A life settlement firm has agreed to pay $1.25 million in stock to settle a lawsuit filed by an investment firm.

The life settlement firm, Life Partners Holdings Inc., Waco, Texas (Nasdaq:LPHI), reached the settlement agreement with Maxim Group L.L.C., New York.

Life Partners agreed to deliver to Maxim 56,230 shares of its common stock valued at $22.23 per share, according to a document Life Partners filed with the U.S. Securities and Exchange Commission. The company delivered the shares after the U.S. District Court for the Southern District of New York concluded a fairness hearing on the settlement April 13, according to the filing.

Maxim filed suit Sept. 17, 2007, according to Life Partners’ 2008 annual report. Maxim alleged that Life Partners had agreed in 2004 to issue a warrant for 100,000 shares of common stock to Maxim, exercisable within 5 years at a price of $7 per share.

Life Partners contended in court that the warrant was for investment banking services Maxim never actually performed, and that Life Partners owed Maxim nothing, according to Life Partners’ annual report.

Life Partners says in the SEC filing that the cost of settlement will be accrued in its consolidated financial statements as of Feb. 28, 2010, and that it will reduce its previously reported fiscal year 2010 earnings by $812,500. The settlement cost will have no effect on Life Partners’ cash position, according to the filing.

A spokesman for Maxim declined to comment on the settlement.

Representatives from Life Partners were not immediately available to comment.