BOSTON - Prosecutors will drop a manslaughter charge against the only company charged in the fatal Big Dig tunnel collapse after the epoxy maker agreed to pay $16 million to settle a lawsuit.

Under the "deferred prosecution agreement" with State Attorney General Martha Coakley, Powers Fasteners Inc. also will take steps to prevent the wrong type of epoxy from being used by its customers, said Max Stern, a company attorney.

"They are happy to put this behind them and get back to business," he said.

Coakley spokeswoman Emily LaGrassa confirmed the two sides reached an agreement to resolve both criminal and civil cases against Powers, but she would not release details.

The Brewster, N.Y., company was indicted after the July 2006 death of Milena Del Valle for providing the epoxy blamed in the ceiling collapse. She was killed when 26 tons of ceiling panels fell on the car she was riding in with her husband, Angel, to Logan International Airport.

Powers officials insisted they told Big Dig officials that their "fast-set" epoxy used in the tunnel was to be used only to secure wall panels, not heavy overhead concrete ceiling panels. But prosecutors said Powers should have figured out the wrong epoxy was used for the ceiling panels when company officials were asked to inspect the tunnel after some ceiling bolts came loose during construction in 1999.

Powers agreed to recall its "fast-set" epoxy. The company also agreed to notify customers that the epoxy failed certain tests and is not recommended for sustained loads.

Those steps need to be completed with 120 days. If they are, the criminal indictment will be dismissed. The company is also prohibited from doing business with state and local governments until 2012.

If convicted of manslaughter, the maximum penalty Powers would have faced under state law was a fine of $1,000.

Powers was among more than a dozen companies and government entities sued by the Attorney General's Office after Del Valle, 39, of Boston was killed.

Brad Henry, an attorney for Del Valle's children, said the family was "happy to see that justice has been done and to bring this . . . to a close."