UPDATE 2-Indaba 'disappointed' with Benefitfocus over director nomination delay

(Adds response from Benefitfocus)

April 15 (Reuters) - Indaba Capital Management said on Thursday Benefitfocus Inc's unwillingness to compromise and appoint the hedge fund's director nominee to the software company's board was disappointing.

The parties have been trading barbs for weeks over the company's high turnover in its executive suite and who should be sitting on its board.

In its latest proposal, Indaba had suggested Benefitfocus appoint Ronald Mitchell, one of the two candidates nominated by the hedge fund on March 16, to its board, and in exchange offered to withdraw its other nomination and accept settlement terms.

Benefitfocus said on Thursday Indaba had misrepresented the terms of a privately negotiated proposal, in which Mitchell would be appointed to the software firm's board under terms consistent with market standards and intended to protect the interests of all shareholders.

"Many of these terms were made necessary because of Indaba's continued refusal to allow us to vet Mr. Mitchell, or even meet or interview him, until an agreement is reached to appoint him to the board," Benefitfocus said in a statement.

San Francisco-based Indaba had in February called on Benefitfocus, in which it holds a roughly 9.5% stake, to sell its business following years of poor returns, sluggish stock price during booming markets, and warned shareholders would lose confidence if nothing changes. (Reporting by Chavi Mehta and Munsif Vengattil in Bengaluru; Editing by Shinjini Ganguli and Ramakrishnan M.)