The expulsions will be erased from the record and the students will be allowed to make up for missed work. Two of them still must write letters of apology to a teacher named in the movie and his wife.
In the movie, the "teddy bear master" orders stuffed animals to kill a teacher who had embarrassed him, but students battle the toy beasts, according to documents filed in court.
School officials last year expelled the four students who made the film, arguing that it was disruptive and they saw it as a threat to Knightstown Intermediate School teacher Dan Clevenger.
Two of the students sued, claiming their free-speech rights were violated. A federal judge in December ordered that school officials allow them back into class, saying that although the students should apologize for the "humiliating" and "obscene" movie, district officials had not proven that the work disrupted school.
A third student joined the lawsuit after it was filed, and the fourth student did not challenge the expulsion.
Superintendent David McGuire said the school district's insurance company will cover the cost of the $69,000 settlement that will be split among the plaintiffs.
