at its current price of $31 per share in cash and stock.

(Editing by Erica Billingham)

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