The University of California regents will pay about $1 million to 21 UC Davis current and former students who were pepper-sprayed during a peaceful campus protest last November.
A video of the incident that went viral shows an officer casually walking up to and aiming a thick stream of the spray directly into the faces of seated students at close range during an Occupy rally. The incident triggered outrage and an investigation by the university.
In the settlement, each student who filed suit will each receive $30,000 and a handwritten apology from UC Davis Chancellor Linda Katehi.
Student Ian Lee was a freshman when he was pepper sprayed.
"The reason we were protesting was that the university has proposed unfair and unreasonable tuition hikes," Lee said.
In addition, the university system has agreed to $250,000 for the students' legal fees.
Lee said he plans to use all of the money to pay future tuition.
"I know that's what a lot of my friends are doing. Some others are donating it, and some others are using the money to get a good start post-college in this difficult economic time," he said.
According to the deal reached earlier this month, the university has set aside $100,000 for additional students hit in the incident who wish to submit claims as a part of the class-action suit. Those students are set to receive up to $20,000 each depending of the number who come forward.
"What we hope to do with this settlement is cause structural changes to the university, so that it will not just tolerate but encourage free speech on campus," said ACLU lawyer Michael Risher.
In the agreement obtained by ABC News, students involved in the November incident will receive "reasonable assistance and counseling" for the "academic performance issues that allegedly arose as a result of the incident."
The settlement comes as a result of the November 18 Occupy protest at UC Davis. Students encamped in the university's quad in protest of rising tuition costs, were warned to leave before pepper sprayed by campus police.
According the settlement, the university believes "they acted reasonably and with good intentions, without violating the rights."
The papers filed this morning will not become official until approved by a federal judge.
ABC News Radio contributed to this report.