As part of a settlement of charges involving his role in stock-options manipulation, former Mercury Interactive Corp. chief executive officer Amnon Landan has agreed not to exercise a large number of options he received three years ago, according to the company.

In an 8-K filing, the business software maker said yesterday that Landan agreed not to exercise his option to acquire 437,500 shares of stock that were issued with a grant date of January 3, 2003 and that he will relinquish rights to the options.

Under the agreement, if Mercury and Landan settle the company’s claims against the ex-CEO, he will receive a credit of the settlement amount or $2,817,500, whichever is the lesser.

In June, Mercury reported that a special committee looking into past stock-option awards voided more than 2.6 million vested and unexercised options granted to Landan. The committee found that the options, granted between 1997 and 2002, were dated improperly. Mercury also said at the time that it would pursue claims against Landan.

In July, Mercury reported that the Securities and Exchange Commission might bring civil charges apparently involving possible option backdating practices against three current directors and its former finance chief Sharlene Abrams, now the CFO of Opsware Inc.