Bristol-Myers Squibb will pay $300 million to avoid prosecution for inflated sales, and two former company executives were indicted.

The fifth-biggest American drug maker settled a three-year probe by federal prosecutors in Newark, N.J., into selling excess inventory to wholesalers to meet sales goals, a practice called “channel stuffing.” Bristol-Myers, which gave wholesalers incentives to discourage returns of the products, was charged with conspiracy to commit securities fraud and won’t be prosecuted if it makes required reforms in the next two years.

The $300 million payment brings to $839 million the amount Bristol-Myers will spend to resolve criminal and regulatory probes and investor litigation related to its sales. The company accepted a “deferred prosecution” arrangement that also requires changes in its business practices, such as adopting internal controls to thwart future manipulation of earnings.

“I think this is a kind of agreement we’re likely to see from companies going forward,” said Patrick Kaser of Brandywine Asset Management in Wilmington, Del. “I think Bristol knows what they have to do to stay clean.”

The company, based in New York, also agreed to appoint an independent director who is acceptable to U.S. prosecutors, a non-executive chairman, and a retired judge to monitor the agreement. The company said it will record an additional reserve of $249 million in the second quarter as a result of the pact.

Frederick Schiff, 57, who was senior vice president and chief financial officer, and Richard Lane, 54, former executive vice president of BMS worldwide medicines group, were charged with conspiracy and securities fraud, prosecutors said. They are scheduled to surrender to authorities today, prosecutors said.

“Rick Lane is innocent of these charges, and he will be fully vindicated at trial,” said Mr. Lane’s lawyer Richard M. Strassberg. “Fred Schiff vigorously denies any wrongdoing, and we are confident he will be vindicated at trial,” said David Zornow, Mr. Schiff’s lawyer.

The two men face maximum penalties of 15 years in prison and a fine of $1 million, prosecutors said.

Under the agreement, the company will continue to implement remedial measures required in its previous settlement with regulators and help prosecutors with their ongoing investigation. Other people may be charged as a result of the probe, said U.S. Attorney Christopher Christie at a press conference.

“This is not a case about accounting trickery,” he said. “This is a case where Bristol-Myers Squibb absolutely failed to disclose relevant information to shareholders which would have affected the price of this stock. It’s about telling the truth.”