N.R. Narayana Murthy, chairman of the Bangalore-based firm, said Infosys will contribute 1.5 million dollars while the other half will be paid by insurers.

Former employee Reka Maximovitch last year filed the case in a California court against the Nasdaq-listed company and its ex-marketing head Phaneesh Murthy, alleging wasteful termination and sexual harassment.

"The settlement was entered into on April 25 and we have 35 days to make the payment. The plaintiff said she will withdraw the lawsuit within three days" of receiving the payment, the chairman told reporters.

"The litigation with the plaintiff is behind us," he said. "We have taken further steps to strengthen our internal processes and improve the checks and balances to handle similar situations."

Infosys, India's second largest software exporter, said it had also paid 570,000 dollars to Phaneesh Murthy, who resigned in July, as a "total settlement," including all dues and leave benefits.

"Under the terms of settlement the company retains all rights to proceed with legal action against Phaneesh Murthy if deemed necessary," N.R. Narayana Murthy said.

He said Phaneesh Murthy did not contribute any money towards the settlement with Maximovitch.

"The allegations in the lawsuit were serious and demanded compensation of several multiples of what we finally settled for," the chairman said, adding that Infosys chose an out-of-court settlement as the case was impinging on the board of directors' time.

He said Phaneesh Murthy did not divulge important facts about the case, including his relationship with Maximovitch.

SPACE.WIRE