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Drkoop settles class-action lawsuits

The online health information company will pay $4.25 million to settle a pair of class-action lawsuits and will also award 4 million stock warrants to shareholders.

    Drkoop.com will pay $4.25 million to settle a pair of class-action lawsuits.

    The beleaguered online health information company will also award 4 million stock warrants to shareholders under the settlement announced Monday. The settlement, which still needs court approval, would end a securities fraud lawsuit and a related shareholder lawsuit against the Santa Monica, Calif.-based company.

    "This means that the big cloud of a major securities class action is lifted," said Christopher Petrovic, vice president of business and legal affairs for Drkoop. "It means we can turn the company around and bring it to profitability very quickly."

    Drkoop said the cash part of the settlement, which will be paid for out of its liability insurance, will have no effect on its financial standing.

    Lawyers for the plaintiffs did not immediately return calls seeking comment.

    Drkoop, one of the first companies to feel the effects of the dot-com downturn, has suffered through layoffs, a plummeting stock price and near bankruptcy. In April, the company's stock was delisted from the Nasdaq. The company closed its Austin, Texas, headquarters in January and laid off 45 employees.

    Despite the setbacks, Drkoop has been attempting to resurrect itself in recent months, buying StayFitUSA.com in March and DrDrew.com in November. In April, Drkoop announced a partnership with ConnectivCorp to create a site for sexual health information.

    The warrants that shareholders will receive as part of the settlement are priced at $2.50 per share.

    Petrovic did not know how many shareholders will benefit from the settlement.

    The two lawsuits were both filed in U.S. District Court for the Western District of Texas. The company still faces a lawsuit filed in a Texas district court by purchasers of convertible notes issued by Drkoop.