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Riverbed Expands Board, Rejects Director's Resignation

Network Equipment Maker Also Changes Executive Pay Structure

Riverbed Technology Inc., which has been fighting a takeover bid by an activist investor, said Wednesday that it added two new directors, expanding the size of its board to nine members, while making changes to its executive pay structure.

Riverbed also declined to accept the resignation of board member Mark Lewis. In May, Mr. Lewis offered to quit after he failed to receive a majority of nonbinding shareholder votes at the company's annual meeting.

Based on shareholder feedback, Riverbed said it concluded the re-election vote on Mr. Lewis resulted from concerns that the company's stockholder rights plan wasn't submitted to a vote at the annual meeting, rather than concerns about his performance or qualifications.

Mr. Lewis had been the only board member up for election.

The company said Wednesday the addition of Mike Nefkens and Steffan Tomlinson means that seven of its nine directors are independent.

Riverbed also said it opted to make changes to its executive compensation plan, an acknowledgment of the concerns of investors who voted against the plan.

Starting next year, the company said a portion of annual equity awards will be subject to vesting based upon a total shareholder return index, while a portion will be linked to time-based vesting, and a another portion will be tied to Riverbed's performance beyond the first year following the date of the award grant.

Riverbed also said that it would give its investors a chance to vote on a shareholder rights plan at the 2015 annual meeting, if indeed the company puts such a plan into effect.

Elliott Management Corp., which recently owned more than 10% of Riverbed, has been critical of the company's operations and management and has been calling for the company to launch a sale process.

The hedge fund dismissed Riverbed's latest moves on Wednesday and reaffirmed its offer, worth $21 a share in cash, to buy the company.

"The board didn't just ignore the larger message to stop entrenching and engage," Elliott said in a news release. "It even decided to keep the board member that was voted off, failed to articulate any meaningful changes to the compensation plan, and chose to keep its poison pill."