updated 9/10/2008 5:45:12 PM ET 2008-09-10T21:45:12

Apple Inc. CEO Steve Jobs and several other senior executives and board members have agreed to settle a lawsuit that claimed the company was damaged by their role in Apple's mishandling of stock option awards.

Because of the structure of the lawsuit, insurers representing Apple's directors and officers will pay the iPod and Macintosh maker $14 million. The settlement is designed to repair damage to Apple that the shareholders, who are suing on behalf of the company and not themselves, claimed the company suffered because of the stock options tampering.

Apple, however, is on the hook for $8.5 million in plaintiffs' attorneys' fees and $350,000 in expenses, according to a filing in U.S. District Court in San Jose, Calif. Apple's board must also adopt several reforms related to stock option grants.

Apple spokeswoman Susan Lundgren said the company had no comment.

The so-called "derivative lawsuit" — in which shareholders sue executives or board members over claims that their actions harmed the company as a whole — has became a popular tool in stock options cases.

Unlike traditional shareholder lawsuits, which usually require evidence that investors were harmed, the accounting problems that follow options-backdating revelations often do little damage to a company's stock. That's partly because many investors don't include options expenses in their measurements of a company's profitability.

In this case, Apple was considered a "nominal defendant" because it had to defend the executives being accused of malfeasance — but derivative cases are unique because any settlement amount winds up going back to the company.

Espen Eckbo, the founding director of the Lindauer Center for Corporate Governance at the Tuck School of Business at Dartmouth College, said a derivative suit may be able to "force changes that otherwise might not have happened inside the firm." He noted, though, that he doesn't think this was the case here.

The settlement cleans up a series of state and federal derivative lawsuits against Apple related to the company's 2006 disclosure that there were accounting problems with some of its stock option awards.

Apple took an $84 million charge after it acknowledged it had backdated 6,428 grants between 1997 and 2002 — retroactively setting a stock option's exercise price to a low point in the stock's value, boosting the profits that are reaped when the options are cashed in. One of those grants was an award of 7.5 million options to Jobs, which he later surrendered in exchange for millions of shares of stock.

This suit claimed that Apple directors and officers, including Jobs, Chief Financial Officer Peter Oppenheimer and former CFO Fred Anderson committed fraud by backdating options grants.

Backdating isn't illegal if companies record the proper expenses for it, which Apple didn't do. The shareholders had asked the court to order that backdated options and any proceeds from them be returned to the company.

The settlement received preliminary approval from District Judge Jeremy Fogel in a court filing Monday. A final settlement hearing was set for Oct. 31.

Federal investigators have also examined Apple's options practices. But with a settlement with Apple's former general counsel Nancy Heinen last month, the Securities and Exchange Commission's investigation of options backdating at Apple is completed, as is the Justice Department's criminal investigation. Heinen had been charged with altering company records to conceal the backdating activities.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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