ClearOne Communications, Inc. ("ClearOne" or the Company) offers products in the conferencing, collaboration, and network streaming space.

The original Complaint charges ClearOne and certain of its executive officers with violations of federal securities laws. Among other things, Plaintiff claims that Defendants' material omissions and the dissemination of materially false and misleading statements concerning ClearOne's revenue and earnings caused ClearOne's stock price to become artificially inflated, inflicting damages on investors. The Complaint alleges that, in order to inflate the price of ClearOne's stock, Defendants caused the Company to falsely report its financial results during the Class Period through improper revenue recognition practices, including recognizing revenue for shipments to distributors even though the distributors had the right to return or exchange unsold goods. On January 15, 2003, the last day of the Class Period, the Securities and Exchange Commission filed a federal lawsuit alleging that Defendants violated numerous federal securities laws, primarily through a program of "channel stuffing" - shipping large amounts of inventory to the Company's distributors with the understanding that the distributors did not have to pay for these products until the distributors resold the products, and that in some instances the distributors were given the right to return or exchange products the distributors were unable to sell.

In a press release dated December 4, 2003, the terms of the settlement, which are subject to court approval, require the Company to pay the shareholder class $5 million in cash and to transfer to them 1.2 million shares of the Company's common stock. The cash payment is to be made in two equal installments of $2.5 million, the first of which has already been made and the second of which is due no later than January 15, 2005.

In a Press Release dated December 18, 2003, ClearOne has received preliminary court approval of a settlement, and the hearing to consider final approval of the settlement is scheduled for March 16, 2004.

According to the docket, a Stipulation for Partial Settlement was entered on December 8, 2003. On March 17, 2004, the Court entered the Orders granting the motion for attorney fees and reimbursement of expense and granting the motion for Final Approval of Partial Settlement, Class Certification, and Plan of Allocation. The Court further entered the Order and Judgment dismissing the case against all Defendants except Ernst & Young per the settlement agreement. The case was later dismissed with prejudice as to Defendant Ernst & Young.