Under the proposed settlement, UC would pay $30,000 to each of 21 plaintiffs named in the complaint and an additional $250,000 for their attorneys to split.
Katehi, who has publicly apologized for the incident, would be required to issue a formal written apology to each of the plaintiffs, who are current students or recent alumni.
UC and plaintiffs represented by the American Civil Liberties Union filed the preliminary settlement in U.S. District Court in Sacramento. The agreement, which was approved by the UC board of regents in mid-September, is subject to the approval of a federal judge, and parties have the right to appeal.
The settlement also calls for UC to set aside $100,000 to pay other individuals who can prove they were arrested or pepper-sprayed. The university would give the ACLU up to $20,000 for its work reviewing free-speech and protest policies at UC Davis.
"It was felt that the proposed settlement was in the best interest of the university," UC spokesman Steve Montiel said. UC officials believe the cost of going to trial would be more expensive than the cost of settling, he said.
A task force report released in April blamed the incident on poor communication and planning throughout the campus chain of command, from the chancellor to the pepper-spraying officers, and concluded the situation could have been prevented.
Last week, Yolo County prosecutors said the UC Davis officers who fired the pepper spray won't face criminal charges because there is not enough evidence to prove the use of force was illegal.