Exhibit
        10.4
 **SETTLEMENT
        AGREEMENT AND RELEASE**
  This
        Settlement Agreement and Release (this “Agreement") is made and entered into as
        of the date it is executed by both parties, between Werner Pekarek (“Employee”)
        and ClearOne Communications, Inc. (“ClearOne”), who shall be referred to as the
“Parties”, or individually as a “Party”.
 
 **DEFINITIONS**
 
 1.  The
        term
“Employee” shall mean Employee and his or her heirs, assigns, and legal
        representatives.
 
 2.  The
        phrase "ClearOne Released Parties" shall mean ClearOne and any and all business
        units, committees, groups, and their present, former or future parents,
        affiliates, subsidiaries, employees, agents, directors, owners, officers,
        attorneys, successors, predecessors, and assigns.
 
 3.  The
        "Released Claims" shall mean any type or manner of suits, claims, demands,
        allegations, charges, damages, or causes of action whatsoever in law or in
        equity under federal, state, municipal or local statute, law, ordinance,
        regulation, constitution, or common law, whether known or unknown, which
        Employee has ever had or now has against the ClearOne Released Parties. This
        includes but is not limited to any action for costs, interest or attorney's
        fees, which arise in whole or in part from Employee's employment relationship
        with ClearOne, from the ending of that relationship, and from any other conduct
        by or dealings of any kind between Employee and the ClearOne Released Parties,
        which occurred prior to the execution of this Agreement. This also includes
        but
        is not limited to any and all claims, rights, demands, allegations and causes
        of
        action for alleged wrongful discharge, breach of alleged employment contract,
        breach of the covenant of good faith and fair dealing, termination in violation
        of public policy, intentional or negligent infliction of emotional distress,
        fraud, misrepresentation, defamation, interference with prospective economic
        advantage, failure to pay wages due or other monies owed, failure to pay
        pension
        benefits, conversion, breach of duty, interference with existing economic
        relations, punitive damages, retaliation, discrimination on the basis of
        age in
        violation of the Age Discrimination and Employment Act of 1967, as amended
        ("ADEA"), negligent employment, negligent supervision, Claims under Title
        VII of
        the Civil Rights Act of 1964, claims under the Sarbanes-Oxley Act of 2002,
        harassment or discrimination on the basis of sex, race, color, citizenship,
        religion, age, national origin, or disability, or other protected classification
        under the federal, state, municipal or local laws of employment, including
        those
        arising under the common law, and any alleged violation of the Employee
        Retirement Income Security Act of 1974 ("ERISA"), the Fair Labor Standards
        Act
        ("FLSA"), the Occupational Safety and Health Act ("OSHA"), and any other
        law.
        Release Claims do not include any claims that arise in the future out of
        events
        that occur after the date of this Agreement.
 
 **RECITALS**
 
 A.  WHEREAS,
        the Parties desire to settle and compromise the Released Claims and to enter
        into this Agreement.
  1
  
 **COVENANTS**
 
 NOW,
        THEREFORE, for good and valuable consideration, the receipt and sufficiency
        of
        which are hereby acknowledged, and in consideration of the mutual covenants
        set
        forth in this Agreement, the Parties agree as follows:
 
 1.  Employee’s
        employment with ClearOne shall end effective August 11, 2006.
 
 2.  Notwithstanding
        the provisions of section 1, above, after his or her execution of this Agreement
        and upon the expiration of the revocation period described in paragraph 22,
        ClearOne will make a one-time severance payment to Employee in the net amount
        of
        $9,230.79.
 
 3.  In
        addition, the Employee must elect from one of the following two options.
        The
        election shall be made by circling either Option 1 or Option 2 and placing
        the
        Employee’s initials next to the circle. The options are as follows:
 
 A.
        Option 1 .
        Employee retains Employee’s vested stock options and upon the expiration of the
        presently existing employee, executive officer and director trading blackout
        (which trading blackout will expire when ClearOne becomes current in its
        periodic filings with the Securities and Exchange Commission), Employee will
        have 90 days in which to exercise said vested options; or
 
 B.
        Option 2 .
        Employee will receive an additional net cash payment of $5,000.00 payable
        upon
        the expiration of the revocation period described in paragraph 22. All
        unexercised stock options acquired by Employee during his employment with
        ClearOne, whether vested or unvested, shall immediately be deemed cancelled.
        Employee further agrees that all of his rights, entitlements, and benefits
        under
        the 1998 ClearOne Stock Option Plan, including any agreements entered into
        in
        relation to the foregoing plans, are hereby terminated and
        cancelled.
 
 4.  Employee
        acknowledges that the above sums constitute consideration for Employee’s
        execution and adherence to the provisions of this Agreement. Employee
        understands and agrees that he or she would not receive the amounts specified
        herein except for his or her execution of this Agreement and the fulfillment
        of
        the promises contained herein. The ClearOne Released Parties make no
        representations whatsoever to Employee concerning the taxable status of the
        payment of the settlement amount. Employee assumes full and sole responsibility
        for any tax consequences related to the settlement amount. Employee understands
        and agrees to indemnify and hold harmless the ClearOne Released Parties from
        any
        taxes, assessments, withholding obligations, penalties or interest payments
        that
        they may incur at any time by reason of demand, suit or proceeding brought
        against them for any taxes or assessments or withholdings arising out of
        the
        payment of the settlement amount. Employee acknowledges he or she has been
        fully
        compensated by the terms of this Agreement for releasing the Released
        Claims.
 
 5.  Employee
        represents that he or she has not filed and there is not pending with any
        governmental agency or any state or federal court, any other claims, complaints,
        charges, or lawsuits of any kind against the ClearOne Released Parties.
 
 6.  Employee
        hereby waives and releases each and every one of the ClearOne Released Parties
        from liability with respect to the Released Claims. Employee acknowledges
        that
        he or she understands he or she is prohibited from any further relief on
        the
        Released Claims. Specifically and without limitation, Employee understands
        and
        agrees that he or she is waiving and forever discharging the ClearOne Released
        Parties from any and all claims, causes of action or complaints he or she
        may
        have or has ever had, which have or may have arisen prior to the execution
        of
        this Agreement, and Employee understands that the Release Claims specifically
        includes age discrimination claims under the Age Discrimination in Employment
        Act (ADEA). However, employee understands that he or she can bring a suit
        limited to challenging the enforceability of the waiver and release of any
        age
        discrimination claims under the ADEA.
 
 7.  Employee
        represents and warrants that he or she is the sole owner of the Released
        Claims,
        that the Released Claims have not been assigned, transferred, or disposed
        of in
        fact, by operation of law or in any manner whatsoever, and that he or she
        has
        the full right and power to grant, execute and deliver the full and complete
        releases, undertakings, and agreements herein contained.
  2
  8.  Employee
        agrees that the existence and terms of this Agreement shall be and remain
        confidential. Employee acknowledges that this confidentiality provision is
        an
        essential element of the consideration he provides to ClearOne for entering
        into
        this Agreement. Therefore, Employee agrees not to discuss or describe any
        information concerning ClearOne, the circumstances of the ending of Employee's
        employment with ClearOne or the existence of the terms of this Agreement
        to
        anyone, except as required by law or permitted herein.
 
 9.  Employee
        reaffirms and agrees to observe and abide by the terms of the Confidentiality
        and Invention Assignment Agreement (“Confidentiality Agreement”) he or she
        signed with ClearOne. Employee certifies and represents that he or she has
        fully
        complied with all terms of the Confidentiality Agreement to date and has
        returned to ClearOne all records or documents or other property of ClearOne
        within his or her possession. Employee understands that his or her receipt
        of
        the consideration provided under this Agreement is expressly conditioned
        on
        Employee’s compliance with the obligations in this paragraph.
 
 10.  Employee
        agrees not to disparage, orally or in writing, ClearOne, its officers,
        employees, management, operations, products, designs, or any other aspects
        of
        ClearOne’s affairs to any third person or entity.
 
 11.  Employee
        agrees that for one year following Employee’s separation from employment with
        ClearOne, Employee shall not, directly or indirectly, in any capacity (including
        but not limited to, as an individual, a sole proprietor, a member of a
        partnership, a stockholder, investor, officer, or director of a corporation,
        an
        employee, agent, associate, or consultant of any person, firm or corporation
        or
        other entity) hire any person from, attempt to hire any person from, or solicit,
        induce, persuade, or otherwise cause any person to leave his or her employment
        with ClearOne.
 
 12.  Employee
        agrees that for one year following Employee’s separation from employment with
        ClearOne, Employee shall not, directly or indirectly, in any capacity, solicit
        the business of any customer of ClearOne except on behalf of ClearOne, or
        attempt to induce any customer of ClearOne to cease or reduce its business
        with
        ClearOne; provided that following Employee’s separation from employment with
        Company he or she may solicit a customer of ClearOne to purchase goods or
        services that do not compete directly or indirectly with those then offered
        by
        ClearOne.
 
 13.  Any
        breach of Employee’s obligations under this Agreement shall, in addition to all
        other remedies available to ClearOne, result in the immediate release of
        ClearOne from any obligations it has to provide further payments under this
        Agreement. In addition, ClearOne may pursue such additional legal or equitable
        remedies as may be available to it.
 
 14.  This
        Agreement does not constitute and shall not be construed as an admission
        by
        ClearOne of any breach of any alleged agreements or duties, or of any wrongdoing
        toward Employee or any other person, including any alleged breach of contract
        or
        violation of any federal, state, or local law, regulation, or ordinance.
        ClearOne specifically disclaims any liability to Employee for wrongdoing
        of any
        kind.
 
 15.  The
        Parties agree that this Agreement may be used in evidence in a subsequent
        proceeding in which any of the Parties alleges a breach of this
        Agreement.
 
 16.  The
        parties shall attempt in good faith to resolve any dispute arising out of
        or
        relating to this Agreement by negotiation. The parties recognize that
        irreparable injury to ClearOne will result from a material breach of this
        Agreement, and that monetary damages will be inadequate to rectify such injury.
        Accordingly, notwithstanding anything to the contrary, ClearOne shall be
        entitled to one or more preliminary or permanent orders: (i) restraining
        or
        enjoining any act which would constitute a material breach of this Agreement,
        and (ii) compelling the performance of any obligation which, if not performed,
        would constitute a material breach of this Agreement, and to attorney’s fees in
        connection with any such action
 
 17.  Employee
        affirms he or she is not relying on any representations or statements made
        by
        the ClearOne Released Parties which are not specifically included in this
        Agreement. Employee acknowledges he or she has been informed in writing by
        this
        Agreement that he or she has the right to consult with legal counsel regarding
        this release, that he or she has been advised by this Agreement that he or
        she
        should consult with legal counsel and confirms Employee has consulted with
        counsel to the extent desired concerning the meaning and consequences of
        this
        Agreement.
  3
  18.  This
        Agreement constitutes the entire agreement between the Parties with relation
        to
        the subject matter hereof. Any prior negotiations or correspondence relating
        to
        the subject matter hereof shall be deemed to have merged into this Agreement
        and
        to the extent inconsistent herewith shall be deemed to be of no force or
        effect.
 
 19.  This
        Agreement may be executed in any number of counterparts, each of which when
        executed and delivered shall be an original, but all of such counterparts
        shall
        constitute one and the same instrument.
 
 20.  This
        Agreement shall be interpreted and enforced in accordance with the laws of
        the
        State of Utah, and/or when applicable, of the United States. By entering
        into
        this Agreement, the Parties submit themselves and their principals individually
        to personal jurisdiction in the courts in the State of Utah and agree that
        Utah
        is the only appropriate venue for any action brought to interpret or enforce
        any
        provision of this Agreement, or which may otherwise arise under or relate
        to the
        subject matter of this Agreement.
 
 21.  The
        provisions of this Agreement are severable, and if any part of it is found
        to be
        unenforceable, the other parts and/or paragraphs shall remain fully valid
        and
        enforceable. Should any provisions of this Agreement be determined by any
        court
        or administrative body to be invalid, the validity of the remaining provisions
        is not affected thereby and the invalidated part shall be deemed not a part
        of
        this Agreement. Any court or administrative body shall construe and interpret
        this Agreement as enforceable to the full extent available under applicable
        law.
        This Agreement shall survive the termination of any arrangements contained
        in
        it.
 
 22.  Employee
        acknowledges and understands this is a legal contract and that he or she
        signs
        this Agreement knowingly, freely and voluntarily and has not been threatened,
        coerced or intimidated into making the same. Employee acknowledges that he
        or
        she has had ample and reasonable time to consider this Agreement and the
        effects
        and import of it and that he or she has fully dwelt on it in his or her mind
        and
        has had such counsel and advice, legal or otherwise, as Employee desires
        in
        order to make this Agreement. EMPLOYEE, BY SIGNING THIS AGREEMENT, ACKNOWLEDGES
        IT CONTAINS A RELEASE OF KNOWN AND UNKNOWN CLAIMS. Employee has read and
        fully
        considered this Agreement and understands and desires to enter into it. The
        terms of this agreement were derived through mutual compromise and are fully
        understood. Employee acknowledges that he or she has been offered at least
        twenty one (21) days to consider the impact of this Agreement and its release
        of
        his or her rights to bring suit against the ClearOne Released Parties and
        after
        due consideration has decided to enter into this Agreement at this time.
        Employee further understands that he or she may revoke this Agreement for
        a
        period of up to seven (7) days following signature and execution of the same.
        This Agreement shall not become effective or enforceable until the revocation
        period has expired. Any revocation within this period must be signed and
        submitted in writing to the undersigned representative of ClearOne and must
        state, "I hereby revoke my acceptance of the Agreement." Employee understands
        that if he or she revokes this Agreement, he or she is not entitled to receive
        the consideration provided by this Agreement. ****
 
 If
        Employee does not accept such terms and conditions within 21 days, this offer
        shall expire at **** that
        time.
 
 IN
        WITNESS WHEREOF, the Parties have executed this Agreement as of the dates
        set
        forth below.
 
 EMPLOYEE
                
                /s/
                  Werner Pekarek
                Werner
                  Pekarek
                Date:
                  August 24, 2006CLEARONE
                  COMMUNICATIONS, INC.
                
                /s/
                  Zee Hakimoglu
                Zee
                  Hakimoglu
                President
                  and Chief Executive Officer
                Date:
                  August 31, 2006
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