Exhibit 10.1


    Exhibit
      10.1

    EMPLOYMENT
      SEPARATION AGREEMENT

     

    This
      Employment Separation Agreement (“Agreement”) is entered into by and between
      ClearOne Communications, Inc. (“ClearOne” or the “Company”) and Frances M. Flood
      (“Flood”) (ClearOne and Flood shall sometimes be hereinafter referred to
      collectively as the “Parties”).

     

    RECITALS

     

    A.  Flood
      has
      been employed by ClearOne in a variety of positions, most recently as the
      Company’s Chief Executive Officer, President, and Chairman of the
      Board.

     

    B.  Flood
      has
      a written Employment Agreement with the Company, effective as of August 1,
      2002 (“Employment Agreement”). The Employment Agreement, which is for a
      three-year term expiring July 31, 2005, specifies the compensation and
      benefits to which Flood is entitled to receive over the term of the contract.
      The Employment Agreement also provides that the Company may terminate Flood’s
      employment for cause only if Flood commits “willful misconduct,” with the term
“willful” expressly defined as an act “done, or omitted to be done, by [Flood]
      not in good faith and without reasonable belief that [her] action or omission
      was in the best interest of the Company.”

     

    C.  On
      January 15, 2003, the United States Securities and Exchange Commission
      filed a civil action against ClearOne, Flood, and Susie S. Strohm, who was
      then
      serving as the Company’s Chief Financial Officer, alleging various improprieties
      and misstatements in connection with the Company’s financial statements (the
“SEC Action”).

     

    D.  The
      filing of the SEC Action has spawned, and may continue to spawn, multiple
      related proceedings, including, but not limited to, multiple shareholder
      securities class actions, multiple shareholder derivative actions, a grand
      jury
      investigation being conducted by the United States Department of Justice, a
      dispute and potential litigation between the Company and its directors and
      officers liability insurers, and potential litigation between the Company and
      its former auditor, Ernst & Young (collectively, “Related
      Proceedings”).

     

    E.  Soon
      after the filing of the SEC Action, the Company placed Flood on a paid
      administrative leave of absence, and this paid administrative leave has
      continued in effect at all times up to the execution of this
      Agreement.

     

    F.  Flood
      has
      employed separate counsel, Max D. Wheeler, Richard A. Van Wagoner, and the
      law
      firm of Snow Christensen & Martineau (collectively, “SC&M”), to defend
      her in the SEC Action and the Related Proceedings. SC&M has also represented
      Flood in connection with the negotiation and drafting of this
      Agreement.

     

    G.  Flood
      has
      made various demands on the Company for indemnification and for advancement
      of
      the attorneys’ fees and costs she has incurred to date, as well as the
      attorneys’ fees and costs she may subsequently incur, in connection with the SEC
      Action and the Related Proceedings and has provided the Company with a written
      undertaking, dated August 27, 2003, in conformity with the requirements of
      Utah Code Ann. § 16-10a-904.

     

    H.  ClearOne
      referred Flood’s demand for indemnification to its Special Litigation Committee
      (“SLC”) comprised of two independent directors. The SLC reviewed those demands,
      as well as similar demands for indemnification made by other present or former
      officers and directors of the Company, in conjunction with its investigation
      of
      the various claims asserted in the multiple shareholder derivative actions
      filed
      against certain of the Company’s present and former officers and directors,
      including Flood. On October 13, 2003, the SLC completed its investigation
      concerning the derivative actions and the indemnification demands and issued
      its
      reports to the Company wherein it concluded, inter alia,
      that
      pursuing the derivative actions was not in the best interest of the Company
      and
      that the Company should attempt to negotiate a settlement of Flood’s
      indemnification demand in the context of negotiating a global settlement of
      all
      potential claims and counterclaims between the Company and Flood. In reliance
      on
      the SLC’s conclusions and recommendations, the Company has moved to dismiss the
      derivative actions pursuant to Utah Code Ann. § 16-10a-740(4)(a) and has
      negotiated this Agreement with Flood.

     

    I.  Flood
      and
      ClearOne desire to resolve any and all disputes that may exist between them,
      whether known or unknown, including, but not limited to, disputes regarding
      Flood’s demand for indemnification, disputes relating to Flood’s employment with
      ClearOne, and disputes relating to the dissolution of that employment
      relationship.

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the mutual promises, covenants, warranties,
      and
      agreements set forth herein, the Parties mutually agree as follows:

     

    1.  Effective
      Date.
      This
      Agreement is effective on the eighth day following Flood’s signing of this
      Agreement, provided that Flood does not revoke her execution of this Agreement
      as provided in Paragraph 19 below.

     

    2.  Receipt
      of this Agreement.
      Flood
      acknowledges that she received a copy of this Agreement on December 2,
      2003, and that she has 21 days from the receipt of this Agreement in which
      to
      consider and consult with an attorney regarding this Agreement. Flood further
      acknowledges that she has had an adequate amount of time in which to consult
      with SC&M, her counsel of choice, with respect to the contents of this
      Agreement prior to signing.

     

    3.  Payment
      to Flood.
      Upon
      the expiration of the revocation period described in Paragraph 19 below and
      the unrevoked signing of this Agreement by Flood, ClearOne shall pay Flood
      the
      sum of $350,000. The Parties acknowledge and agree that this payment is being
      made in consideration of, inter alia,
      the
      Company’s purchase of Flood’s shares of the Company’s common stock, the
      Company’s cancellation of Flood’s options to purchase additional shares of the
      Company’s common stock, and the release of all claims that Flood may have
      against the Company, all as more fully stated in Paragraphs 5, 6, and 9
      below. The Parties also acknowledge and agree that the Company is not
      responsible for the withholding of any federal or state taxes from said payment
      and that Flood is responsible for paying any taxes that may become due and
      owing
      as a result of her receipt of said payment.

     

    4.  Separation
      of Employment and Dissolution of Employment Agreement.
      Flood
      hereby resigns her employment with ClearOne, as well as her membership on the
      Company’s board of directors, effective December 5, 2003. Flood’s
      Employment Agreement is dissolved and cancelled as of the effective date of
      this
      Agreement, except that Flood’s post-termination obligations under Sections 8 and
      9 of the Employment Agreement shall remain in effect to the full extent provided
      in the Employment Agreement.

     

    5.  Cancellation
      of Stock Options.
      As
      partial consideration for the payment specified in Paragraph 3 above, upon
      the expiration of the revocation period described in Paragraph 19 below and
      the unrevoked signing of this Agreement by Flood, all unexercised stock options
      acquired by Flood during her employment with the Company, whether vested or
      unvested, shall immediately be deemed cancelled. Flood represents and warrants
      that, immediately prior to the effective date of this Agreement, she holds
      vested and unvested stock options entitling her to purchase up to a total of
      706,434 shares of the Company’s common stock and that 461,433 of these options
      are vested. Flood further agrees that all of her rights, entitlements, and
      benefits under the 1990 Gentner Stock Option Plan and the 1998 ClearOne Stock
      Option Plan, including any agreements entered into in relation to the foregoing
      plans, are hereby terminated and cancelled.

     

    6.  Transfer
      of Stock.
      As
      partial consideration for the payment specified in Paragraph 3 above, upon
      the expiration of the revocation period described in Paragraph 19 below and
      the unrevoked signing of this Agreement by Flood, Flood shall transfer, assign,
      and sell to the Company 35,000 shares of the Company’s common
      stock.

     

    7.  Cooperation
      in Related Proceedings.
      Flood
      shall cooperate with the Company and its counsel in the defense and/or
      prosecution of the SEC Action and the Related Proceedings. Flood’s cooperation
      shall include, but shall not be limited to, voluntarily providing deposition
      and
      trial testimony, meeting with the Company and its counsel for the purpose of
      preparing for depositions or trial proceedings, and providing information and
      documents to the Company or its counsel in connection with the defense and/or
      prosecution of the SEC Action and the Related Proceedings. With respect to
      any
      request by the Company and/or its counsel for deposition or trial testimony,
      meetings, information, or documents, the Company shall give reasonable notice
      to
      Flood of its request, including the time and place of the deposition, trial,
      or
      meeting, and shall reimburse Flood for all reasonable expenses incurred by
      her,
      including reasonable attorneys’ fees and costs, in providing the requested
      cooperation. Despite the foregoing, this Agreement does not require Flood to
      forego any constitutional rights.

     

    8.  Indemnification.
      Subject
      to the limitations imposed by Utah Code Ann. § 16-10a-902 and the Company’s
      articles of incorporation and bylaws, and also subject to the undertaking
      referred to in Recital G above, ClearOne shall indemnify Flood for any liability
      and for all reasonable attorneys’ fees and costs incurred by her in connection
      with the SEC Action or any Related Proceedings, whether incurred before or
      after
      the effective date of this Agreement. The Company’s duty to indemnify Flood is
      further conditioned upon Flood’s fulfillment of her duty under Paragraph 7 above
      to cooperate with the Company and its counsel in connection with the SEC Action
      and Related Proceedings. Subject to the foregoing limitation, ClearOne will
      continue to pay for the reasonable defense costs incurred by Flood in defending
      matters or future matters, if any, which may arise from or relate to her tenure
      as an officer or director of ClearOne.

     

    9.  Release
      of Claims by Flood.
      Flood,
      on behalf of herself and her heirs and assigns, hereby completely releases
      and
      discharges ClearOne and all of ClearOne’s predecessors, successors, parents,
      subsidiaries, and affiliates, and all of their respective present and former
      directors, officers, employees, attorneys and agents (hereinafter collectively
      referred to as “Releasees”) from any and all existing claims and causes of
      action of every kind and nature, whether presently known or unknown by the
      Parties, including but not limited to any claims or causes of action for breach
      of implied or express contract (including the Employment Agreement), libel,
      slander, wrongful discharge or termination, discrimination claims under the
      Age
      Discrimination in Employment Act and/or Older Workers Benefit Protection Act,
      Title VII of the Civil Rights Act of 1964, as amended, the Utah
      Antidiscrimination Act, local laws prohibiting age, race, religion, sex,
      national origin, disability and other forms of discrimination, or any other
      federal or state law that may be applicable thereto, claims growing out of
      any
      legal restrictions on ClearOne’s right to terminate its employees, any tort
      claim or other claim arising in any way out of the employment relationship
      between Flood and ClearOne or the termination of that relationship. Flood
      specifically waives any and all claims for back pay, front pay, or any other
      form of compensation for services, except as set forth herein.

     

    Except
      as
      expressly stated in Paragraph 8 above, Flood hereby waives any right to
      recover damages, costs, attorneys’ fees, and any other relief in any proceeding
      or action brought against ClearOne by any other party, including without
      limitation the Equal Employment Opportunity Commission and the Utah
      Antidiscrimination and Labor Division, on Flood’s behalf asserting any claim,
      charge, demand, grievance, or cause of action released by Flood as stated
      above.

     

    Notwithstanding
      the foregoing, Flood does not waive rights, if any, Flood may have to
      unemployment insurance benefits or workers’ compensation benefits. Nothing in
      this Paragraph 9 prohibits Flood from paying COBRA premiums to maintain
      Flood’s participation, if any, in ClearOne’s group health plan to the extent
      allowed by law and by the terms, conditions, and limitations of the health
      plan.

     

    10.  Release
      of Claims by ClearOne.
      Except
      for any claim as to which indemnification is not allowed by Utah Code Ann.
      § 16-10a-902 and any claim that may accrue under the undertaking referenced
      in Recital G above, ClearOne, on behalf of itself and its successors and
      assigns, hereby completely releases and discharges Flood from all existing
      claims and causes of action of any kind and nature, whether presently known
      or
      unknown by the Parties, including but not limited to any claims or causes of
      action arising out of or relating to Flood’s Employment Agreement or her
      employment with ClearOne.

     

    11.  No
      Assignment of Claims.
      Flood
      represents and warrants that she has not previously assigned or transferred,
      or
      attempted to assign or transfer, to any third party, any of the claims waived
      and released herein.

     

    12.  No
      Claim Filed.
      Flood
      represents that she has not filed any claim, complaint, charge, or lawsuit
      against ClearOne or any other Releasee with any governmental agency or any
      state
      or federal court, and covenants not to file any lawsuit at any time hereafter
      for any matter, claim, or incident known or unknown which occurred or arose
      out
      of occurrences prior to the date hereof.

     

    13.  No
      Admission of Liability.
      This
      Agreement does not constitute an admission of any fault, liability, or
      wrongdoing by any Releasee, nor an admission that Flood has any claim whatsoever
      against ClearOne or any other Releasee. ClearOne and all other Releasees
      specifically deny having any liability to Flood or having committed any wrongful
      acts against Flood. This Agreement does not constitute an admission of any
      fault, liability, or wrongdoing by Flood, nor an admission that ClearOne has
      any
      claim against Flood. Flood specifically denies having any liability to ClearOne
      or having committed any wrongful acts against ClearOne.

     

    14.  Additional
      Consideration.
      Flood
      acknowledges and agrees that as of the date she signs this Agreement, ClearOne
      has paid to Flood (a) all compensation for wages earned, less normal
      payroll deductions, (b) all amounts due for earned vacation pay less normal
      payroll deductions, and (c) all other amounts due and owing to Flood by
      ClearOne. Notwithstanding the foregoing, ClearOne will pay Flood her normal
      paycheck on December 12, 2003, which covers Flood’s compensation through
      December 5, 2003, the effective date of her resignation. Flood agrees and
      acknowledges that the sums paid pursuant to this Agreement are in addition
      to
      any sums or payments to which Flood would be entitled but for the signing of
      this Agreement.

     

    15.  Conditions
      Subsequent.
      This
      Agreement is conditioned upon Flood signing settlement documents in the SEC
      Action by December 5, 2003, and upon the final approval of the settlement
      of the SEC Action, as it applies to Flood, by January 31, 2004. If for any
      reason Flood fails to satisfy either of these conditions, this Agreement will
      automatically become null and void, and the Parties shall forthwith return
      to
      each other any and all consideration received by them pursuant to this
      Agreement.

     

    16.  Integration
      Clause.
      This
      Agreement contains the entire agreement and understanding of ClearOne and Flood
      concerning the subject matter hereof, and except as expressly noted herein,
      this
      Agreement supersedes and replaces all prior negotiations, proposed agreements,
      agreements or representations whether written or oral concerning the subject
      matter hereof, including Flood’s Employment Agreement. ClearOne and Flood agree
      and acknowledge that neither ClearOne or Flood, nor any agent or attorney of
      either, has made any representation, warranty, promise or covenant whatsoever,
      express or implied, not contained in this Agreement, to induce the other to
      execute this Agreement. No amendment, alteration, or modification of this
      Agreement shall be effective unless made in writing and signed by both
      Parties.

     

    17.  Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Utah, without giving effect to Utah’s choice of law rules.

     

    18.  Voluntary
      and Knowing Signing.
      Flood
      acknowledges that she has read this Agreement carefully and fully understands
      this Agreement and that she has consulted with her counsel, SC&M, prior to
      signing this Agreement. Flood acknowledges that she has executed this Agreement
      voluntarily and of her own free will and that she is knowingly and voluntarily
      releasing and waiving all claims she may have against Releasees, including
      ClearOne.

     

    19.  Revocation
      Period.
      Flood
      has seven (7) days from the date on which she signs this Agreement to revoke
      this Agreement by providing written notice, by mail, hand delivery, or
      facsimile, of her revocation to:

     

    Raymond
      J. Etcheverry

    Parsons
      Behle & Latimer

    Counsel
      for ClearOne

    201
      South
      Main Street

    Suite
      1800

    Salt
      Lake
      City, Utah 84111

    Facsimile:
      (801) 536-6111

     

    Flood’s
      revocation, to be effective, must be received by the above-named person by
      the
      end of the seventh day after Flood signs this Agreement. This Agreement becomes
      effective on the eighth day after Flood signs this Agreement, providing that
      Flood has not revoked this Agreement as provided above.

     

    IN
      WITNESS WHEREOF, the Parties have executed this Agreement on the dates indicated
      below.

     

    
      	
               

               

               

              Dated:
                December 5, 2003

            	
              CLEARONE
                COMMUNICATIONS, INC.

               

              /s/
                Mike Keough

               

              By:
                Mike Keough

               

              Its:
                CEO

            
	
               

               

               

              Dated:
                December 5, 2003

            	
               

              /s/
                Frances M. Flood

               

              Frances
                M. Flood

              FRANCES
                M. FLOOD