Staples settles shareholders’ lawsuit over stock-option accounting

Framingham, Mass. Staples has settled a lawsuit over the company's past stock-option grants, the company said Friday.

As part of the agreement, which the Court of Chancery of the State of Delaware must approve, Staples will not oppose paying $2.5 million in plaintiff's attorney fees, costs and expenses.

The agreement is contingent upon Staples receiving $7.3 million in insurance proceeds related to adjustments made in 2006 to some stock-option awards, and on Staples changing its process for awarding stock options.

The retailer said neither it nor the individuals named in the lawsuit admits wrongdoing.

Filed in 2006, the lawsuit relates to Staples' accounting for backdated stock options -- those dated to coincide with low points in the share price to boost payouts.

The practice is legal when properly accounted for. But if it's not properly disclosed, it can result in a company overstating its profit and underpaying its taxes.

The settlement Staples announced Friday is intended to resolve all litigation on the issue that is pending against the company and former and current officers and directors.