Exhibit 10.7


    Exhibit
      10.7

    
 

    JOINT
      PROSECUTION AND DEFENSE AGREEMENT

    


    This
      Joint Prosecution and Defense Agreement (the "Agreement") is made effective
      as
      of April 1, 2004, by and between ClearOne Communications, Inc. (“ClearOne”),
      Parsons Behle & Latimer (“PB&L”), Edward Dallin Bagley (“Bagley”) and
      Burbidge & Mitchell (“B&M”). Each of the foregoing are individually
      referred to as a "Party" and sometimes collectively referred to as the "Parties"
      throughout this Agreement.

    


    RECITALS

    


    A.
       Bagley
      is
      a director and shareholder of ClearOne.

    


    B.
       On
      or
      about February 6, 2004, Lumbermens Mutual Casualty Company (“Lumbermens”) filed
      a Complaint for Declaratory Judgment in the United States District Court for
      the
      District of Utah against ClearOne, Bagley and certain other current and former
      directors of ClearOne entitled Lumbermens
      Mutual Casualty Company v. ClearOne Communications, Inc.,
      Case
      No. 2:04CV0119TC (the “Insurance Litigation”). 

    


    C.
       On
      or
      about February 9, 2004, ClearOne and Bagley filed a complaint against National
      Union Fire Insurance Company of Pittsburgh, Pennsylvania (“National Union”) and
      Lumbermens in the United States District Court for the District of Utah entitled
      ClearOne
      Communications, Inc., et al. v. National Union Fire Insurance Company, et
      al.,
      Case
      No. 2:04CV0145TS (the “Second Insurance Lawsuit”).

    


    D.
       PB&L
      has entered an appearance for, and is representing, all defendants in the
      Insurance Litigation other than Bagley and Michael A. Pierce. PB&L is
      representing ClearOne in the Second Insurance Lawsuit. B&M has entered an
      appearance for and is representing Bagley in the Insurance Litigation and the
      Second Insurance Lawsuit.

    


    E.
       In
      the
      Insurance Litigation, ClearOne and Bagley have asserted counterclaims against
      National Union and Lumbermens. In addition, the Second Insurance Lawsuit has
      been consolidated with the Insurance Litigation for all purposes. (For further
      reference in this Agreement, the “Insurance Litigation” refers to all claims and
      defenses therein, together with the Second Insurance Lawsuit unless otherwise
      stated.)

    


    F.
       In
      the
      Insurance Litigation (with the consolidated claims from the Second Insurance
      Lawsuit), ClearOne is pursuing claims, inter
      alia,
      to
      recover the policy limits of ceratin policies for directors and officers
      insurance issued by National Union and Lumbermens (the “Insurance Policies”) and
      Bagley is pursuing related claims, inter
      alia,
      to
      recover losses which he incurred due to National Union’s and Lumbermens’s
      refusal to pay the policy limits under the Insurance Policies to ClearOne which
      refusals caused ClearOne to enter into a settlement agreement which diluted
      his
      shareholdings in ClearOne. On the other hand, National Union and



    
      
        
        

      

      
        1

        
        

      

      
        
        

      

    


    Lumbermens
      allege in the Insurance Litigation, inter
      alia,
      that
      they have properly rescinded the Insurance Policies due to alleged fraud in
      procuring the Insurance Policies. 

    


    G.
       The
      joint
      prosecution of the Company’s claims and Bagley’s claims in the Insurance
      Litigation, and defense of National Union’s and Lumbermens’ claims in the
      Insurance Litigation, is in the best interests of ClearOne and Bagley and will
      likely lead to an economy of litigation expenses in the Insurance
      Litigation.

    


    H.
       Due
      to
      their prior and current representation of ClearOne and Bagley in litigation
      concerning matters which are also the subject of the Insurance Litigation,
      PB&L and B&M are familiar with the underlying facts in the Insurance
      Litigation and are able to work as co-counsel in the Insurance Litigation.
      

    


    I.
       Through
      March 30, 2004, Bagley has paid the attorney’s fees and costs of B&M in
      connection with Insurance Litigation. On the other hand, ClearOne has paid
      the
      attorney’s fees and costs of PB&L in connection with the Insurance
      Litigation. 

    


    J.
       ClearOne,
      Bagley, PB&L and B&M now wish (1) to reach certain agreements concerning
      the joint prosecution of ClearOne’s and Bagley’s claims in the Insurance
      Litigation and joint defense of claims made by National Union and Lumbermens
      in
      the Insurance Litigation, (2) to allocate certain responsibilities in the
      Insurance Litigation, (3) to make certain agreements in order to protect all
      applicable privileges, including the attorney/client privilege and work product
      doctrine, and (4) to reach certain agreements concerning the payment of
      litigation expenses, including attorney’s fees, in the Insurance Litigation.


    


    THEREFORE,
      upon the foregoing premises, which are incorporated herein by reference, and
      in
      consideration of the mutual covenants herein, the Parties agree as
      follows:

    


    1. Joint
      Prosecution and Representation.
      For
      purposes of the Insurance Litigation, PB&L and B&M shall jointly
      prosecute ClearOne’s and Bagley’s claims in the Insurance Litigation and shall
      jointly defend ClearOne and Bagley with respect to claims made by National
      Union
      and Lumbermens in such litigation. PB&L and B&M shall divide and
      allocate duties and responsibilities for pre-trial activities (including
      discovery), as well as for trial in a cost efficient manner (but in a manner
      which will not impede the effective representation of ClearOne and Bagley).
      In
      connection with such joint representation, B&M may make formal appearances
      for ClearOne and PB&L may make formal appearances for Bagley. 

    


    2. Conflicts
      of Interest.
      There
      is a potential for a conflict of interest arising from PB&L’s and B&M’s
      joint and concurrent representation of ClearOne and Bagley. In particular,
      and
      among various potential conflicts, ClearOne and Bagley may have or may develop
      adverse positions with respect to the division of any proceeds received by
      settlement, or otherwise, from the Insurance Litigation. When any conflicts
      of
      interests arise between ClearOne and Bagley in connection with the Insurance
      Litigation, PB&L and B&M shall undertake to notify ClearOne



    
      
        
        

      

      
        2

        
        

      

      
        
        

      

    


    and
      Bagley of the existence of such conflict(s) of interest. In the event of any
      such conflicts, PB&L shall represent ClearOne solely with respect to any
      conflict and B&M shall represent Bagley solely with respect to such
      conflict. Accordingly, ClearOne and Bagley waive any actual or potential
      conflict of interest by virtue of the joint representation set forth in Section
      1, above.

    


    3. Payment
      of Litigation Expenses.
      Unless
      and until this Agreement is terminated by any of the Parties hereto in
      accordance with Section 9, below, ClearOne shall pay all litigation expenses,
      including attorney’s fees, of PB&L and B&M in the Insurance
      Litigation.

    


    4. Cooperation.
      ClearOne and Bagley agree to cooperate with PB&L and B&M in connection
      with the Insurance Litigation by (i) making themselves and persons in their
      employ and control available to PB&L and B&M for interviews, for
      deposition testimony and for trial in the Insurance Litigation and (ii) making
      documents within their possession or control available to PB&L and B&M
      for purposes of the Insurance Litigation. It is expressly anticipated that
      Bagley will have confidential communications with PB&L and that ClearOne and
      its officers, directors and employees will have confidential communications
      with
      B&M; it is the express intent of the Parties that such communications will
      be protected by the attorney/client privilege.

    


    5. Joint
      Litigation Materials.
      The
      Parties agree to share Joint Litigation Materials (as defined below) protected
      by the attorney-client privilege, the work product doctrine, and all other
      applicable privileges, protections, doctrines, or any other immunity otherwise
      available, in order to assert mutually common and/or joint claims and defenses
      that are or may be asserted in the Insurance Litigation. To further their common
      interests, the Parties intend to exchange privileged and work product
      information, orally, electronically, and in documents. The Parties intend to
      share draft pleadings and memoranda, and other information that may or may
      not
      include factual analyses, mental impressions, reports of witness interviews,
      and
      other similar information (collectively, “Joint Litigation Materials”). The
      Parties would not exchange any of the other Parties such Joint Litigation
      Materials but for their mutual and common interests in the Insurance Litigation,
      but for the undertakings in this Agreement and but for the understanding that
      by
      doing so they do not waive any attorney/client privilege, work product privilege
      or any other applicable privilege. The Parties agree that in the exchange of
      Joint Litigation Materials among the Parties to this Agreement they shall
      continue to protect the confidentiality of the Joint Insurance Materials or
      will
      not waive any applicable privilege, protection or immunity.

    


    6. Privilege.
      The
      Joint Litigation Materials which the Parties intend to exchange between and
      among the Parties to this Agreement are privileged from disclosure to adverse
      or
      other third parties as a result of the attorney-client privilege, the
      joint-defense privilege, the work product doctrine, and other applicable
      privileges or protections. By this Agreement, the Parties state that in the
      pursuit of their common interests in of the Insurance Litigation they do not
      intend to waive any applicable privileges and they intend to preserve to the
      maximum extent permitted by applicable law the attorney-client privilege, the
      work-product doctrine and all other privileges or protections which they may
      have. The disclosure of Joint Litigation Materials by a receiving



    
      
        
        

      

      
        3

        
        

      

      
        
        

      

    


    Party
      does not constitute a waiver of any attorney/client privilege, work product
      privilege or any other applicable privilege held by the producing Party.


    


    7. Waiver.
      Neither
      ClearOne nor Bagley shall have authority to waive any applicable privilege
      or
      doctrine for conversations, matters or materials exchanged or developed during
      the pendency of this Agreement on behalf of the other without the other’s
      consent; nor shall any waiver of an applicable privilege or doctrine by the
      conduct of any Party be construed to apply to any other Party. 

    


    8. Non-Disclosure.
      The
      Parties shall not disclose any Joint Litigation Materials, and any other
      conversations, matters of materials otherwise protected by any applicable
      privileges or doctrines, to any third persons (other than those working with
      or
      on behalf of the Parties for purposes of the Insurance Litigation) without
      the
      consent of both ClearOne and Bagley. This obligation survives any termination
      of
      this Agreement pursuant to Section 9, below.

    


    9. Termination.
      Any
      Party to this Agreement may terminate this Agreement by giving written notice
      to
      all other Parties. In the event of termination of this Agreement, Bagley hereby
      waives any right to preclude PB&L from representing ClearOne in the
      Insurance Litigation or in any other matter or dispute (even if adverse to
      Bagley) on the grounds of PB&L’s representation of Bagley pursuant to this
      Agreement; likewise, ClearOne hereby waives any right to preclude B&M from
      representing Bagley in the Insurance Litigation or in any other matter or
      dispute (even if adverse to ClearOne) on the grounds of B&M’s representation
      of ClearOne pursuant to this Agreement. Notwithstanding any termination of
      this
      Agreement, all parties shall continue to be bound by this Agreement with regard
      to any Joint Litigation Materials and matters protected by the attorney/client
      privilege disclosed to the Parties. 

    


    10. Severability.
      If any
      provision of this Agreement is invalidated, the remainder of this Agreement
      shall be fully enforceable.

    


    11. Enforcement.
      The
      Parties agree that a breach of the provisions of this Agreement by a Party
      will
      cause irreparable harm to the other Parties and therefore agree that injunctive
      relief is an appropriate means to enforce this Agreement. The Parties further
      agree that this paragraph is not intended to limit the rights or remedies of
      the
      Parties in the event of a breach of the Agreement.

    


    12. Modification.
      This
      Agreement may be modified, amended, or supplemented only by a writing signed
      by
      all Parties to this Agreement.

    


    13. No
      Admission.
      In the
      event of any adversarial action, proceeding or litigation between any of the
      Parties, no Joint Litigation Materials, as defined here, that have been
      disclosed pursuant to this Agreement, shall be used or construed to constitute
      an admission against interest by any Party or to alter or adversely affect
      any
      rights, claims, defenses or other relations as among any of the Parties. In
      any
      such adversarial action, proceeding or litigation 


    
      
        
        

      

      
        4

        
        

      

      
        
        

      

    


    between
      any of the Parties, the Joint Litigation Materials may only be used if such
      are
      part of the public record of any proceeding or are otherwise discoverable.
      

    


    14. Substitution
      of Counsel.
      If
      ClearOne or Bagley retains new counsel for the Insurance Litigation other than
      PB&L and B&M, the Joint Litigation Materials shall be provided to such
      new counsel when and only when new counsel provides written assurance to
      ClearOne and Bagley , in a form acceptable to ClearOne and Bagley, that such
      new
      counsel will protect the confidentiality of the Joint Litigation Materials
      and
      matters protected by the attorney/client privilege and work product doctrine
      in
      accordance with the provisions of this Agreement. 

    


    15. Headings.
      The
      headings in this Agreement are intended solely as a convenience and shall not
      control or in any way affect the meaning or interpretation of any provision
      of
      this Agreement.

    


    16. Governing
      Law.
      This
      Agreement shall be governed by the laws of the State of Utah.

    


    
      	
               

               

               

               

              /s/
                Edward Dallin Bagley

              _____________________________________

              EDWARD
                DALLIN BAGLEY

            	
               

              CLEARONE
                COMMUNICATIONS, INC., a Utah corporation

               

               

              By: 
                /s/ Delonie N.
                Call                                           
                

              Delonie
                N. Call, VP, Human Resources

            
	
               

               

              BURBIDGE
                & MITCHELL

               

               

              By: 
                /s/ Jefferson W.
                Gross                                     
                

              Jefferson
                W. Gross

            	
               

               

              PARSONS
                BEHLE & LATIMER

               

               

              By: 
                /s/ Raymond
                Etcheverry                                 
                

              Raymond
                Etcheverry

            


    

    
 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      FIRST
        AMENDMENT TO JOINT PROSECUTION AND 

      DEFENSE
        AGREEMENT

      


      This
        First Amendment to the Joint Prosecution and Defense Agreement (the "Amendment")
        is made effective retroactively to April 1, 2004, by and between ClearOne
        Communications, Inc. (“ClearOne”), Parsons Behle & Latimer (“PB&L”),
        Edward Dallin Bagley (“Bagley”) and Burbidge & Mitchell (“B&M”). Each of
        the foregoing are individually referred to as a "Party" and sometimes
        collectively referred to as the "Parties" throughout this
        Agreement.

      


      RECITALS

      


      A.
         Effective
        April 1, 2004, ClearOne, Bagley, PB&L and Burbidge & Mitchell entered
        into a Joint Prosecution and Defense Agreement (the “JPDA”).

      


      B.
         In
        order
        to resolve an ambiguity in the JPDA, the parties have agreed to enter into
        this
        Amendment. 

      


      1. Amendment.
        Section
        3 of the JPDA is hereby amended to read in its entirety as follows:


      Payment
        of Litigation Expenses.
        Unless
        and until this Agreement is terminated by any of the Parties hereto in
        accordance with Section 9, below, ClearOne shall pay all litigation expenses,
        including attorney’s fees, of PB&L and B&M in the Insurance Litigation
        except for litigation expenses which are solely related to Bagley’s claims in
        the Insurance Litigation.

      


      2. Except
        as
        expressly amended herein, the parties re-affirm the JPDA.

      
        	
                 

                 

                 

                 

                /s/
                  Edward Dallin Bagley

                _____________________________________

                EDWARD
                  DALLIN BAGLEY

              	
                 

                CLEARONE
                  COMMUNICATIONS, INC., a Utah corporation

                 

                 

                By: 
                  /s/ Zee Hakimoglu___________________

                Zee
                  Hakimoglu, Chief Executive Officer

              
	
                 

                 

                BURBIDGE
                  & MITCHELL

                 

                 

                By: 
                  /s/ Jefferson W.
                  Gross                                     
                  

                Jefferson
                  W. Gross

              	
                 

                 

                PARSONS
                  BEHLE & LATIMER

                 

                 

                By:
                  /s/ Raymond
                  Etcheverry                                 
                  

                Raymond
                  Etcheverry