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<SEC-DOCUMENT>0000931763-02-002852.txt : 20020814
<SEC-HEADER>0000931763-02-002852.hdr.sgml : 20020814
<ACCEPTANCE-DATETIME>20020814152206
ACCESSION NUMBER:		0000931763-02-002852
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20020630
FILED AS OF DATE:		20020814

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CLARUS CORP
		CENTRAL INDEX KEY:			0000913277
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-PREPACKAGED SOFTWARE [7372]
		IRS NUMBER:				581972600
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24277
		FILM NUMBER:		02735681

	BUSINESS ADDRESS:	
		STREET 1:		3970 JOHNS CREEK CT
		STREET 2:		STE 100
		CITY:			SUWANEE
		STATE:			GA
		ZIP:			30024
		BUSINESS PHONE:		7702913900

	MAIL ADDRESS:	
		STREET 1:		3970 JOHNS CREEK CT
		STREET 2:		STE 100
		CITY:			SUWANEE
		STATE:			GA
		ZIP:			30024

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SQL FINANCIALS INTERNATIONAL INC /DE/
		DATE OF NAME CHANGE:	19980911
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
<PAGE>
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

                  For the quarterly period ended June 30, 2002

                                       or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

             For the transition period from _________ to _________

                        Commission File Number: 0-24277

                               Clarus Corporation
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Delaware                               58-1972600
   ------------------------------              ----------------------
  (State or other jurisdiction of                (I.R.S. Employer
   incorporation or organization)              Identification Number)

                             3970 Johns Creek Court
                             Suwanee, Georgia 30024
                    ----------------------------------------
                    (Address of principal executive offices)
                                   (Zip code)

                                 (770) 291-3900
               ---------------------------------------------------
              (Registrant's telephone number, including area code)

              ----------------------------------------------------
                     (Former name, former address and former
                   fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES  X   NO
                                       ---     ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.

                        Common Stock, ($.0001 Par Value)
               --------------------------------------------------
               15,623,347 shares outstanding as of August 9, 2002

================================================================================

<PAGE>

                                     INDEX
                                     -----

                               CLARUS CORPORATION
<TABLE>


<S>      <C>                                                                           <C>

PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets (unaudited) - June 30, 2002 and
          December 31, 2001;                                                            3

         Condensed Consolidated Statements of Operations (unaudited) - Three and
          six months ended June 30, 2002 and 2001;                                      4

         Condensed Consolidated Statements of Cash Flows (unaudited) - Six
          months ended June 30, 2002 and 2001;                                          5

         Notes to Condensed Consolidated Financial Statements (unaudited) -
          June 30, 2002                                                                 6

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                                     10

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                    31


PART II  OTHER INFORMATION

Item 1.  Legal Proceedings                                                             31

Item 4.  Submission of Matters to a Vote of Security Holders                           32

Item 5.  Other Information                                                             32

Item 6.  Exhibits and Reports on Form 8-K                                              32

SIGNATURES                                                                             33

</TABLE>

                                       2

<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                               CLARUS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)
               (in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
                                                                           June 30,   December 31,
                                                                             2002         2001
                                                                          ---------   ------------
<S>                                                                        <C>         <C>
                                     ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                            $  38,676     $ 55,628
     Marketable securities                                                   68,629       65,264
     Accounts receivable, less allowance for doubtful accounts
       of $787 and $675 in 2002 and 2001, respectively                          999        2,566
     Deferred marketing expense, current                                          -          391
     Prepaids and other current assets                                        1,596        2,472
                                                                          ---------     --------
Total current assets                                                        109,900      126,321

PROPERTY AND EQUIPMENT, NET                                                   4,183        7,352

OTHER ASSETS:
     Deferred marketing expense, net of current portion                           -           98
     Investments                                                                  -          200
     Goodwill                                                                     -        6,736
     Intangible assets, net of accumulated amortization of 1,493 in 2001          -        4,079
     Deposits and other long-term assets                                        592          488
                                                                          ---------     --------
         TOTAL ASSETS                                                     $ 114,675     $145,274
                                                                          =========     ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable and accrued liabilities                             $   8,155     $  6,506
     Deferred revenue                                                         1,844        5,206
                                                                          ---------     --------
Total current liabilities                                                     9,999       11,712

LONG-TERM LIABILITIES:
     Deferred revenue                                                           104        1,969
     Long-term debt                                                           5,000        5,000
     Other long-term liabilities                                                258          265
                                                                          ---------     --------
Total liabilities                                                            15,361       18,946

STOCKHOLDERS' EQUITY:
     Preferred stock, $0.0001 par value; 5,000,000 shares authorized;
       none issued                                                                -            -
     Common stock, $0.0001 par value; 100,000,000 shares authorized;
       15,676,501 and 15,638,712 shares issued and 15,601,501 and
       15,563,712 outstanding in 2002 and 2001, respectively                      2            2
    Additional paid-in capital                                              360,845      360,670
    Accumulated deficit                                                    (261,651)    (234,623)
    Treasury stock, at cost                                                      (2)          (2)
    Accumulated other comprehensive income                                      120          281
                                                                          ---------     --------
Total stockholders' equity                                                   99,314      126,328
                                                                          ---------     --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $ 114,675     $145,274
                                                                          =========     ========

</TABLE>

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


                                       3

<PAGE>

                               CLARUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                             Three months ended    Six months ended
                                                                  June 30,              June 30,
                                                           --------------------  --------------------
                                                              2002       2001       2002       2001
<S>                                                        <C>        <C>         <C>        <C>
REVENUES:
   License fees                                             $  1,013   $  3,600   $  2,486   $  5,910
   Services fees                                               1,531      2,595      3,999      5,125
                                                           ---------  ---------  ---------  ---------
     Total revenues                                            2,544      6,195      6,485     11,035
COST OF REVENUES:
   License fees                                                    3         80         17        124
   Services fees                                               1,881      3,341      3,819      7,119
                                                           ---------  ---------  ---------  ---------
     Total cost of revenues                                    1,884      3,421      3,836      7,243

OPERATING EXPENSES:
   Research and development                                    2,553      4,570      5,182     10,125
   Sales and marketing, exclusive of non-cash expense          2,680      9,329      6,228     17,398
   Non-cash sales and marketing                                  352      1,688        450      3,376
   General and administrative, exclusive of non-cash
     expense                                                   3,594      2,330      5,099      5,024
   Non-cash general and administrative                             -        112          -        224
   Provision for doubtful accounts                                 1        555          3      2,610
   Intangible impairment loss                                 10,360          -     10,360          -
   Depreciation and amortization on property and equipment     1,304        838      2,433      1,683
   Amortization of intangible assets                             227      2,463        455      4,483
   Loss on disposal of assets                                    795          7        785          7
                                                           ---------  ---------  ---------  ---------
     Total operating expenses                                 21,866     21,892     30,995     44,930

OPERATING LOSS                                               (21,206)   (19,118)   (28,346)   (41,138)
OTHER INCOME                                                       6         11         12         10
LOSS ON IMPAIRMENT OF INVESTMENTS                                  -     (3,386)         -     (6,484)
INTEREST INCOME                                                  685      1,762      1,418      4,184
INTEREST EXPENSE                                                 (56)       (56)      (112)      (120)
                                                           ---------  ---------  ---------  ---------
NET LOSS                                                    $(20,571)  $(20,787)  $(27,028)  $(43,548)
                                                           =========  =========  =========  =========


  Loss per common share (Note 2):
     Basic                                                 $   (1.32) $   (1.34) $   (1.73) $   (2.81)
     Diluted                                               $   (1.32) $   (1.34) $   (1.73) $   (2.81)

  Weighted average shares outstanding (Note 2):
     Basic                                                    15,588     15,507     15,580     15,507
     Diluted                                                  15,588     15,507     15,580     15,507
</TABLE>

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.



                                       4

<PAGE>

                               CLARUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                      (in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                        Six months ended
                                                                                             June 30,
                                                                                      --------------------
                                                                                         2002       2001
                                                                                      ---------   --------
     <S>                                                                              <C>         <C>
     OPERATING ACTIVITIES:
     Net loss                                                                         $ (27,028)  $(43,548)
     Adjustments to reconcile net loss to net cash used in operating activities:
          Depreciation and amortization on property and equipment                         2,433      1,683
          Amortization of intangible assets                                                 455      4,483
          Loss on impairment of investments                                                   -      5,506
          Impairment of intangible assets                                                10,360
          Loss on impairment of marketable securities                                         -        979
          Gain on sale of investments                                                       (15)       (10)
          Noncash sales and marketing expense                                               450      3,376
          Noncash general and administrative expense                                          -        224
          Provision for doubtful accounts                                                     3      2,610
          Loss on disposal of property and equipment                                        785          7
          Changes in operating assets and liabilities:
             Accounts receivable                                                          1,564     (1,082)
             Prepaid and other current assets                                               876       (815)
             Deposits and other long-term assets                                           (104)       (17)
             Accounts payable and accrued liabilities                                     1,649     (2,189)
             Deferred revenue                                                            (5,227)       777
             Other long-term liabilities                                                     (7)         9
                                                                                      ---------   --------
                       NET CASH USED IN OPERATING ACTIVITIES                            (13,806)   (28,007)

     INVESTING ACTIVITIES:
         Purchase of marketable securities                                              (20,282)   (40,794)
         Proceeds from sale of marketable securities                                      2,628      4,664
         Proceeds from maturity of marketable securities                                 14,140     32,189
         Proceeds from sale of investments                                                  200          -
         Purchase of investments                                                              -     (2,000)
         Proceeds from sale of property and equipment                                        27          -
         Purchases of property and equipment                                                (76)    (2,694)
                                                                                      ---------   --------
                       NET CASH USED IN INVESTING ACTIVITIES                             (3,363)    (8,635)

     FINANCING ACTIVITIES:
         Proceeds from the exercises of stock options                                       136         70
         Proceeds from issuance of common stock related to employee stock
           purchase plan                                                                     78         96
                                                                                      ---------   --------
                   NET CASH PROVIDED BY FINANCING ACTIVITIES                                214        166
                                                                                      ---------   --------
     Effect of exchange rate change on cash                                                   3         83
     CHANGE IN CASH AND CASH EQUIVALENTS                                                (16,952)   (36,393)
     CASH AND CASH EQUIVALENTS, beginning of period                                      55,628    118,303
                                                                                      ---------   --------
     CASH AND CASH EQUIVALENTS, end of period                                         $  38,676   $ 81,910
                                                                                      =========   ========
     SUPPLEMENTAL CASH FLOW DISCLOSURE:
         Cash paid for interest                                                       $      56   $     64
                                                                                      =========   ========
     NONCASH TRANSACTIONS:
         Retirement of 82,500 shares of common stock pursuant to a terminated
           employment agreement with former owners of the SAI/Redeo Companies         $       -   $  2,181
                                                                                      =========   ========
         Retirement of 7,500 shares related to the termination of a sales and
           marketing agreement.                                                       $      39   $      -
                                                                                      =========   ========

</TABLE>
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


                                       5

<PAGE>

                               CLARUS CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Clarus
Corporation and subsidiaries (the "Company") for the three and six months ended
June 30, 2002, have been prepared in accordance with accounting principles
generally accepted in the United States of America and instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the unaudited condensed consolidated financial
statements have been included. The results of the three and six months ended
June 30, 2002 are not necessarily indicative of the results to be obtained for
the year ending December 31, 2002. These interim financial statements should be
read in conjunction with the Company's audited consolidated financial statements
and footnotes thereto included in the Company's Form 10-K for the fiscal year
ended December 31, 2001, filed with the Securities and Exchange Commission.

NOTE 2.  EARNINGS PER SHARE

Basic and diluted net loss per share were computed in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", using
the weighted average number of common shares outstanding. The diluted net loss
per share for the three and six months ended June 30, 2002 and 2001 does not
include the effect of common stock equivalents, calculated using the treasury
stock method, as their impact would be antidilutive. The potentially dilutive
effect of excluded common stock equivalents are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                Three months ended   Six months ended
                                                                     June 30,            June 30,
                                                                ------------------  -----------------
                                                                 2002        2001    2002       2001
                                                                ------      ------  ------     ------
<S>                                                             <C>         <C>     <C>        <C>

Effect of shares issuable under stock options                     180         196     141        289
Effect of shares issuable pursuant to warrants to purchase
   common stock                                                     -           -       -          1
                                                                ------      ------  ------     ------
Total effect of dilutive common stock equivalents                 180         196     141        290
                                                                ------      ------  ------     ------
</TABLE>

NOTE 3.  STOCK OPTION EXCHANGE PROGRAM

On April 9, 2001, the Company announced a voluntary stock option exchange
program for its employees. Under the program, employees were given the
opportunity to cancel outstanding stock options previously granted to them on or
after November 1, 1999 in exchange for an equal number of new options to be
granted at a future date. The exercise price of the new options was equal to the
fair market value of the Company's common stock on the date of grant. During the
first phase of the program 366,174 options with a weighted average exercise
price of $30.55 per share were canceled and new options to purchase 263,920
shares with an exercise price of $3.49 per share were issued on November 9,
2001. During the second phase of the program 273,188 options with a weighted
average exercise price of $43.87 per share were canceled and new options to
purchase 198,052 shares with an exercise price of $4.10 per share were issued on
February 11, 2002. Employees who participated in the first exchange were not
eligible for the second exchange. The exchange program was designed to comply
with Financial Accounting Standards Board ("FASB") Interpretation No. 44
"Accounting for Certain Transactions Involving Stock Compensation" and did not
result in any additional compensation charges or variable accounting. Members of
the Company's Board of Directors and its executive officers were not eligible to
participate in the exchange program.

NOTE 4.  RESTRUCTURING AND RELATED COSTS

During 2001 and 2002, the Company's management approved restructuring plans to
reorganize and reduce operating costs. Restructuring and related charges of
$513,000, $498,000 and $3.1 million were expensed in the first, third and fourth
quarters of 2001, respectively, to better align the Company's cost structure
with projected revenue. The first and third quarter charges were comprised
entirely of employee separation and related costs for 23 and 43 employees,
respectively. The fourth quarter charge was comprised of $1.9 million for
employee separation and related costs for 115 employees and $1.2 million for
facility closures and consolidation costs. During the first quarter of 2002, the
Company determined that amounts previously charged during 2001 of approximately
$202,000 that related to employee separation and related charges were no longer
required and this amount was credited to sales and marketing expense in the
accompanying condensed consolidated statement of operations during the three
months ended March 31, 2002. The Company's management approved further
reductions and reorganizations during the three months ended June 30, 2002,
which resulted in restructuring and related charges of $3.8 million. These
charges were comprised of


                                       6

<PAGE>

$2.2 million for employee separation and related costs for 102 employees and
$1.6 million for facility closures and consolidation costs.

The Company expects to complete the facility closures and consolidation during
2002. The facility closures and consolidation costs relate to the abandonment of
the Company's leased facilities in Limerick, Ireland; Maidenhead, England; and
near Toronto, Canada, as well as the restructuring of the Company's leased
facility in Suwanee, Georgia. Total facility closures and consolidation costs
include the write-down of property and equipment and leasehold improvements to
their net realizable value, remaining lease liabilities, construction costs and
brokerage fees to sublet the abandoned space offset by estimated sublease
income. The estimated costs of abandoning these leased facilities, including
estimated costs to sublease, were based on market information trend analysis
provided by a commercial real estate brokerage firm retained by the Company.

In connection with the Company's continuing restructuring program, the Company
implemented a further reduction of its worldwide workforce and incurred a
related restructuring charge of approximately $1.3 million during July 2002. The
July 2002 charge is comprised of employee separation and related costs for 47
employees.

The following is a reconciliation of the components of the accrual for
restructuring and related costs, the amounts charged against the accrual during
2001 and 2002 and the balance of the accrual as of June 30, 2002:

<TABLE>
<CAPTION>

                                                                                   Six Months Ended June 30, 2002
                                   Accruals      Expenditures      Balance     -------------------------------------     Balance
                                  During 2001     During 2001     12/31/01     Accruals     Expenditures     Credits    06/30/02
                                  -----------    ------------     --------     --------     ------------     -------    --------
<S>                               <C>             <C>             <C>          <C>          <C>              <C>        <c>
  (in thousands)
  Employee separation costs          $2,939         $2,259         $  680       $2,239          $2,388         $202       $  329
  Facility closure costs              1,218              9          1,209        1,568             401            -        2,376
                                     ------         ------         ------       ------          ------         ----       ------
  Total restructuring and
    related costs                    $4,157         $2,268         $1,889       $3,807          $2,789         $202       $2,705
                                     ======         ======         ======       ======          ======         ====       ======
</TABLE>

The accrual for restructuring and related costs is included in accounts payable
and accrued liabilities in the accompanying condensed consolidated balance
sheets.

NOTE 5.  COMPREHENSIVE INCOME (LOSS)

SFAS No. 130 "Reporting Comprehensive Income (Loss)", establishes standards of
reporting and display of comprehensive income (loss) and its components of net
income (loss) and "Other Comprehensive Income (Loss)". "Other Comprehensive
Income (Loss)" refers to revenues, expenses and gains and losses that are not
included in net income (loss) but rather are recorded directly in stockholders'
equity. The components of comprehensive loss for the three and six months ended
June 30, 2002 and 2001 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                           Three months ended       Six months ended
                                                                June 30,                June 30,
                                                          --------------------    --------------------
                                                            2002         2001        2002        2001
                                                          --------   ---------    --------    --------
<S>                                                       <C>        <C>          <C>         <C>
     Net loss                                             $(20,571)  $(20,787)    $(27,028)   $(43,548)
     Unrealized gain (loss) on marketable securities            18        812         (164)        709
     Foreign currency translation adjustments                   87         (7)           3          83
                                                          --------   --------     --------    --------
     Comprehensive loss                                   $(20,466)  $(19,982)    $(27,189)   $(42,756)
                                                          ========   ========     ========    ========
</TABLE>

NOTE 6. CREDIT AND CUSTOMER CONCENTRATIONS

The Company's accounts receivable potentially subject the Company to credit
risk, as collateral is generally not required. As of June 30, 2002, four
customers accounted for more than 10% each, totaling $1.1 million or 64.2% of
the gross accounts receivable balance on that date. The percentage by customer
was 23.8%, 18.2%, 11.8%, and 10.4% , respectively, at June 30, 2002. As of
December 31, 2001, four customers accounted for more than 10% each, totaling
$1.7 million or 53.2% of the gross accounts receivable balance on that date. The
percentage of total accounts receivable due from each of these four customers
was 15.8%, 13.9%, 12.6% and 10.9%, respectively, at December 31, 2001.

During the quarter ended June 30, 2002, two customers accounted for more than
10% of total revenue, totaling $1.0 million or 40.7% of total revenue. The
percentage by customer was 30.6% and 10.1% respectively, for the quarter ended
June 30, 2002. During the quarter ended June 30, 2001, three customers accounted
for more than 10% each, totaling $4.0 million or 63.8% of total revenue. The
percentage by customer was 25.0%, 23.9% and 14.9%, respectively, for the quarter
ended June 30, 2001. During the


                                       7

<PAGE>

six months ended June 30, 2002, one customer accounted for more than 10% of
total revenue, totaling $2.6 million or 39.5% of total revenue. During the six
months ended June 30, 2001, three customers accounted for more than 10% each,
totaling $6.3 million or 57.0% of total revenue. The percentage by customer was
28.2%, 15.3%, and 13.5%, respectively, for the six months ended June 30, 2001.

As a result of BarclaysB2B's recent decision to discontinue its external
operations to focus on internal cost reduction, the Company was notified that
BarclaysB2B will terminate its current software license and service agreements
with the Company effective August 31, 2002. Upon termination the Company will be
required to refund to BarclaysB2B prepaid software license and support fees of
approximately $2.7 million less costs incurred by the Company associated with
terminating the contract. During the six months ended June 30, 2002, revenues
from the Company's agreements with BarclaysB2B represented 39.5% of the
Company's total revenues for this period.

NOTE 7.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities include the following (in thousands):

<TABLE>
<CAPTION>

                                                                  June 30,   December 31,
                                                                    2002         2001
                                                                  -------    ------------
<S>                                                                <C>          <C>
       Accounts payable                                            $  461       $  588
       Accrued compensation, benefits, and commissions              1,237        1,386
       Restructuring reserves                                       2,705        1,889
       Payable to BarclaysB2B                                       2,657            -
       Other                                                        1,095        2,643
                                                                   ------       ------
         Total                                                     $8,155       $6,506
                                                                   ======       ======
</TABLE>

NOTE 8. CONTINGENCIES

The Company is a party to lawsuits in the normal course of its business.
Litigation in general, and securities litigation in particular, can be expensive
and disruptive to normal business operations. Moreover, the results of complex
legal proceedings are difficult to predict. An unfavorable resolution of the
following lawsuit could adversely affect the Company's business, results of
operations, liquidity or financial condition.

Following its public announcement on October 25, 2000, of its financial results
for the third quarter, the Company and certain of its directors and officers
were named as defendants in fourteen putative class action lawsuits filed in the
United States District Court for the Northern District of Georgia on behalf of
all purchasers of common stock of the Company during various periods beginning
as early as October 20, 1999 and ending on October 25, 2000. The fourteen class
action lawsuits filed against the Company were consolidated into one case, Case
No. 1:00-CV-2841, pursuant to an order of the court dated November 17, 2000. On
March 22, 2001, the Court entered an order appointing as the lead Plaintiffs
John Nittolo, Dean Monroe, Ronald Williams, V&S Industries, Ltd., VIP World
Asset Management, Ltd., Atlantic Coast Capital Management, Ltd., and T.F.M.
Investment Group. Pursuant to the previous Consolidation Order of the Court, a
Consolidated Amended Complaint was filed on May 14, 2001.

The class action complaint alleges claims against the Company and other
defendants for violations of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, as amended, and Rule 10b-5 promulgated thereunder with respect to
alleged material misrepresentations and omissions in public filings made with
the Securities and Exchange Commission and certain press releases and other
public statements made by the Company and certain of its officers relating to
its business, results of operations, financial condition and future prospects,
as a result of which, it is alleged, the market price of the Company's common
stock was artificially inflated during the class periods. The class action
complaint focuses on statements made concerning an account receivable from one
of the Company's customers. The plaintiffs seek unspecified compensatory damages
and costs (including attorneys' and expert fees), expenses and other unspecified
relief on behalf of the classes. The Company believes that it has complied with
all of its obligations under the Federal securities laws and the Company intends
to defend this lawsuit vigorously. As a result of consultation with legal
representation and current insurance coverage, the Company does not believe the
lawsuit will have a material impact on the Company's results of operations or
financial position.

NOTE 9. NEW ACCOUNTING PRONOUNCEMENTS

In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities". SFAS 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
Certain Employee termination Benefits and Other Costs to Exit an


                                       8

<PAGE>

Activity (including Certain Costs Incurred in a Restructuring)". The provisions
of SFAS 146 are effective for the Company's 2003 fiscal year. The Company does
not believe that SFAS 146 will have a material impact on its financial
statements

In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". SFAS
145 rescinds SFAS 4, "Reporting Gains and Losses from Extinguishment of Debt",
SFAS 44, "Accounting for Intangible Assets of Motor Carriers" and SFAS 64,
"Extinguishments of Debt Made to Satisfy Sinking Fund Requirements". SFAS 145
amends SFAS 13, "Accounting for Leases", eliminating an inconsistency between
the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications with similar economic effects as
sale-leaseback transactions. This statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under certain conditions. The
provisions related to SFAS 13 are effective for transactions occurring after May
15, 2002. All other provisions of the statement are effective for financial
statements issued on or after May 15, 2002. The adoption of SFAS 145 did not
have a material impact on the Company's financial statements.

At the November 2001 EITF meeting, the FASB released Staff Announcement Topic
D-103, "Income Statement Characterization of Reimbursements Received for
`Out-of-Pocket' Expenses Incurred" stating that the Staff believes that
reimbursements received for out-of-pocket expenses should be characterized as
revenue. The Company adopted this Staff Announcement effective January 1, 2002.
Historically the Company has not reflected such reimbursements as revenue in its
consolidated statements of operations. Upon adoption of this FASB Staff
Announcement, comparative financial statements for prior periods were
reclassified to provide consistent presentation. The adoption of this FASB Staff
Announcement did not have any impact on the Company's financial position or
results of operations, however, the Company's services fees revenue and cost of
services fees revenue increased by an equal amount as a result of the gross-up
of revenues and expenses for reimbursable expenses. For the three and six months
ended June 30, 2002, the Company recorded revenue from reimbursement of
out-of-pocket expenses of approximately $62,000 and $150,000, respectively. For
the three and six months ended June 30, 2001, the Company's services fees
revenue and cost of services fees revenue increased by approximately $202,000
and $470,000, respectively, as a result of the reclassification of these
reimbursements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". This statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed
Of". The Company adopted SFAS 144 effective January 1, 2002, which did not have
a material impact on the Company's financial statements.

In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations". SFAS 143 addresses financial accounting and reporting obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The provisions of SFAS 143 are effective for the
Company's 2003 fiscal year. The Company does not believe that SFAS 143 will have
a material impact on its financial statements.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. SFAS 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually. SFAS 142 also requires that intangible assets with
estimable useful lives be amortized over their respective estimated useful lives
to their estimated residual values. The Company adopted SFAS 141 upon issuance
and adopted SFAS 142 effective January 1, 2002. Upon adoption, the Company
tested goodwill for impairment at January 1, 2002 according to the provisions of
SFAS 142, which resulted in no impairment required as a cumulative effect of
accounting change. In the second quarter of 2002, the Company tested goodwill
for impairment according to the provisions of SFAS 142 and intangible assets
with definite lives according to SFAS 144 due to certain changes in business
strategy that effected the Company's business plans, which resulted in an
impairment of $6.7 million of goodwill and $3.6 million of intangible assets
with definite lives. The Company recorded $2.2 million and $4.0 million,
respectively, of amortization expense related to goodwill during the three and
six months ended June 30, 2001. As a result of adopting SFAS 142, the Company
did not recognize any goodwill amortization during the three and six months
ended June 30, 2002.

In September 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement was amended in June 2000 by
Statement No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities." The Company adopted these new pronouncements in January of
2001. The new Statements require all derivatives to be recorded on the balance
sheet at fair value and establish accounting treatment for three types of
hedges: hedges of changes in the fair value of assets, liabilities or firm
commitments; hedges of the variable cash flows of forecasted transactions; and
hedges of foreign currency exposures of net investments in foreign operations.
The Company has no derivatives and the adoption of these pronouncements did not
have any impact on the Company's results of operations or financial position.


                                       9

<PAGE>

NOTE 10. RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the current
period presentation.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

This report contains certain forward-looking statements related to our future
results, including certain projections and business trends. Assumptions relating
to forward-looking statements involve judgments with respect to, among other
things, future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond our control. When used in this report, the words
"estimate," "project," "intend," "believe" and "expect" and similar expressions
are intended to identify forward-looking statements. Although we believe that
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate, and we may not realize the results
contemplated by the forward-looking statement. Management decisions are
subjective in many respects and susceptible to interpretations and periodic
revisions based upon actual experience and business developments, the impact of
which may cause us to alter our business strategy or capital expenditure plans
that may, in turn, affect our results of operations. In light of the significant
uncertainties inherent in the forward-looking information included in this
report, you should not regard the inclusion of such information as our
representation that we will achieve any strategy, objectives or other plans. The
forward-looking statements contained in this report speak only as of the date of
this report, and we have no obligation to update publicly or revise any of these
forward-looking statements.

These and other statements, which are not historical facts, are based largely
upon our current expectations and assumptions and are subject to a number of
risks and uncertainties that could cause actual results to differ materially
from those contemplated by such forward-looking statements. These risks and
uncertainties include, among others, the risks and uncertainties described in
"Risk Factors" herein.

Overview

The Company develops, markets, and supports Internet-based business-to-business
("B2B") e-commerce solutions that automate the procurement, sourcing, and
settlement of goods and services. The Company's software helps organizations
reduce the costs associated with the purchasing and payment settlement of goods
and services, and helps to maximize procurement economies of scale. The
Company's digital marketplace solution provides a framework that allows
companies to create trading communities and additional revenue opportunities.
The Company's solutions also benefit suppliers by reducing sales costs and
providing the opportunity to increase revenues. The Company's products have been
licensed by customers such as BarclaysB2B, the Burlington Northern and Santa Fe
Railway Company, Cox Enterprises, Mastercard International, Union Pacific
Corporation, Parsons Brinckerhoff, Smurfit-Stone Container Corporation, and
Wachovia Corporation.

In May 2002 the Company announced that it had retained an investment banking
firm to assist the Company in exploring all strategic alternatives to enhance
stockholder value. Such alternatives may include a sale of the Company, its
assets or its product lines or the adoption of a plan of liquidation. In
addition, the Company may redeploy its cash to acquire a company or companies
that may or may not be related to the Company's current business.

Critical Accounting Policies and Use of Estimates

As a result of the Company's announcement on exploring strategic alternatives
and the continuing poor market conditions, the Company has experienced a decline
in the demand for its software. While the Company has significantly reduced its
head count, the Company's announced strategy makes the retention of certain
employees critical to the success of this strategy. There is no guarantee that
the Company will be able to successfully execute on its announced strategy to
explore all strategic alternatives to enhance stockholder value.

If demand for business-to-business software and related services remain soft,
the Company's business, operating results, liquidity and financial condition
will be adversely affected. The Company's success depends on market acceptance
of e-commerce as a viable method for corporate procurement and other commercial
transactions and market adoption of the Company's current and future products.
The competitive landscape the Company faces is continuously changing. It is
difficult to estimate how competition will affect the Company's revenues.

It is also very difficult to predict the Company's quarterly results. The
Company has incurred significant net losses in each year since its inception.
The Company may not increase its customer base sufficient to generate the
substantial additional revenues necessary to become profitable. The Company has
established strategic selling relationships with a number of outside companies.
There is no guarantee that these relationships will generate the level of
revenues currently anticipated.


                                       10

<PAGE>

The Company's international sales and marketing activities cause the Company's
business to be more susceptible to the numerous risks associated with
international sales. The Company may not be successful in addressing these and
other risks and difficulties that it may encounter. Please refer to the "Risk
Factors" sections for additional information regarding the risks associated with
the Company's operations and financial condition.

The Company's discussion of financial condition and results of operations are
based on the consolidated financial statements which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements. Estimates also affect the reported amounts of revenues and
expenses during the reporting periods. The Company continually evaluates its
estimates and assumptions including those related to revenue recognition,
allowance for doubtful accounts, impairment of long-lived assets, impairment of
investments, and contingencies and litigation. The Company bases its estimates
on historical experience and other assumptions that are believed to be
reasonable under the circumstances. Actual results could differ from these
estimates.

The Company believes the following critical accounting policies include the more
significant estimates and assumptions used by management in the preparation of
its consolidated financial statements.

      -        The Company recognizes revenue from two primary sources, software
               licenses and services. Revenue from software licensing and
               services fees is recognized in accordance with Statement of
               Position ("SOP") 97-2, "Software Revenue Recognition", and SOP
               98-9, "Software Revenue Recognition with Respect to Certain
               Transactions" and related interpretations. The Company recognizes
               software license revenue when: (1) persuasive evidence of an
               arrangement exists; (2) delivery has occurred; (3) the fee is
               fixed or determinable; and (4) collectibility is probable.

      -        The Company maintains allowances for doubtful accounts based on
               expected losses resulting from the inability of the Company's
               customers to make required payments. As a result, the Company
               recorded a provision for doubtful accounts of $1,000 and $3,000
               for the three and six months ended June 30, 2002, respectively.
               The Company recorded a provision for doubtful accounts of
               $555,000 and $2.6 million for the three and six months ended June
               30, 2001, respectively.

      -        The Company has significant long-lived assets, primarily
               intangibles and goodwill, as a result of acquisitions completed
               during 2000. The Company currently evaluates the carrying value
               of its long-lived assets, including intangibles, according to
               Statement of Financial Accounting Standards ("SFAS") No. 142,
               "Goodwill and Other Intangible Assets" and SFAS No. 144,
               "Accounting for the Impairment or Disposal of Long-Lived Assets".
               Prior to 2002, the Company periodically evaluated the carrying
               value of its long-lived assets, including intangibles, according
               to SFAS No. 121, "Accounting for the Impairment of Long-Lived
               Assets and for Long-Lived Assets to Be Disposed Of". During the
               fourth quarter of 2001, the Company's evaluation of the
               performance of the SAI/Redeo companies compared to initial
               projections, negative economic trends and a decline in industry
               growth rate projections indicated that the carrying value of
               these intangible assets exceeded management's revised estimates
               of future undiscounted cash flows. This assessment resulted in a
               $36.8 million impairment charge during the three months ended
               December 31, 2001 to goodwill and intangible assets based on the
               amount by which the carrying amount of these assets exceeded fair
               value. As a result of a change in the Company's strategic
               direction during the second quarter of 2002, the Company
               determined that remaining goodwill and intangible assets should
               be tested for further impairment. The Company's evaluation of the
               present value of future cash flows based on the change in
               strategic direction indicated the carrying value of the Company's
               assets exceeded fair value. As a result, the Company recorded an
               additional impairment charge to goodwill of $6.7 million and an
               impairment charge to intangible assets of $3.6 million during the
               three months ended June 30, 2002. The Company recorded $227,000
               of amortization expense related to intangible assets with
               definite lives during the three months ended June 30, 2002 and
               2001. The Company recorded $455,000 of amortization expense
               related to intangible assets with definite lives during the six
               months ended June 30, 2002 and 2001. The Company recorded $2.2
               million and $4.0 million of amortization expense related to
               goodwill during the three and six months ended June 30, 2001. As
               a result of adopting SFAS 142, the Company did not record
               amortization expense related to goodwill during 2002.

      -        The Company has made equity investments in several privately
               held companies. The Company records an impairment charge when it
               believes an investment has experienced a decline in value that is
               other than temporary. During the three and six months ended June
               30, 2001, the Company recorded impairment charges on investments
               of $3.4 million and $6.5 million, respectively.

      -        The Company is a party to lawsuits in the normal course of its
               business. Litigation in general, and securities litigation in
               particular, can be expensive and disruptive to normal business
               operations. Moreover, the results of complex legal proceedings
               are difficult to predict. An unfavorable resolution of the
               Company's pending securities


                                       11

<PAGE>

               lawsuit could adversely affect the Company's business, results of
               operations, liquidity or financial condition. See "Risk Factors"
               and "Part II Other Information - Item 1. Legal Proceedings"
               herein.

Sources of Revenue

The Company's revenue consists of license fees and services fees. License fees
are generated from the licensing of the Company's suite of products. Services
fees are generated from consulting, implementation, training, content
aggregation and maintenance and support services.

Revenue Recognition

The Company recognizes revenue from two primary sources, software licenses and
services. Revenue from software licensing and services fees is recognized in
accordance with Statement of Position ("SOP") 97-2, "Software Revenue
Recognition", and SOP 98-9, "Software Revenue Recognition with Respect to
Certain Transactions" and related interpretations. The Company recognizes
software license revenue when: (1) persuasive evidence of an arrangement exists;
(2) delivery has occurred; (3) the fee is fixed or determinable; and (4)
collectibility is probable.

SOP No. 97-2 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on the
relative fair values of the elements. The fair value of an element must be based
on evidence that is specific to the vendor. License fee revenue allocated to
software products generally is recognized upon delivery of the products or
deferred and recognized in future periods to the extent that an arrangement
includes one or more elements to be delivered at a future date and for which
fair values have not been established. Revenue allocated to maintenance is
recognized ratably over the maintenance term, which is typically 12 months and
revenue allocated to training and other service elements is recognized as the
services are performed.

Under SOP No. 98-9, if evidence of fair value does not exist for all elements of
a license agreement and post-contract customer support is the only undelivered
element, then all revenue for the license arrangement is recognized ratably over
the term of the agreement as license revenue. If evidence of fair value of all
undelivered elements exists, but evidence does not exist for one or more
delivered elements, then revenue is recognized using the residual method. Under
the residual method, the fair value of the undelivered elements is deferred and
the remaining portion of the arrangement fee is recognized as revenue. Revenue
from hosted software agreements are recognized ratably over the term of the
hosting arrangements.

Operating Expenses

Cost of license fees includes royalties and software duplication and
distribution costs. The Company recognizes these costs as software applications
are shipped.

Cost of services fees includes personnel related expenses and third-party
consulting fees incurred to provide implementation, training, maintenance,
content aggregation, and upgrade services to customers and partners. These costs
are recognized as they are incurred for time and material arrangements and are
recognized using the percentage of completion method for fixed price
arrangements.

Research and development expenses consist primarily of personnel related
expenses and third-party consulting fees. The Company accounts for software
development costs under Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed". The Company charges research and development costs related to new
products or enhancements to expense as incurred until technological feasibility
is established, after which the remaining costs are capitalized until the
product or enhancement is available for general release to customers. The
Company defines technological feasibility as the point in time at which a
working model of the related product or enhancement exists. Historically, the
costs incurred during the period between the achievement of technological
feasibility and the point at which the product is available for general release
to customers have not been material.

Sales and marketing expenses consist primarily of personnel related expenses,
including sales commissions and bonuses, expenses related to travel, customer
meetings, trade show participation, public relations, promotional activities,
regional sales offices, and advertising.

General and administrative expenses consist primarily of personnel related
expenses for financial, administrative and management personnel, fees for
professional services, board of director fees, and the provision for doubtful
accounts. The Company allocates the total cost of its information technology
function and costs related to the occupancy of its corporate headquarters to
each of the functional areas. Information technology expenses include personnel
related expenses, communication charges, and software support. Occupancy charges
include rent, utilities, and maintenance services.


                                       12

<PAGE>

Limited Operating History

The Company has a limited operating history as an e-commerce business that makes
it difficult to forecast its future operating results. Prior period results
should not be relied on to predict the Company's future performance.

Pro-forma Results

The Company prepares and releases quarterly unaudited financial statements
prepared in accordance with generally accepted accounting principles ("GAAP").
The Company also discloses and discusses certain pro forma financial information
in the related earnings releases and investor conference calls. This pro forma
financial information excludes restructuring costs and expenses related to
reductions in employee workforce and office closures and consolidation,
depreciation and amortization on property and equipment, amortization of
intangibles, intangible impairment losses, stock-based compensation expenses,
losses realized on the disposal of assets, gains on sales of marketable
securities, and losses on impairment of investments, all of which are included
in our financial results for GAAP reporting purposes. The Company believes the
disclosure of the pro forma financial information helps investors more
meaningfully evaluate the results of the Company's ongoing operations. The pro
forma measures are not in accordance with GAAP and may be different from pro
forma measures used by other companies including the Company's competitors.
Therefore, we urge you to carefully review the GAAP financial information
included as part of this Form 10-Q, compare GAAP financial information with the
pro forma financial results disclosed below and read the associated
reconciliation.

            Pro Forma Condensed Consolidated Statements of Operations
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                           Three months ended               Six months ended
                                                                                 June 30                          June 30
                                                                        ------------------------       -------------------------
                                                                          2002             2001           2002             2001
<S>                                                                     <C>             <C>            <C>              <C>
REVENUES:
  License fees                                                          $ 1,013         $  3,600       $  2,486         $  5,910
  Services fees                                                           1,531            2,595          3,999            5,125
                                                                        -------         --------       --------         --------
      TOTAL REVENUES                                                      2,544            6,195          6,485           11,035

COST OF REVENUES:
  License fees                                                                3               80             17              124
  Services fees                                                           1,336            3,341          3,274            6,958
                                                                        -------         --------       --------         --------
      TOTAL COST OF REVENUES                                              1,339            3,421          3,291            7,082

OPERATING EXPENSES:
  Research and development                                                1,806            4,570          4,435           10,125
  Sales and marketing                                                     2,046            9,329          5,796           17,264
  General and administrative                                              1,714            2,885          3,221            7,416
                                                                        --------        --------       --------         --------
      TOTAL OPERATING EXPENSES                                            5,566           16,784         13,452           34,805
                                                                        --------        --------       --------         --------
  Operating loss                                                        $(4,361)        $(14,010)      $(10,258)        $(30,852)
  Loss on foreign currency transactions                                      (9)               -             (3)               -
  Interest income, (net)                                                    629            1,706          1,306            4,064
                                                                        --------        --------       --------         --------
  Pro forma net loss                                                    $(3,741)        $(12,304)      $ (8,955)        $(26,788)
                                                                        ========        ========       ========         ========
  Weighted average shares outstanding - basic and diluted                15,588           15,507         15,580           15,507
                                                                        ========        ========       ========         ========
  Pro forma net loss per share - basic and diluted                      $ (0.24)        $  (0.79)      $  (0.57)        $  (1.73)
                                                                        ========        ========       ========         ========
</TABLE>


                                       13

<PAGE>

              Reconciliation of GAAP Net Loss to Pro Forma Net Loss
                      (in thousands, except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                          Three months ended               Six months ended
                                                                                June 30                         June 30
                                                                         2002            2001             2002          2001
                                                                       -------------------------       ------------------------
<S>                                                                    <C>              <C>            <C>             <C>
  Net loss                                                             $(20,571)        $(20,787)      $(27,028)       $(43,548)
   Restructuring costs/1/                                                 3,807                -          3,605             513
   Depreciation and amortization on property and equipment                1,304              838          2,433           1,683
   Amortization of intangibles                                              227            2,463            455           4,483
   Intangible impairment loss                                            10,360                -         10,360               -
   Stock-based compensation                                                 352            1,800            450           3,600
   Loss on disposal of assets                                               795                7            785               7
   Gain on sale of marketable securities                                    (15)             (11)           (15)            (10)
   Loss on impairment of investments                                          -            3,386              -           6,484
                                                                       --------         --------       --------        --------
   Pro forma net loss                                                  $ (3,741)        $(12,304)      $ (8,955)       $(26,788)
                                                                       ========         ========       ========        ========
  Weighted average shares outstanding - basic and diluted                15,588           15,507         15,580          15,507
                                                                       --------         --------       --------        --------
   Pro forma net loss per share - basic and diluted                    $  (0.24)        $  (0.79)      $  (0.57)       $  (1.73)
                                                                       --------         --------       --------        --------
</TABLE>
- ----------
/1/ Restructuring costs are comprised of employee severance and termination
costs and office closures and consolidation costs. For the three and six months
ended June 30, 2002 and 2001, these costs consist of the following:

<TABLE>
<CAPTION>
     (in thousands)                     Three Months Ended     Three Months Ended   Six Months Ended     Six Months Ended
                                          June 30, 2002           June 30, 2001       June 30, 2002       June 30, 2001
<S>                                     <C>                     <C>                  <C>                 <C>
     Cost of services fees revenue        $   545                   $   -                $   545                $  161
     Research and development                 747                       -                    747                     -
     Sales and marketing                      634                       -                    432                   134
     General and administrative             1,881                       -                  1,881                   218
                                          -------                   -----                -------                ------
     Total                                $ 3,807                   $   -                $ 3,605                $  513
                                          =======                   =====                =======                ======
</TABLE>

Restructuring and Related Costs

During 2001 and 2002, the Company's management approved restructuring plans to
reorganize and reduce operating costs. Restructuring and related charges of
$513,000, $498,000 and $3.1 million were expensed in the first, third and fourth
quarters of 2001, respectively, to better align the Company's cost structure
with projected revenue. The first and third quarter charges were comprised
entirely of employee separation and related costs for 23 and 43 employees,
respectively. The fourth quarter charge was comprised of $1.9 million for
employee separation and related costs for 115 employees and $1.2 million for
facility closures and consolidation costs. During the first quarter of 2002, the
Company determined that amounts previously charged during 2001 of approximately
$202,000 that related to employee separation and related charges were no longer
required and this amount was credited to sales and marketing expense in the
accompanying condensed consolidated statement of operations during the three
months ended March 31, 2002. The Company's management approved further
reductions and reorganizations during the three months ended June 30, 2002,
which resulted in restructuring and related charges of $3.8 million. These
charges were comprised of $2.2 million for employee separation and related costs
for 102 employees and $1.6 million for facility closures and consolidation
costs.

The Company expects to complete the facility closures and consolidation during
2002. The facility closures and consolidation costs relate to the abandonment of
the Company's leased facilities in Limerick, Ireland; Maidenhead, England; and
near Toronto, Canada, as well as the restructuring of the Company's leased
facility in Suwanee, Georgia. Total facility closures and consolidation costs
include the write-down of property and equipment and leasehold improvements to
their net realizable value, remaining lease liabilities, construction costs and
brokerage fees to sublet the abandoned space offset by estimated sublease
income. The estimated costs of abandoning these leased facilities, including
estimated costs to sublease, were based on market information trend analysis
provided by a commercial real estate brokerage firm retained by the Company.

In connection with the Company's continuing restructuring program, the Company
implemented a further reduction of its worldwide workforce and incurred a
related restructuring charge of approximately $1.3 million during July, 2002.
The July 2002 charge is comprised of employee separation and related costs for
47 employees.

The following is a reconciliation of the components of the accrual for
restructuring and related costs, the amounts charged against the accrual during
2001 and 2002 and the balance of the accrual as of June 30, 2002:


                                       14

<PAGE>
<TABLE>
<CAPTION>
                                                                                     Six Months Ended June 30, 2002
                                     Accruals       Expenditures      Balance      -----------------------------------    Balance
                                   During 2001       During 2001      12/31/01     Accruals    Expenditures    Credits    06/30/02
                                   -----------      ------------      --------     --------    ------------    -------    --------
<S>                                <C>               <C>              <C>          <C>         <C>             <C>        <C>
  (in thousands)
  Employee separation costs         $2,939              $2,259        $   680      $ 2,239       $   2,388      $ 202      $  329
  Facility closure costs             1,218                   9          1,209        1,568             401          -       2,376
                                    ------              ------        -------      -------       ---------      -----      ------
  Total restructuring and
  related costs                     $4,157              $2,268        $ 1,889      $ 3,807       $   2,789      $ 202      $2,705
                                    ======              ======        =======      =======       =========      =====      ======
</TABLE>

The accrual for restructuring and related costs is included in accounts payable
and accrued liabilities in the accompanying condensed consolidated balance
sheets.

Results of Operations

Revenues

Total Revenues. Total revenues for the quarter ended June 30, 2002 decreased
58.9% to $2.5 million from $6.2 million during the same period in 2001. Total
revenues for the six months ended June 30, 2002 decreased 41.2% to $6.5 million
from $11.0 million during the same period in 2001. The decrease in total
revenues in both periods resulted primarily from a decrease in license revenue
due to reduced demand for the Company's software products as a result of reduced
information technology spending and the announcement by the Company to explore
all strategic alternatives during the quarter ended June 30, 2002. During the
quarter ended June 30, 2002, two customers accounted for more than 10% of total
revenue, totaling $1.0 million or 40.7% of total revenue. The percentage by
customer was 30.6% and 10.1% respectively, for the quarter ended June 30, 2002.
During the quarter ended June 30, 2001, three customers accounted for more than
10% each, totaling $4.0 million or 63.8% of total revenue. The percentage by
customer was 25.0%, 23.9%, and 14.9%, respectively, for the quarter ended June
30, 2001. During the six months ended June 30, 2002, one customer accounted for
more than 10% of total revenue, totaling $2.6 million or 39.5% of total revenue.
During the six months ended June 30, 2001, three customers accounted for more
than 10% each, totaling $6.3 million or 57.0% of total revenue. The percentage
by customer was 28.2%, 15.3% and 13.5%, respectively, for the six months ended
June 30, 2001.

As a result of BarclaysB2B's recent decision to discontinue its external
operations to focus on internal cost reduction, the Company was notified that
BarclaysB2B will terminate its current software license and service agreements
with the Company effective August 31, 2002. Upon termination the Company will be
required to refund to BarclaysB2B prepaid software license and support fees of
approximately $2.7 million less costs incurred by the Company associated with
terminating the contract. During the six months ended June 30, 2002, revenues
from the Company's agreements with BarclaysB2B represented 39.5% of the
Company's total revenues for this period.

License Fees. License fees decreased 71.9% to $1.0 million or 39.8% of total
revenues, for the quarter ended June 30, 2002 from $3.6 million, or 58.1% of
total revenues, for the same period in 2001. License fees decreased 57.9% to
$2.5 million or 38.3% of total revenues, for the six months ended June 30, 2002
from $5.9 million, or 53.6% of total revenues, for the same period in 2001. The
decrease in license fees was primarily attributable to the decision by the
Company to explore strategic alternatives during the quarter ended June 30,
2002, the softening demand for business-to-business software and the information
technology market generally.

Services Fees. Services fees decreased 41.0% to $1.5 million for the quarter
ended June 30, 2002, from $2.6 million for the same period in 2001. Services
fees decreased 22.0% to $4.0 million, for the six months ended June 30, 2002,
from $5.1 million for the same period in 2001. Services fees, however, increased
as a percentage of total revenues to 60.2%, for the quarter ended June 30, 2002,
from 41.9% during the same period in 2001, and to 61.7% for the six months ended
June 30, 2002, from 46.4% during the same period in 2001. The decrease in
services fees revenue for the three and six months ended June 30, 2002 is
primarily attributable to a decrease in implementation and training services, a
direct result of the decrease in the amount of software licensed, partially
offset by an increase in maintenance fees. As a result of the decision by the
Company to explore strategic alternatives during the quarter ended June 30,
2002, the Company anticipates certain customers may terminate their
relationships with the Company which would result in a decrease in maintenance
fees in future periods.

Cost of Revenues

Total Cost of Revenues. Cost of revenues decreased 44.9% to $1.9 million, or
74.1% of total revenue, during the quarter ended June 30, 2002 from $3.4
million, or 55.2% of total revenue, during the same period in 2001. Cost of
revenues decreased 47.0% to $3.8 million, or 59.2% of total revenue, during the
six months ended June 30, 2002 from $7.2 million, or 65.6% of total revenue,
during the same period in 2001. The decreases in cost of revenues are primarily
a result of a decrease in the cost of services fees


                                       15

<PAGE>

due to lower personnel related costs, partially offset by costs associated with
restructuring costs incurred during the three months ended June 30, 2002. During
the three months ended June 30, 2002, the Company had an average of 64.5% fewer
employees in services compared to the same period in 2001. During the six months
ended June 30, 2002, the Company had an average of 61.5% fewer employees in
services compared to the same period in 2001. The reduced personnel related
costs are a result of Company instituted cost control measures that began during
2001 and the Company's announced strategy in May 2002 to pursue strategic
alternatives such as a sale of the Company, its assets or its product lines.

Cost of License Fees. Cost of license fees decreased 96.3% to $3,000 in the
second quarter of 2002 from $80,000 in the second quarter of 2001. Cost of
license fees decreased 86.3% to $17,000 in the first six months of 2002 from
$124,000 in the first six months of 2001. Cost of license fees may vary from
period to period depending on the product mix licensed, but are expected to
remain a small percentage of license fees.

Cost of Services Fees. Cost of services fees decreased 43.7% to $1.9 million, or
122.9% of total services fees revenues, during the quarter ended June 30, 2002
compared to $3.3 million, or 128.7% of total services fees revenues, during the
same period in 2001. Cost of services fees decreased 46.4% to $3.8 million, or
95.5% of total services fees revenues, during the six months ended June 30, 2002
compared to $7.1 million, or 138.9% of total services fees revenues, during the
same period in 2001. As discussed above, the decrease in the cost of services
fees was primarily attributable to lower personnel related costs in both the
services implementation and customer support areas, partially offset by costs
associated with restructuring costs incurred during the three months ended June
30, 2002. The Company incurred costs related to employee severance and related
costs of $545,000 during the three months ended June 30, 2002 and costs of
$161,000 during the three months ended March 31, 2001.

Research and Development Expense

Research and development expenses decreased 44.1% to approximately $2.6 million,
or 100.4% of total revenues, during the quarter ended June 30, 2002 from $4.6
million, or 73.8% of total revenues, during the same period in 2001. During the
six months ended June 30, 2002, research and development expenses decreased
48.8% to approximately $5.2 million, or 79.9% of total revenues from $10.1
million, or 91.8% of total revenues, during the same period in 2001. Research
and development expenses decreased primarily as a result of a reduction in
personnel related costs and consulting fees incurred to develop the Company's
products, partially offset by costs associated with restructuring costs incurred
during the three months ended June 30, 2002. Consulting fees were $196,000 in
the second quarter of 2002 compared to $1.6 million in the second quarter of
2001. During the three months ended June 30, 2002, the Company had an average of
52.5% fewer employees in the research and development area compared to the same
period of 2001. Consulting fees were $706,000 in the first six months of 2002
compared to $3.7 million in the first six months of 2001. During the six months
ended June 30, 2002, the Company had an average of 46.5% fewer employees in the
research and development area compared to the same period of 2001. The Company
incurred costs related to employee severance and related costs of $747,000
during the three months ended June 30, 2002. The Company did not incur any
severance or related costs during the three or six month periods ended June 30,
2001.

Sales and Marketing Expense, exclusive of non-cash expense

Sales and marketing expenses decreased 71.3% to $2.7 million, or 105.3% of total
revenues, during the quarter ended June 30, 2002 from $9.3 million, or 150.6% of
total revenues, during the same period in 2001. Sales and marketing expenses
decreased 64.2% to $6.2 million, or 96.0% of total revenues, during the six
months ended June 30, 2002 from $17.4 million, or 157.7% of total revenues,
during the same period in 2001. The decrease was primarily attributable to a
decrease in variable compensation as a result of lower license revenue during
the period and a decrease in sales and marketing personnel, partially offset by
costs associated with restructuring costs incurred during the three months ended
June 30, 2002. The Company had an average of 72.1% fewer employees during the
second quarter of 2002 in the sales, marketing and business development areas
compared to the second quarter of 2001. The Company had an average of 67.5%
fewer employees during the first six months of 2002 in the sales, marketing and
business development areas compared to the first six months of 2001. The Company
incurred severance and related costs of $634,000 and $432,000, respectively,
during the three and six months ended June 30, 2002. The company incurred no
costs during the three months ended June 30, 2001 and $134,000 during the six
months ended June 30, 2001.

Noncash Sales and Marketing Expense

During the three months ended June 30, 2002 and 2001, noncash sales and
marketing expenses of approximately $352,000 and $1.7 million, respectively,
were recognized in connection with sales and marketing agreements signed by the
Company during the fourth quarter of 1999 and the first quarter of 2000. The
Company recognized $450,000 and $3.4 million, respectively, associated with
these agreements during the six months ended June 30, 2002 and 2001. In
connection with these agreements, the Company issued warrants and shares of
common stock to certain strategic partners, all of whom were also customers, in
exchange for their participation in the Company's sales and marketing efforts.
The decrease in noncash sales and marketing expense during 2002 is


                                       16

<PAGE>

due to the termination of the sales and marketing agreement with one customer
during the fourth quarter of 2001. As of June 30, 2002 all deferred sales and
marketing costs, previously capitalized, have been expensed.

General and Administrative, Exclusive of Noncash Expense

General and administrative expenses, including the provision for doubtful
accounts, increased 24.6% to $3.6 million during the quarter ended June 30,
2002, or 141.3% of total revenue from $2.9 million, or 46.6% of total revenues,
during the same period in 2001. General and administrative expenses, including
the provision for doubtful accounts, decreased 33.2% to $5.1 million during the
six months ended June 30, 2002, or 78.7% of total revenue from $7.6 million, or
69.2% of total revenues, during the same period in 2001. The increase in general
and administrative expense for the three months ended June 30, 2002 was
primarily attributable to severance related costs and facility restructuring
costs partially offset by a decrease in the provision for doubtful accounts and
reduced headcount. The Company had approximately $313,000 of severance related
costs and approximately $1.6 million in facility restructuring expenses during
the three months ended June 20, 2002. The Company had an average of 50.5% fewer
employees during the three months ended June 30, 2002 in the general and
administrative areas compared to the same period of 2001. The Company recorded a
provision for doubtful accounts of $1,000 during the three months ended June 30,
2002 compared to a provision of $555,000 for the three months ended June 30,
2001. The decrease in general and administrative expense for the six months
ended June 30, 2002 was primarily attributable to a decrease in the provision
for doubtful accounts and reduced headcount, partially offset by severance and
related costs and facility restructuring costs. The Company had an average of
50.9% fewer employees during the six months ended June 30, 2002 in the general
and administrative areas compared to the same period of 2001. The Company
recorded a provision for doubtful accounts of $3,000 during the six months ended
June 30, 2002 compared to a provision of $2.6 million for the six months ended
June 30, 2001.

Noncash General and Administrative Expense

For the three months ended March 31, 2001, noncash general and administrative
expenses were $112,000, or 1.8% of total revenues. For the six months ended June
30, 2001, noncash general and administrative expenses were $224,000, or 2.0% of
total revenues. In the third quarter of 2000, the Company granted 18,750 options
to a new board member at a price below the fair market value at the date of
grant. The amount expensed during 2001 relates primarily to these options.

Loss on Impairment of Intangible Assets

In the second quarter of 2002, the Company recognized a goodwill impairment loss
of $6.7 million and an intangible asset impairment loss of $3.6 million as a
result of a change in the Company's strategic direction. The Company
periodically evaluates the carrying value of its long-lived assets, including
intangibles, according to Statement of Financial Accounting Standards ("SFAS")
No. 142, "Goodwill and Other Intangible Assets" and SFAS 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". As a result of a change in the
Company's strategic direction during the second quarter of 2002, the Company
determined that remaining goodwill and intangible assets should be tested for
further impairment. The Company's evaluation of the present value of future cash
flows based on the change in strategic direction indicated the carrying value of
the Company's assets exceeded fair value. As a result the Company recorded an
additional impairment charge to goodwill and intangible assets of $10.4 million
during the three months ended June 30, 2002.

Depreciation and Amortization on Property and Equipment

Depreciation and amortization on property and equipment increased to $1.3
million in the quarter ended June 30, 2002 from $838,000 in the same period of
2001. Depreciation and amortization on property and equipment increased to $2.4
million in the six months ended June 30, 2002 from $1.7 million in the same
period of 2001. The increase in depreciation and amortization on property and
equipment during 2002 is primarily due to financial, professional services
management and customer relationship software implemented during 2001.

Amortization of Intangible Assets

Amortization of intangible assets decreased to $227,000 during the three months
ended June 30, 2002 from $2.5 million during the same period of 2001.
Amortization of intangible assets decreased to $455,000 during the six months
ended June 30, 2002 from $4.5 million during the same period of 2001. The
decrease is primarily the result of adopting SFAS 142, effective January 1,
2002, which requires that goodwill and intangible assets with indefinite useful
lives no longer be amortized. The amortization during 2002 relates to intangible
assets with definite lives. As a result of adopting SFAS 142, the Company did
not recognize any amortization related to goodwill during 2002. The Company
recorded $2.2 million of amortization expense related to goodwill during the
three months ended June 30, 2001 and $4.0 million during the six months ended
June 30, 2001. The Company recorded $227,000 of amortization related to
intangible assets with definite lives during the three months ended June 30,
2001 and $455,000 during the six months ended June 30, 2001.


                                       17

<PAGE>

Loss on Disposal of Assets

For the three and six month periods ended June 30, 2002, the Company recorded a
loss on the disposal of assets of $795,000 and $785,000, respectively. For the
three and six month periods ended June 30, 2001, the Company recorded a loss on
the disposal of assets of $7,000. The increase in the loss on the disposal of
assets in the second quarter of 2002 is primarily attributable to the write down
of assets located in the Maidenhead and Limerick offices to their net realizable
value.

Other Income

For the three months ended June 30, 2002 and 2001, the Company recorded other
income of $6,000 and $11,000, respectively. For the six months ended June 30,
2002, and 2001 the Company recorded other income of $12,000 and $10,000
respectively. These amounts are comprised of losses on foreign currency and
realized gains and losses on marketable securities.

Loss on Impairment of Investments

During the three and six months ended June 30, 2001, the Company recorded a loss
on impairment of investments of approximately $3.4 million and $6.5 million,
respectively. These losses were necessitated by other than temporary losses to
the value of investments the Company has made in privately held companies. These
companies are primarily early-stage companies and are subject to significant
risk due to their limited operating history and current economic and capital
market conditions.

Interest Income

Interest income decreased to $685,000 in the second quarter of 2002, or 26.9% of
total revenues from $1.8 million, or 28.4% of total revenues, in the same period
of 2001. Interest income decreased to $1.4 million in the first six months of
2002, or 21.9% of total revenues from $4.2 million, or 37.9% of total revenues,
in the same period of 2001. The decrease in interest income was due to lower
levels of cash available for investment and lower interest rates. The Company
expects to continue to use cash to fund operating losses and, as a result,
interest income on available cash is expected to decline in future quarters.

Interest Expense

Interest expense for the three months ended June 30, 2002 and 2001 was $56,000.
Interest expense for the six months ended June 30, 2002 was $112,000 compared to
$120,000 during the same period of 2001. In March of 2000, the Company entered
into a $5.0 million borrowing arrangement with an interest rate of 4.5% with
Wachovia Capital Investments, Inc. The interest expense in 2002 and 2001 is
primarily related to this agreement. The $5.0 million is due on March 15, 2005.

Income Taxes

As a result of the operating losses incurred since the Company's inception, no
provision or benefit for income taxes was recorded during the three and six
months ended June 30, 2002 and 2001, respectively.

Liquidity and Capital Resources

The Company's cash and cash equivalents decreased to $38.7 million at June 30,
2002 from $55.6 million at December 31, 2001. Marketable securities increased to
$68.6 million at June 30, 2002 from $65.3 million at December 31, 2001. The
overall decrease in cash and cash equivalents and marketable securities is due
primarily to cash used to fund operating losses.

Cash used in operating activities was approximately $13.8 million during the six
months ended June 30, 2002. The cash used was primarily attributable to the
Company's net loss and to a decrease in deferred revenue partially offset by
noncash items, an increase in accounts payable and a decrease in accounts
receivable and prepaid and other assets. Cash used in operating activities was
approximately $28.0 million during the six months ended June 30, 2001. The cash
used was primarily attributable to the Company's net loss, an increase in
accounts receivable and prepaid and other current assets, and a decrease in
accounts payable and accrued liabilities partially offset by noncash items and
an increase in deferred revenue.

Cash used for investing activities was approximately $3.4 million during the six
months ended June 30, 2002. The cash was used primarily for purchases of
marketable securities partially offset by the sale of investments and the sale
and maturity of marketable securities. Cash used by investing activities was
approximately $8.6 million during the six months ended June 30, 2001. The cash
used by investing activities was primarily attributable to the purchase of
marketable securities, the purchase of property and equipment and an investment
in a private company partially offset by proceeds received from the sale and
maturity of marketable securities.


                                       18

<PAGE>

Cash provided by financing activities was approximately $214,000 during the six
months ended June 30, 2002, and approximately $166,000 during the six months
ended June 30, 2001. The cash provided by financing activities during the six
months ended June 30, 2002 and 2001 was primarily attributable to proceeds from
shares issued under the employee stock purchase plan and stock option exercises.

The Company's accounts receivable potentially subject the Company to credit
risk, as collateral is generally not required. As of June 30, 2002, four
customers accounted for more than 10% each, totaling $1.1 million or 64.2% of
the gross accounts receivable balance on that date. The percentage by customer
was 23.8%, 18.2%, 11.8%, and 10.4%, respectively, at June 30, 2002. As of
December 31, 2001, four customers accounted for more than 10% each, totaling
$1.7 million or 53.2% of the gross accounts receivable balance on that date. The
percentage of total accounts receivable due from each of these four customers
was 15.8%, 13.9%, 12.6% and 10.9%, respectively, at December 31, 2001.

During the quarter ended June 30, 2002, two customers accounted for more than
10% of total revenue, totaling $1.0 million or 40.7% of total revenue. The
percentage by customer was 30.6% and 10.1% respectively, for the quarter ended
June 30, 2002. During the quarter ended June 30, 2001, three customers accounted
for more than 10% each, totaling $4.0 million or 63.8% of total revenue. The
percentage by customer was 25.0%, 23.9%, and 14.9%, respectively, for the
quarter ended June 30, 2001. During the six months ended June 30, 2002, one
customer accounted for more than 10% of total revenue, totaling $2.6 million or
39.5% of total revenue. During the six months ended June 30, 2001, three
customers accounted for more than 10% each, totaling $6.3 million or 57.0% of
total revenue. The percentage by customer was 28.2%, 15.3%, and 13.5%,
respectively, for the six months ended June 30, 2001.

As a result of BarclaysB2B's recent decision to discontinue its external
operations to focus on internal cost reduction, the Company was notified that
BarclaysB2B will terminate its current software license and service agreements
with the Company effective August 31, 2002. Upon termination the Company will be
required to refund to BarclaysB2B prepaid software license and support fees of
approximately $2.7 million less costs incurred by the Company associated with
terminating the contract. During the six months ended June 30, 2002, revenues
from the Company's agreements with BarclaysB2B represented 39.5% of the
Company's total revenues for this period.

At the July 15, 2002 meeting of the Company's Board of Directors, the Board
resolved to recommend to the stockholders of the Company for approval at the
next meeting called for any purpose, that costs incurred by Warren B. Kanders,
Burtt R. Erlich and Nicholas Sokolow in connection with the solicitation of
proxies for the 2002 annual meeting, be reimbursed by the Company. These costs
are approximately $500,000.

On March 14, 2000, the Company entered into a securities purchase agreement with
Wachovia Capital Investments, Inc. Wachovia purchased a 4.5% convertible
subordinated promissory note (the "Note") in the original principal amount of
$5.0 million. The Note is due March 15, 2005 and the $5.0 million principal
amount was placed in investment grade cash equivalents. Upon the occurrence of a
change of control, as defined in the Note, the Company would be required to
prepay the outstanding principal amount of the Note, together with any unpaid
interest, within five business days after the occurrence of a change of control.
As part of the Company's announced strategic alternatives process, many
strategic options could constitute a change of control, as defined in the Note,
and require a prepayment of the Note, together with any unpaid interest.

At June 30, 2002, the Company had net operating loss carryforwards, research and
experimentation credit, and alternative minimum tax credit carryforwards for
U.S. federal income tax purposes, which expire in varying amounts beginning in
the year 2009. The Company's ability to benefit from certain net operating loss
carryforwards is limited under section 382 of the Internal Revenue Code as the
Company is deemed to have had an ownership change of greater than 50%.
Accordingly, certain net operating losses may not be realizable in future years
due to this limitation.

Although operating activities may provide cash in certain periods, to the extent
the Company incurs continuing operating losses or experiences growth in the
future, the Company's operating and investing activities will continue to use
cash. The Company currently estimates uses of cash to fund operating losses and
for purchases of property and equipment. The actual use of cash in operations
during 2002 will be impacted dramatically by any fluctuations in projected
revenue as the Company's operating expenses are relatively fixed in the short
term. The Company currently believes that existing cash and cash equivalents and
marketable securities will be sufficient to meet operating and investing needs
for the foreseeable future.

The following summarizes the Company's contractual obligations and commercial
commitments at June 30, 2002, and the effect such obligations are expected to
have on our liquidity and cash flow in future periods:

<TABLE>
<CAPTION>
                       Total           2002            2003           2004           2005            2006          Thereafter
                       -----           ----            ----           ----           ----            ----          ----------
<S>                  <C>              <C>            <C>            <C>            <C>              <C>            <C>
(in thousands)
Long-term debt       $  5,000         $    -         $     -        $     -        $ 5,000          $     -          $    -
Operating leases        6,990            914           1,774          1,803          1,802              644              53
                     --------         ------         -------        -------        -------          -------          ------
Total                $ 11,990         $  914         $ 1,774        $ 1,803        $ 6,802          $   644          $   53
                     ========         ======         =======        =======        =======          =======          ======
</TABLE>

The Company does not have commercial commitments under capital leases, lines of
credit, standby lines of credit, guaranties, standby repurchase obligations or
other such arrangements.


                                       19

<PAGE>

The Company does not engage in any transactions or have relationships or other
arrangements with an unconsolidated entity. These include special purpose and
similar entities or other off-balance sheet arrangements. The Company also does
not trade in energy, weather or other commodity based contracts.

Related Party Transactions

On November 1, 2001, the Company engaged E.Com Consulting to perform market
research and provide recommendations concerning the needs and opportunities
associated with the Company's settlement product. E.Com Consulting subcontracted
with e-RM International, Inc. ("e-RMI") to assist with a portion of this
project. e-RMI is a Delaware corporation whose sole shareholder is Chrismark
Enterprises LLC. Chrismark Enterprises LLC is owned by Mark Johnson, a former
director of the Company and his wife. The contract period of the engagement was
November 1, 2001 through January 31, 2002 for which the Company agreed to pay
total professional fees of $50,000 plus out-of-pocket expenses. Of this amount,
$7,805 was paid to e-RMI. The Company expensed a total of $42,164 in connection
with the engagement during the fourth quarter of 2001 and had a balance due
E.Com of $34,359 at December 31, 2001 that is included in accounts payable and
accrued liabilities in the accompanying consolidated balance sheet. The contract
was terminated by the Company during January 2002. No expense was incurred
during 2002 and all amounts due E.Com were paid in January, 2002. At the May 21,
2002 Annual Meeting of stockholders, Mr. Johnson was not re-elected a director
of the Company.

On February 7, 2002 Todd Hewlin joined the Company's board of directors. Mr.
Hewlin is a managing director of The Chasm Group, LLC, a consultancy
organization focusing on helping technology companies develop and implement
strategies that create and sustain market leadership positions for their core
products while building shareholder value and a sustainable competitive
advantage. During 2001, the Company engaged The Chasm Group to assist the
Company on various strategic and organizational issues. The contract period of
the engagement was November 15, 2001 through February 15, 2002 for which the
company agreed to professional fees of $225,000 plus out-of-pocket expenses. The
Company expensed a total of $145,000 during the three months ended March 31,
2002 that is included in general and administrative in the accompanying
consolidated statement of operations and expensed $131,000 during the fourth
quarter of 2001. The Company expensed an additional $54,000 during the three
months ended March 31, 2002 related to further services performed by The Chasm
Group that is included in general and administrative in the accompanying
consolidated statement of operations. At the May 21, 2002 Annual Meeting of
stockholders, Mr. Hewlin was not re-elected a director of the Company.

In the opinion of management, the rates, terms and considerations of the
transactions with the related parties described above approximate those that the
Company would have received in transactions with unaffiliated parties.

New Accounting Pronouncements

In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities". SFAS 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
Certain Employee termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". The provisions of SFAS
146 are effective for the Company's 2003 fiscal year. The Company does not
believe that SFAS 146 will have a material impact on its financial statements

In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". SFAS
145 rescinds SFAS 4, "Reporting Gains and Losses from Extinguishment of Debt",
SFAS 44, "Accounting for Intangible Assets of Motor Carriers" and SFAS 64,
"Extinguishments of Debt Made to Satisfy Sinking Fund Requirements". SFAS 145
amends SFAS 13, "Accounting for Leases", eliminating an inconsistency between
the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications with similar economic effects as
sale-leaseback transactions. This statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under certain conditions. The
provisions related to SFAS 13 are effective for transactions occurring after May
15, 2002. All other provisions of the statement are effective for financial
statements issued on or after May 15, 2002. The adoption of SFAS 145 did not
have a material impact on the Company's financial statements.

At the November 2001 EITF meeting, the FASB released Staff Announcement Topic
D-103, "Income Statement Characterization of Reimbursements Received for
`Out-of-Pocket' Expenses Incurred" stating that the Staff believes that
reimbursements received for out-of-pocket expenses should be characterized as
revenue. The Company adopted this Staff Announcement effective January 1, 2002.
Historically the Company has not reflected such reimbursements as revenue in its
consolidated statements of operations. Upon adoption of this FASB Staff
Announcement, comparative financial statements for prior periods were
reclassified to provide consistent presentation. The adoption of this FASB Staff
Announcement did not have any impact on the Company's financial position or
results of operations, however, the Company's services fees revenue and cost of
services fees revenue increased by an


                                       20

<PAGE>

equal amount as a result of the gross-up of revenues and expenses for
reimbursable expenses. For the three and six months ended June 30, 2002, the
Company recorded revenue from reimbursement of out-of-pocket expenses of
approximately $62,000 and $150,000, respectively. For the three and six months
ended June 30, 2001, the Company's services fees revenue and cost of services
fees revenue increased by approximately $202,000 and $470,000, respectively, as
a result of the reclassification of these reimbursements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". This statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed
Of". The Company adopted SFAS 144 effective January 1, 2002, which did not have
a material impact on the Company's financial statements.

In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations". SFAS 143 addresses financial accounting and reporting obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The provisions of SFAS 143 are effective for the
Company's 2003 fiscal year. The Company does not believe that SFAS 143 will have
a material impact on its financial statements.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. SFAS 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually. SFAS 142 also requires that intangible assets with
estimable useful lives be amortized over their respective estimated useful lives
to their estimated residual values. The Company adopted SFAS 141 upon issuance
and adopted SFAS 142 effective January 1, 2002. Upon adoption, the Company
tested goodwill for impairment at January 1, 2002 according to the provisions of
SFAS 142, which resulted in no impairment required as a cumulative effect of
accounting change. In the second quarter of 2002, the Company tested goodwill
for impairment according to the provisions of SFAS 142 and intangible assets
with definite lives according to SFAS 144 due to certain changes in business
strategy that effected the Company's business plans, which resulted in an
impairment of $6.7 million of goodwill and $3.6 million of intangible assets
with definite lives. The Company recorded $2.2 million and $4.0 million,
respectively, of amortization expense related to goodwill during the three and
six months ended June 30, 2001. As a result of adopting SFAS 142, the Company
did not recognize any goodwill amortization during the three and six months
ended June 30, 2002.

In September 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement was amended in June 2000 by
Statement No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities." The Company adopted these new pronouncements in January of
2001. The new Statements require all derivatives to be recorded on the balance
sheet at fair value and establish accounting treatment for three types of
hedges: hedges of changes in the fair value of assets, liabilities or firm
commitments; hedges of the variable cash flows of forecasted transactions; and
hedges of foreign currency exposures of net investments in foreign operations.
The Company has no derivatives and the adoption of these pronouncements did not
have any impact on the Company's results of operations or financial position.

Risk Factors

In addition to other information in this quarterly report on Form 10-Q, the
following risk factors should be carefully considered in evaluating the Company
and its business because such factors currently may have a significant impact on
the Company's business, operating results, liquidity and financial condition. As
a result of the risk factors set forth below, actual results could differ
materially from those projected in any forward-looking statements.

The Company's announced plans to pursue all strategic alternatives to enhance
stockholder value have, and are likely to continue to, reduce the demand for the
Company's software.

In May 2002 the Company announced that it had retained an investment banking
firm to assist the Company in exploring all strategic alternatives to enhance
stockholder value. As a result of this announced strategy and steps taken by the
Company to reduce its operating expenses, the Company has experienced a decline
in the demand for its software and its ability to acquire new customers. The
Company has significantly reduced the number of its sales and marketing
personnel from approximately 46 in April, 2002 to approximately 3 in August,
2002. Management believes that demand for the Company's software will continue
to decline as a result of the Company's announced strategy. Continued decline in
demand for the Company's products and services will negatively affect the
Company's business, results of operations, liquidity and financial condition.

The Company's announced plans to pursue strategic alternatives has caused, and
is likely to continue to cause, the Company to lose its customers.


                                       21

<PAGE>

The uncertainty surrounding the Company's announced strategy to pursue strategic
alternatives has caused the Company's customers to question the Company's
long-term commitment to its software and electronic commerce products and
services. As a result, certain customers have indicated that they may terminate
their relationships with the Company. If this uncertainty continues, the Company
expects to lose existing software customers.

The Company's ability to execute on its announced strategy to pursue strategic
alternatives has been adversely effected by market conditions and the Company's
declining business.

Market conditions and the Company's public announcement to seek alternatives
such as the sale of the Company, its assets, product lines or adopt a plan of
liquidation has made it more difficult for the Company to negotiate the terms of
any such transaction. As a result, the Company may not be able to sell the
Company, its assets or product lines on terms that are acceptable to the Company
or at all. If the Company does not successfully negotiate the sale of the
Company, its assets or product lines, the Company may cease operating its
software and electronic commerce business.

As the Company pursues its announced strategy of pursuing strategic
alternatives, the Company is dependent on certain key executives and employees.

To execute on the Company's announced strategy to reduce its operating expenses
and pursue a sale of the Company, its assets, product lines, or plan of
liquidation, the Company must retain critical executives and certain employees
that work in the support and services and development areas. The familiarity of
these individuals with the Company's current products and services makes them
especially critical to the Company's success in executing on any of its
announced strategies. The loss of any such key executives or employees could
make it more difficult for the Company to pursue and execute on its announced
strategies.

There is no guarantee that the Company will continue to operate its software and
electronic commerce business.

The Company may use a substantial portion of its cash to acquire a business or
businesses that are not related or complementary to the Company's current
software and electronic commerce business. The Company may determine not to
continue any operations and it may adopt a plan of liquidation. The Company may
not be successful in any business it may acquire.

Any acquisitions that the Company attempts or makes could prove difficult to
integrate or require a substantial commitment of management time and other
resources.

As part of the Company's announced strategy, the Company may seek to acquire or
invest in additional businesses, products or technologies that may or may not
complement or expand its current business. The Company's management may not have
experience in operating the types of business that may be acquired by the
Company. In addition, acquisitions, particularly acquisitions of unrelated
businesses, involve a number of special problems including:

     .    executing successful due diligence;

     .    difficulty integrating acquired technologies, operations and personnel
          with the existing businesses;

     .    diversion of management attention in connection with both negotiating
          the acquisitions and integrating the assets;

     .    strain on managerial and operational resources as management tries to
          oversee larger operations;

     .    the funding requirements for acquired companies may be significant;

     .    exposure to unforeseen liabilities of acquired companies;

     .    increased risk of costly and time-consuming litigation, including
          stockholder lawsuits; and

     .    the requirement to record potentially significant additional future
          operating costs for the amortization of intangible assets.

The Company may not be able to successfully address these problems. Moreover,
the Company's future operating results will depend to a significant degree on
its ability to successfully integrate acquisitions (if any) and manage
operations while also controlling expenses.


                                       22

<PAGE>

In addition, if the Company identifies an appropriate acquisition opportunity,
the Company may not be able to negotiate the terms of that acquisition
successfully. The Company may not be able to select, manage or absorb or
integrate any future acquisitions successfully, particularly acquisitions of
large companies. Any acquisition, even if successfully integrated, may not
benefit the stockholders.

The softening demand for business-to-business software and related services has
and is likely to continue to negatively affect the Company's software business,
operating results, liquidity and financial condition.

The Company's revenue growth and operating results depend significantly on the
overall demand for technological goods and services, and in particular, demand
for business-to-business software and services. Softening demand for these
products and services caused by ongoing economic uncertainty and recently, the
Company's announced strategy to pursue strategic alternatives has contributed to
and will continue to contribute to lower revenues.

The success of the Company's software business depends upon market acceptance of
e-commerce as a reliable method for corporate procurement and other commercial
transactions.

Market acceptance of e-commerce, generally, and the Internet specifically, as a
forum for corporate procurement is subject to a number of risks. The success of
the Company's suite of business-to-business e-commerce applications, including
Clarus eProcurement and Clarus eMarket, depends upon the development and
expansion of the market for Internet-based software applications, in particular
e-commerce applications. This market is rapidly evolving. Many significant
issues relating to commercial use of the Internet, including security,
reliability, cost, ease of use, quality of service and government regulation,
remain unresolved and could delay or prevent Internet growth. If widespread use
of the Internet for commercial transactions does not develop or if the Internet
otherwise does not develop as an effective forum for corporate procurement, the
demand for the Company's product suite and our overall business, operating
results, liquidity and financial condition will be materially and adversely
affected.

The Company's settlement platform is a new technology product in an evolving
market.

The Company's settlement product is a technology that is currently being
marketed to early-adopting customers. The Company has limited experience in
marketing this product. If the market for the settlement product fails to
completely develop or develops more slowly than the Company anticipates or if
the Company fails to develop and gain market acceptance of this product, the
Company's software business, operating results, liquidity and financial
condition could be materially and adversely affected.

The Company's quarterly operations are volatile and default to predict. If the
Company fails to meet the expectations of public market analysts or investors
the market price of the Company's common stock may decrease significantly.

The Company believes that its quarterly and annual operating results will
fluctuate significantly in the future, and the results of operations may fall
below the expectations of securities analysts and investors. If this occurs or
if market analysts perceive that it will occur, the market price of the
Company's common stock could decrease substantially.

Because the percentage of the Company's revenues represented by maintenance
services and other recurring forms of revenue is smaller than that of many
software companies with a longer history of operations, the Company does not
have a significant recurring revenue stream that could lessen the effect of
quarterly fluctuations in operating results. Many factors may cause significant
fluctuations in the Company's quarterly and annual operating results, including:

     .    changes in the demand for the Company's products;

     .    the timing, composition and size of orders from the Company's
          customers;

     .    customer spending patterns and budgetary resources;

     .    the Company's success in attracting new customers;

     .    the timing of introductions or enhancements to the Company's products;

     .    changes in the Company's pricing policies or those of the Company's
          competitors;

     .    the Company's ability to anticipate and adapt effectively to
          developing markets and rapidly changing technologies;



                                       23

<PAGE>

     .    the Company's ability to retain and motivate critical personnel,
          particularly within the Company's finance and support and services
          organizations;

     .    the publication of opinions or reports about the Company, its
          products, its competitors or their products;

     .    unforeseen events affecting business-to-business e-commerce;

     .    changes in general economic conditions;

     .    bad debt write-offs;

     .    impairment of intangibles;

     .    impairment of investments;

     .    actions taken by the Company's competitors, including new product
          introductions and enhancements;

     .    restructuring of the Company's operations and related charges;

     .    the Company's ability to scale its network and operations to support
          large numbers of customers, suppliers and transactions;

     .    the Company's success in maintaining and enhancing existing
          relationships and developing new relationships with strategic
          partners, including application service providers, systems
          integrators, resellers and other partners; and

     .    the Company's ability to control its costs.

The Company's quarterly revenues are especially subject to fluctuation because
they can depend on the sale of relatively large orders for the Company's
products and related services. As a result, the Company's quarterly operating
results may fluctuate significantly if the Company is unable to complete one or
more substantial sales in a given quarter.

The Company's stock price is highly volatile.

The Company's stock price has fluctuated dramatically. The market price of the
Company's common stock may decrease significantly in the future in response to
the following factors, some of which are beyond the Company's control:

     .    variations in the Company's quarterly operating results;

     .    announcements that the Company's revenue or income are below analysts'
          expectations;

     .    changes in analysts' estimates of the Company's performance or
          industry performance;

     .    changes in market valuations of similar companies;

     .    sales of large blocks of the Company's common stock;

     .    announcements by the Company or its competitors of significant
          contracts, acquisitions, strategic partnerships, joint ventures or
          capital commitments;

     .    loss of a major customer or failure to complete significant license
          transactions;

     .    additions or departures of key personnel; and

     .    fluctuations in stock market price and volume, which are particularly
          common among highly volatile securities of software and Internet-based
          companies.


                                       24

<PAGE>

The Company may be required to defer recognition of license fee revenue for a
significant period of time after entering into a license agreement, which could
negatively impact the Company's financial results.

The Company may be required to defer recognition of license fee revenue for a
significant period of time after entering into a license agreement for a variety
of transactions, including:

     .    transactions that include both currently available software products
          and products that are under development or other undeliverable
          elements;

     .    transactions where the customers demand services that include
          significant modifications or customizations that could delay product
          delivery or acceptance;

     .    transactions that involve acceptance criteria that may preclude
          revenue recognition or if there are identified product-related issues,
          such as performance issues; and

     .    transactions that involve payment terms or fees that depend on
          contingencies.

Generally accepted accounting principles ("GAAP") for software revenue
recognition requires that the Company's license agreements meet specific
criteria in order to recognize revenue when we initially deliver software.
Although the Company has standard form license agreements that are designed to
meet the GAAP criteria for immediate revenue recognition on delivered elements,
the Company does on some occasions negotiate the terms of its license
agreements. Some of these negotiated agreements may not meet the GAAP criteria
for immediate software revenue recognition on delivered elements.

Although the Company's business model allows for time-based license agreements,
the Company continues to record some of its license fee revenue upon software
delivery. The deferral of license fee revenue recognition on these agreements
could have an adverse effect on our financial results.

The Company may not generate the additional revenues and cut operating cost
necessary to become profitable.

The Company has incurred significant net losses in each year since its
formation. In addition, the Company has incurred significant costs to develop
its e-commerce technology and products, and to recruit and train personnel. The
Company believes its success is contingent upon increasing its customer base and
reducing operating costs. The Company cannot guarantee that it will be able to
generate the additional revenue and cut operating costs necessary to be
profitable.

If the Company's flexible payment options are not well received, the market may
adopt the Company's products at a slower rate than anticipated, and the
Company's business may suffer materially.

The Company offers flexible payment methods to its customers. These programs are
unproven and represents a significant departure from the fee-based software
licensing strategies that the Company has traditionally employed. If the Company
does not successfully execute these programs, the market may adopt its products
at a slower rate than anticipated and the Company's business may suffer
materially.

The adoption rate of the Company's flexible payment options may, from quarter to
quarter, fluctuate or be rejected by the market altogether. As the Company
continues this program, the Company may find that the majority of its revenues
continue to come from traditional revenue recognition license arrangements that
result in revenues being recognized upon delivery. If the results of the
Company's flexible payment options program fluctuate due to uneven adoption
rates or if the Company's program is rejected entirely, its business, results of
operations, liquidity and financial condition would be materially and adversely
affected.

An increase in the length of the Company's sales cycle may contribute to
fluctuations in its operating results.

As the Company pursues its announced strategy of exploring and pursuing
strategic alternatives, the length of its sales cycle is likely to increase. The
loss or delay of orders due to increased sales and evaluation cycles could
materially and adversely affect its business, results of operations, liquidity
and financial condition and, in particular, could contribute to significant
fluctuations in its quarterly operating results. A customer's decision to
license and implement its solutions may present significant enterprise-wide
implications for the customer and involve a substantial commitment of its
management and resources. The period of time between initial customer contact
and the purchase commitment typically ranges from four to nine months for the
Company's applications. The Company's sales cycle could extend beyond current
levels as a result of lengthy evaluation and approval processes that typically
accompany major initiatives or capital expenditures or other delays over which
the Company has little or no control.


                                       25

<PAGE>

The Company may not be able to maintain referenceable accounts.

The implementation of the Company's product suite by buying organizations can be
complex, time consuming and expensive. In many cases, these organizations must
change established business practices and conduct business in new ways. The
Company's ability to attract additional customers for its product suite will
depend on using its existing customers as referenceable accounts. As a result,
the Company's solutions may not achieve significant market acceptance. In
addition, current customers are subject to the effects of being acquired, which
may jeopardize their use of the Company's products and referencability in the
future.

Market adoption for the Company's solutions will be impeded if the Company does
not continue to establish and maintain strategic relationships.

The Company's success depends in part on the ability of its strategic partners
to expand market adoption of its solutions. If the Company is unable to maintain
its existing strategic partnerships or enter into new partnerships, the Company
would also lose anticipated customer introductions and co-marketing benefits.

The Company relies exclusively on third-party content services providers to
provide catalog aggregation and management services to its customers, as part of
its procurement solution. If the Company is unable to maintain effective,
long-term relationships with its content services providers, or if their
services do not meet the Company's customers' needs or expectations, the
Company's business could be seriously harmed. If the demand for the Company's
solutions increases, the Company will need to develop relationships with
additional third-party service providers to provide these types of services. The
Company's competitors have or may develop relationships with these third parties
and, as a result, these third parties may be more likely to recommend
competitors' products and services.

Many of the Company's strategic partners have multiple strategic relationships,
and they may not regard the Company as important to their businesses. In
addition, the Company's strategic partners may terminate their relationships
with the Company, pursue other partnerships or relationships or attempt to
develop or acquire products or services that compete with the Company's
solutions. Further, the Company's existing strategic relationships may interfere
with its ability to enter into other desirable strategic relationships. A
significant number of the Company's Clarus eProcurement and Clarus eMarket
customers have been obtained through referrals from Microsoft, but Microsoft is
not obligated to refer any potential customers to the Company, and it has
entered into strategic relationships with other providers of electronic
procurement applications.

The Company's international sales and marketing activities makes the Company's
business more susceptible to risks associated with international business
activities.

The Company is subject to a number of risks associated with international
business activities. These risks generally include:

     .    currency exchange rate fluctuations;

     .    seasonal fluctuations in purchasing patterns;

     .    unexpected changes in regulatory requirements;

     .    tariffs, export controls and other trade barriers;

     .    longer accounts receivable payment cycles and difficulties in
          collecting accounts receivable;

     .    potentially adverse tax consequences, including restrictions on the
          repatriation of earnings;

     .    increased transaction costs related to sales transactions conducted
          outside the United States;

     .    reduced protection of intellectual property rights and increased risk
          of piracy;

     .    challenges of retaining and maintaining strategic relationships with
          customers and business alliances in international markets;

     .    foreign laws and courts may govern many of the agreements with
          customers and resellers;

     .    difficulties in maintaining knowledgeable sales representatives in
          countries outside the United States;


                                       26

<PAGE>

     .    adequacy of local infrastructures outside the United States;

     .    differing technology standards, translations, and localization
          standards;

     .    uncertain demand for electronic commerce;

     .    linguistic and cultural differences;

     .    the burdens of complying with a wide variety of foreign laws; and

     .    political, social, and economic instability.

The Company may incur costs and liabilities related to potential or pending
litigation.

In a number of lawsuits filed against the Company in the fourth quarter of 2000
that are now consolidated into one lawsuit, the Company and several of its
officers have been named as defendants in a number of securities class action
lawsuits filed in the United States District Court for the Northern District of
Georgia. This lawsuit diverts the time and attention of management and an
adverse judgment could cause the Company's financial condition or operating
results to suffer.

In addition, if in connection with the Company's announced strategy to pursue
strategic alternatives the Company does not continue its current software
business operations, the Company may be subject to claims by its customers under
its license agreements.

The Company's estimate of costs associated with our restructuring and related
activities may not be adequate.

During 2001 and in April 2002, and in July 2002, the Company's management
approved restructuring plans to reorganize and reduce operating costs.
Restructuring and related charges of $4.2 million were expensed during 2001,
$3.8 million in April 2002 and approximately $1.3 million in July 2002 to better
align the Company's cost structure with projected revenue. These charges were
comprised of employee separation related costs and facility closures and
consolidation costs. If the estimates and assumptions used in the restructuring
plan prove to be incorrect the Company may incur additional costs related to
these activities. In addition the Company may pursue alternatives to the current
facility closures and consolidation plans, including a buy-out of remaining
lease obligations, which may result in additional costs.

Defects in the Company's products could delay market adoption of its solutions
or cause the Company to commit significant resources to remedial efforts

The Company could lose revenues as a result of software errors or other product
defects. The Company's products may perform inadequately in a high volume
environment. As a result of their complexity, software products may contain
undetected errors or failures when first introduced or as new versions are
released. Despite the Company's testing of its software products and their use
by current customers, errors may appear in new applications after commercial
shipping begins. If the Company discovers errors, it may not be able to correct
them.

Errors and failures in the Company's products could result in the loss of
customers and market share or delay in market adoption of the Company's
applications, and alleviating these errors and failures could require the
Company to expend significant capital and other resources. The consequences of
these errors and failures could materially and adversely affect the Company's
business, results of operations, liquidity and financial condition. Because the
Company does not maintain product liability insurance, a product liability claim
could materially and adversely affect the Company's business, results of
operations, liquidity and financial condition. Provisions in the Company's
license agreements may not effectively protect the Company from product
liability claims.

The success of the Company's software products depends on the continued use of
Microsoft technologies or other technologies that operate with the Company's
products.

The Company's products operate with, or are based on, Microsoft's proprietary
products. If businesses do not continue to adopt these technologies as
anticipated, or if they adopt alternative technologies that the Company does not
support, the Company may not be able to license its software products. Customers
may be unable to use the Company's products if they experience significant
problems with Microsoft technologies that are not corrected.


                                       27

<PAGE>

Competition from other electronic procurement providers may continue to reduce
demand for the Company's products and cause it to reduce the price of its
products.

The market for Internet-based procurement applications, and e-commerce
technology generally, is intensely competitive. The intensity of competition has
increased and is expected to increase in the future. The Company may not compete
effectively in its current market or new markets it develops or enters.
Competitive pressure has resulted in the Company reducing the price of its
products, which has negatively affect its revenues and operating margins. The
Company's competitors vary in size and in the scope and breath of the products
and services they offer. If the Company is unable to compete effectively in its
markets, the Company's business, results of operations, liquidity and financial
condition would be materially and adversely affected.

In the e-commerce market, the Company must compete with electronic procurement
providers such as Ariba and Commerce One. The Company also encounters
competition with respect to different aspects of its solution from companies
such as VerticalNet, PurchasePro, FreeMarkets, and i2. The Company also faces
competition from some of the large enterprise software developers, such as
Oracle, PeopleSoft and SAP.

In addition, because there are relatively low barriers to entry in the
business-to-business exchange market, the Company expects additional competition
from other established and emerging companies, particularly if they acquire one
of the Company's competitors.

Many of the Company's current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, significantly greater name recognition, and a larger installed base
of customers than the Company does. In addition, many of the Company's
competitors have well-established relationships with the Company's current and
potential customers and have extensive knowledge of the industry. In the past,
the Company has lost potential customers to competitors for various reasons,
including lower prices and incentives not matched by the Company. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with their partners to increase the ability of
their products to address customer needs.

Accordingly, it is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share. The Company also
expects that competition will increase as a result of industry consolidations.

The Company may not be able to compete successfully against its current and
future competitors.

The failure to maintain, support or update software licensed from third parties
could materially and adversely affect the Company's products performance or
cause product shipment delays.

The Company has entered into license agreements with third-party licensers for
products that enhance its products, are used as tools with the Company's
products, are licensed as products complementary to the Company's products or
are integrated with the Company's products. If these licenses terminate or if
any of these licensors fail to stay in business or adequately maintain, support
or update their products, the Company could be required to delay the shipment of
its products until it could identify and license software offered by alternative
sources. Product shipment delays could materially and adversely affect the
Company's business, operating results, liquidity and financial condition, and
replacement licenses could prove costly. The Company may be unable to obtain
additional product licenses on commercially reasonable terms. Additionally, the
Company's inability to maintain compatibility with new technologies could impact
the Company's customers' use of its products.

Illegal use of the Company's proprietary technology could result in substantial
litigation costs and divert management resources.

The Company's success will depend significantly on internally developed
proprietary intellectual property and intellectual property licensed from
others. The Company relies on a combination of patent, copyright, trademark and
trade secret laws, as well as on confidentiality procedures and licensing
arrangements, to establish and protect its proprietary rights in its products.
Existing patent, trade secret and copyright laws provide only limited protection
of the Company's proprietary rights. The Company has applied for registration of
its trademarks. The Company enters into license agreements with its customers
that give the customer the non-exclusive right to use the object code version of
the Company's products. These license agreements prohibit the customer from
disclosing object code to third parties or reverse-engineering its products and
disclosing the Company's confidential information. Despite the Company's efforts
to protect its products' proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. Third parties may also independently develop
products similar to the Company's products.

Litigation may be necessary to enforce the Company's intellectual property
rights, to protect its trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Such litigation


                                       28

<PAGE>

could result in substantial costs and diversion of resources and could harm the
Company's business, operating results, liquidity and financial condition.

Claims against the Company regarding its proprietary technology could require
the Company to pay licensing or royalty fees or to modify or discontinue its
products.

Any claim that the Company's products infringe on the intellectual property
rights of others could materially and adversely affect the Company's business,
results of operations, liquidity and financial condition. Because knowledge of a
third party's patent rights is not required for a determination of patent
infringement and because the United States Patent and Trademark Office is
issuing new patents on an ongoing basis, infringement claims against the Company
are a continuing risk. Infringement claims against the Company could cause
product release delays, require the Company to redesign its products or require
the Company to enter into royalty or license agreements. These agreements may be
unavailable on acceptable terms. Litigation, regardless of the outcome, could
result in substantial cost, divert management attention and delay or reduce
customer purchases. Claims of infringement are becoming increasingly common as
the software industry matures and as courts apply expanded legal protections to
software products. Third parties may assert infringement claims against the
Company regarding its proprietary technology and intellectual property licensed
from others. Generally, third-party software licensors indemnify the Company
from claims of infringement. However, licensors may be unable to indemnify the
Company fully for such claims, if at all.

If a court determines that one of the Company's products violates a third
party's patent or other intellectual property rights, there is a material risk
that the revenue from the sale of the infringing product will be significantly
reduced or eliminated, as the Company may have to:

     .    pay licensing fees or royalties to continue selling the product;

     .    incur substantial expense to modify the product so that the third
          party's patent or other intellectual property rights no longer apply
          to the product; or

     .    stop selling the product.

In addition, if a court finds that one of the Company's products infringes a
third party's patent or other intellectual property rights, then the Company may
be liable to that third party for actual damages and attorneys' fees. If a court
finds that the Company willfully infringed on a third party's patent, the third
party may be able to recover treble damages, plus attorneys' fees and costs.

A compromise of the encryption technology employed in the Company's solutions
could reduce customer and market confidence in the Company's products or result
in claims against the Company.

A significant barrier to Internet-based commerce is the secure exchange of
valued and confidential information over public networks. Any compromise of the
Company's security technology could result in reduced customer and market
confidence in the Company's products and in customer or third party claims
against the Company. This could materially and adversely affect the Company's
business, financial condition, operating results and liquidity. Clarus
eProcurement and Clarus eMarket rely on encryption technology to provide the
security and authentication necessary to protect the exchange of valuable and
confidential information. Advances in computer capabilities, discoveries in the
field of cryptography or other events or developments may result in a compromise
of the encryption methods the Company employs in Clarus eProcurement and Clarus
eMarket to protect transaction data.

The market for business-to-business e-commerce solutions is characterized by
rapid technological change, and the Company's failure to introduce enhancements
to its products in a timely manner could render the Company's products obsolete
and unmarketable.

The market for e-commerce applications is characterized by rapid technological
change, frequent introductions of new and enhanced products and changes in
customer demands. In attempting to satisfy this market's demands, the Company
may incur substantial costs that may not result in increased revenues due to the
short life cycles for business-to-business e-commerce solutions. Because of the
potentially rapid changes in the e-commerce applications market, the life cycle
of the Company's products is difficult to estimate.

Products, capabilities or technologies others develop may render the Company's
products or technologies obsolete or noncompetitive and shorten the life cycles
of the Company's products. Satisfying the increasingly sophisticated needs of
the Company's customers requires developing and introducing enhancements to the
Company's products and technologies in a timely manner that keeps pace with
technological developments, emerging industry standards and customer
requirements while keeping


                                       29

<PAGE>

the Company's products priced competitively. The Company's failure to develop
and introduce new or enhanced e-commerce products that compete with other
available products could materially and adversely affect the Company's software
business.

Future governmental regulations could materially and adversely affect the
Company's software business and e-commerce generally.

The Company is not subject to direct regulation by any government agency, other
than under regulations applicable to businesses generally, and few laws or
regulations specifically address commerce on the Internet. In view of the
increasing use and growth of the internet, however, the federal government or
state governments may adopt laws and regulations covering issues such as user
privacy, property ownership, libel, pricing and characteristics and quality of
products and services. For example, a number of comprehensive legislative and
regulatory privacy proposals are now under consideration by federal, state, and
local governments. The Company could incur substantial costs in complying with
these laws and regulations, and the potential exposure to statutory liability
for information carried on or disseminated through the Company's application
systems could force the Company to discontinue some, or all of its services.
These eventualities could adversely affect the Company's software business. The
adoption of any laws or regulations covering these issues also could slow the
growth of e-commerce generally, which would also adversely affect the Company's
software business.

Foreign governmental regulations could also materially and adversely affect the
Company's business. For example, the European Union has enacted the European
Data Privacy Directive, which relates to the protection and processing of
certain types of personal data. Under the directive, personal data about
citizens of European Union member states may not be transferred outside the
European Union unless certain specified conditions are met. In addition, persons
whose personal data is collected within the European Union are guaranteed
certain rights, including the right to access and obtain information about their
data and to object to certain forms of processing of their data. The directive
therefore affects all companies that collect, process, or transfer personal data
in the European Union or receive personal data from the European Union. Other
countries outside the European Union have also recently enacted similar laws
regulating the transmission of private data, including, without limitation,
Argentina, Australia, Hong Kong, Poland and Switzerland. The potential effect of
the European Union directive and other foreign data privacy regulations on the
Company's business is uncertain. These laws could create uncertainty in the
marketplace that could reduce demand for the Company's software or increase the
cost of doing business as a result of litigation costs or increased service
delivery costs, or could in some other manner have a material and adverse effect
on the Company's business, results of operations, liquidity and financial
condition.

In addition, because the Company's services are accessible worldwide, and the
Company facilitates sales of goods to users worldwide, other jurisdictions may
claim that the Company is required to qualify to do business as a foreign
corporation in a particular state or foreign country. The Company's failure to
qualify as a foreign corporation in a jurisdiction could subject the Company to
taxes and penalties and could result in the Company's inability to enforce
contracts in such jurisdictions. Any such new legislation or regulation or the
application of laws or regulations from jurisdictions whose laws do not
currently apply to the Company's business, could have a material and adverse
effect on the Company's business, results of operations, liquidity and financial
condition.

Security risks may affect the use of the Internet in electronic commerce.

The secure transmission of confidential information over public networks is
necessary to the conduct of electronic commerce. Advances in cryptography and
other computer capabilities, however, could result in compromises or breaches of
the Company's security systems or the security systems of other Web sites. If a
particularly well-published compromise of security were to occur, the use of the
Web for communications and commerce could be substantially affected.

Anyone circumventing the Company's security measures could potentially
misappropriate proprietary information or cause interruptions in the Company's
operations. Because the Internet is a public network, computer viruses could be
introduced to the Company's system or those of the Company's customers or
suppliers, thereby disrupting the Company's operational network and making its
services inaccessible. In the event the Company's security measures ever failed,
the Company's business and financial condition would be substantially harmed.
Furthermore, the Company may be required to expend substantial capital and other
resources in order to protect against security breaches and interruptions and in
order to keep the Company's security system up-to-date.

Legislation limiting further levels of encryption technology may adversely
affect the Company's sales.

As a result of customer demand, it is possible that the Company's products will
be required to incorporate additional encryption technology. The United States
government regulates the exportation of this technology. Export regulations,
either in their current form or as they may be subsequently enacted, may further
limit the levels of encryption or authentication technology that we are able to
use in the Company's software and the Company's ability to distribute its
products outside the United States. Any


                                       30

<PAGE>

revocation or modification of the Company's export authority, unlawful
exportation or use of the Company's software or adoption of new legislation or
regulations relating to exportation or use of software and encryption technology
could materially and adversely affect the Company's sales prospects and,
potentially, the Company's business, financial condition, operating results and
liquidity as a whole.

Future taxation could harm the Company's business and Internet commerce
generally.

The Company files tax returns in such states as required by law based on
principles applicable to traditional businesses. The Company does not collect
sales or similar taxes in respect of transactions conducted through its software
products or trading communications created with the Company's products. However,
one or more states could seek to impose additional income tax obligations or
sales tax collection obligations on out-of-state companies engaging in or
facilitating online commerce. A number of proposals have been made at state and
local levels that could impose such taxes on the sale of products and services
through the Internet or the income derived from such sales. Such proposals, if
adopted, could substantially impair the growth of electronic commerce and reduce
the demand for the Company's electronic commerce products and digital
marketplaces in general.

Legislation limiting the ability of the states to impose taxes on Internet-based
transactions was enacted by the United States Congress. This legislation was
recently extended through November 1, 2003 as a result of the Internet Tax
Non-discrimination Act, signed on November 28, 2001. If the moratorium is not
renewed after November 1, 2003, any such taxes could adversely affect the
Company's ability to license its electronic commerce products.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following discussion concerning the Company's market risk involves
forward-looking statements that are subject to risks and uncertainties. Actual
results could differ materially from those discussed in the forward-looking
statements. The Company is exposed to market risk related to foreign currency
exchange rates, interest rates and investment values. The Company currently does
not use derivative financial instruments to hedge these risks or for trading
purposes.

Foreign Currency Risk

Substantially all of the revenue recognized to date by the Company has been
denominated in U.S. dollars, including sales made internationally. As a result,
a strengthening of the U.S. dollar could make the Company's products less
competitive in foreign markets. In addition, the Company has foreign
subsidiaries which subject the Company to risks associated with foreign currency
exchange rates and weak economic conditions in these foreign markets. An
increase or decrease in foreign currency exchange rates of 10% would not have a
material effect on the Company's financial position or results of operations.

Interest Rate Risk

The Company is exposed to market risk from changes in interest rates primarily
through its investing activities. The primary objective of the Company's
investment activities is to manage interest rate exposure by investing in
short-term, highly liquid investments. As a result of this strategy, the Company
believes that there is very little exposure. The Company's investments are
carried at market value, which approximates cost. An increase or decrease in
interest rates of 10% would not have a material effect on the Company's
financial position or results of operations.

Investments

During the second quarter of 2001, the Company made an equity investment of $2.0
million in a privately held company. Prior to 2001, the Company made equity
investments of $17.7 million in eleven privately held companies. The Company's
equity interest in these entities ranges from 2.5% to 12.5% and the Company is
accounting for these investments using the cost method of accounting. During
2001 and 2000 the Company recorded charges of $15.4 million and $4.1 million,
respectively, for other than temporary losses on these investments.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is a party to lawsuits in the normal course of its business.
Litigation in general, and securities litigation in particular, can be expensive
and disruptive to normal business operations. Moreover, the results of complex
legal proceedings are difficult to predict. An unfavorable resolution of the
following lawsuit could adversely affect the Company's business, results of
operations, liquidity or financial condition.


                                       31

<PAGE>

Following its public announcement on October 25, 2000, of its financial results
for the third quarter, the Company and certain of its directors and officers
were named as defendants in fourteen putative class action lawsuits filed in the
United States District Court for the Northern District of Georgia on behalf of
all purchasers of common stock of the Company during various periods beginning
as early as October 20, 1999 and ending on October 25, 2000. The fourteen class
action lawsuits filed against the Company were consolidated into one case, Case
No. 1:00-CV-2841, pursuant to an order of the court dated November 17, 2000. On
March 22, 2001, the Court entered an order appointing as the lead Plaintiffs
John Nittolo, Dean Monroe, Ronald Williams, V&S Industries, Ltd., VIP World
Asset Management, Ltd., Atlantic Coast Capital Management, Ltd., and T.F.M.
Investment Group. Pursuant to the previous Consolidation Order of the Court, a
Consolidated Amended Complaint was filed on May 14, 2001.

The class action complaint alleges claims against the Company and other
defendants for violations of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, as amended, and Rule 10b-5 promulgated thereunder with respect to
alleged material misrepresentations and omissions in public filings made with
the Securities and Exchange Commission and certain press releases and other
public statements made by the Company and certain of its officers relating to
its business, results of operations, financial condition and future prospects,
as a result of which, it is alleged, the market price of the Company's common
stock was artificially inflated during the class periods. The class action
complaint focuses on statements made concerning an account receivable from one
of the Company's customers. The plaintiffs seek unspecified compensatory damages
and costs (including attorneys' and expert fees), expenses and other unspecified
relief on behalf of the classes. The Company believes that it has complied with
all of its obligations under the Federal securities laws and the Company intends
to defend this lawsuit vigorously. As a result of consultation with legal
representation and current insurance coverage, the Company does not believe the
lawsuit will have a material impact on the Company's results of operations or
financial position.

Item 4.  Submission of Matters to a Vote of Security Holders

On May 21, 2002 the Annual Meeting of stockholders of the Company was held to
elect nominees for director and to ratify the appointment of the Company's
independent auditors. The following individuals were elected as directors with
terms to expire in 2005.

          Nominee                                  For                 Withheld
          -------                                  ---                 --------
          Warren B. Kanders                     5,223,790               16,658
          Burtt R. Erlich                       5,223,790               16,658
          Nicholas Sokolow                      5,223,790               16,658


With respect to the ratification of KPMG LLP as the Company's independent
auditors for the fiscal year ending December 31, 2002, the results were as
follows:

              For                   Against                Abstain
           ---------                -------                -------
           9,102,552                 25,959                20,235

Item 5. Other Information

At the July 15, 2002 meeting of the Company's Board of Directors, the Board
resolved to recommend to the stockholders of the Company for approval at the
next meeting called for any purpose, that costs incurred by Warren B. Kanders,
Burtt R. Erlich and Nicholas Sokolow in connection with the solicitation of
proxies for the 2002 annual meeting, be reimbursed by the Company. These costs
are approximately $500,000.

Item 6. Exhibits and Reports on Form 8-K

     a)   The following Exhibits are filed as part of this report

          3.1  Amended and Restated Bylaws

          10.1 Amendment to Employment Agreement with Stephen P. Jeffery

          10.2 Amendment to Employment Agreement with Steven M. Hornyak

          10.3 Amendment to Employment Agreement with Sean Feeney

          99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002

          99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002


                                       32

<PAGE>

          b)   Reports on form 8-K

               None

                                   SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

CLARUS CORPORATION


Date:  August 14, 2002              /s/ James J. McDevitt
                                    -------------------------------------
                                    James J. McDevitt,
                                    Chief Financial Officer and Secretary

                                       33

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>3
<FILENAME>dex31.txt
<DESCRIPTION>AMENDED AND RESTATED BYLAWS
<TEXT>
<PAGE>



                                                                     Exhibit 3.1

                              AMENDED AND RESTATED

                                     BY-LAWS

                                       OF

                               CLARUS CORPORATION

                           As Amended on May 20, 2002

                                    ARTICLE I
                                    ---------

                                Corporate Offices
                                -----------------

         Section 1. Principal and Registered Offices. The principal office of
         ---------  --------------------------------
the Corporation shall be located at such place as the Board of Directors may
specify from time to time. The registered office of the Corporation shall be
located at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.

         Section 2. Other Offices.  The Corporation may have offices at such
         ---------  -------------
other places, either within or without the State of Delaware, as the Board of
Directors may from time to time determine.

                                   ARTICLE II
                                   ----------

                            Meetings of Stockholders
                            ------------------------

         Section 1. Place of Meeting. Meetings of stockholders shall be held at
         ---------  ----------------
the principal office of the Corporation or at such other place or places, either
within or without the State of Delaware, as shall be designated by the Board of
Directors. In the absence of any such designation, meetings of stockholders
shall be held at the principal executive office of the Corporation.

         Section 2. Annual Meeting. The annual meeting of stockholders shall be
         ---------  --------------
held each yearon a date and at a time designated by the Board of Directors. At
the annual meeting, directors shall be elected and any other proper business may
be transacted.

         Section 3. Special Meeting. A special meeting of the stockholders for
         ---------  ---------------
any purpose or purposes may be called at any time by the Chairman of the Board
or the Chief Executive Officer, and shall be called by the Secretary at the
written request of, or by resolution adopted by, (a) a majority of the Board of
Directors or (b) the holders of a majority of all of the outstanding shares of
capital stock of the Corporation entitled to vote at such meeting, in which
case, such request shall state the purpose of the proposed meeting.

         Section 4. Notice of Meetings. Written or printed notice, stating the
         ---------  ------------------
place, date and hour of the meeting and, in the case of a special meeting,
briefly describing the purpose or purposes of the meeting, shall be given not
less than ten (10) days nor more than sixty (60) days before the date of the
meeting, to each stockholder of record entitled to vote at the meeting. Such
notice shall be given either personally or by first-class mail or by telegraphic
or other written communication. Notices not personally


<PAGE>

delivered shall be sent charges prepaid and shall be addressed to the
stockholder at the address of such stockholder appearing on the books of the
Corporation or given by the stockholder to the Corporation for the purpose of
notice. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.

         Section 5. Proxies. Each stockholder entitled to vote at a meeting of
         ---------  -------
stockholders may authorize another person or persons to act for him by proxy,
but no such proxy shall be voted or acted upon after three (3) years from its
date, unless the proxy provides for a longer period. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of the State of
Delaware (or any successor statute).

         Section 6. Quorum. Except as otherwise provided by law, the holders of
         ---------  ------
a majority of the issued and outstanding shares of capital stock of the
Corporation entitled to vote at a meeting of stockholders, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at such meeting. In the absence of a quorum, the chairman of the meeting shall
have the power to adjourn the meeting in accordance with Article II, Section 7,
of these by-laws. If a quorum is initially present, the stockholders may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum, if any action taken is
approved by a majority of the stockholders initially constituting a quorum for
that meeting.

         Section 7. Adjourned Meeting. When a meeting is adjourned to another
         ---------  -----------------
time and place, unless these by-laws otherwise require, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business that might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.

         Section 8. Voting of Shares. Each outstanding share of voting capital
         ---------  ----------------
stock of the Corporation shall be entitled to one vote on each matter submitted
to a vote at a meeting of the stockholders, except as otherwise provided in the
Certificate of Incorporation of the Corporation. Except as otherwise provided by
law, the Certificate of Incorporation of the Corporation or these by-laws, if a
quorum is present (a) directors shall be elected by a plurality of the votes of
the shares of capital stock of the Corporation present in person or represented
by proxy at the meeting and entitled to vote on the election of directors and
(b) the affirmative vote of the holders of a majority of shares of capital stock
of the Corporation present in person or by proxy at the meeting and entitled to
vote on the subject matter shall be the act of the stockholders of the
Corporation in all matters other than the election of directors.

         Section 9. Stockholder Nominations and Proposals. Nominations for
         ---------  -------------------------------------
election as a director and proposals for stockholder action may be made only by
stockholders of the Corporation of record at the time of the giving of notice
provided for herein and shall be made in writing and shall be delivered or
mailed to the Secretary of the Corporation (a) in the case of an annual meeting
of stockholders that is called for a date that is within thirty (30) days before
or after the anniversary date of the immediately preceding annual meeting of
stockholders, not less than sixty (60) days nor more than ninety (90) days prior
to such anniversary date and (b) in the case of an annual meeting of
stockholders that is called for a date that is not within thirty (30) days
before or after the anniversary date of the immediately preceding annual meeting
of stockholders, or in the case of a special meeting of stockholders, not later
than the close of business on the tenth (10th) day following the day on which
the notice of meeting was mailed or public disclosure of the date of the meeting
was made, whichever occurs first. Such notification shall contain a written
statement of the stockholder's proposal and of the reasons therefor, his name
and

                                      -2-



<PAGE>

address and number of shares owned, and, in the case of the nomination of a
director, nominations shall contain the following information to the extent
known by the notifying stockholder: (i) the name, age and address of each
proposed nominee; (ii) the principal occupation of each proposed nominee; (iii)
the nominee's qualifications to serve as a director; (iv) such other information
relating to such nominee as required to be disclosed in solicitation of proxies
for the election of directors pursuant to the rules and regulations of the
Securities and Exchange Commission; (v) the name and residence address of the
notifying stockholder; and (vi) the number of shares owned by the notifying
stockholder, and shall be accompanied by the nominee's written consent to being
named a nominee and serving as a director if elected. A stockholder making any
proposal shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended. Nominations or proposals not made in
accordance herewith may be disregarded by the chairman of the meeting in his
discretion, and upon his instructions all votes cast for each such nominee or
for such proposal may be disregarded.

         Section 10. Action Without Meeting. Any action which the stockholders
         ----------  ----------------------
could take at a meeting may be taken without a meeting if one or more written
consents, setting forth the action taken, shall be signed, before or after such
action, by all the stockholders who would be entitled to vote upon the action at
a meeting. The consent shall be delivered to the Corporation for inclusion in
the minutes or filing with the corporate records. In order that the Corporation
may determine the stockholders entitled to consent to corporate action in
writing without a meeting, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, and which date shall not be
more than ten days after the date upon which the resolution fixing the record
date is adopted by the board of directors. Any person seeking to have the
stockholders authorize or take corporate action by written consent shall, by
written notice to the Secretary of the Corporation, request the board of
directors to fix a record date. The board of directors shall promptly, but in
all events within ten days after the date on which such a request is received,
adopt a resolution fixing the record date. If no record date has been fixed by
the board of directors within ten days of the date on which such a request was
received, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the board
of directors is required by applicable law, shall be the first date on (after
the ten-day period) which a signed written consent setting forth the action
taken or proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of stockholders meetings are recorded, to the attention of the
Secretary of the Corporation. Delivery shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
applicable law, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close of
business on the date on which the board of directors adopts the resolution
taking such prior action. If by law, the Corporation is required to give its
nonvoting stockholders written notice of the proposed action, it shall do so at
least ten (10) days before the action is taken, and such notice must contain or
be accompanied by the same material that would have been required by law to be
sent to nonvoting stockholders in a notice of meeting at which the proposed
action would have been submitted to the stockholders for action.

         Section 11. Record Date for Stockholder Notice. The Board of Directors
         ----------  ----------------------------------
may fix a date as the record date for the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders. Such record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors and shall not be more than sixty (60) days
or less than ten (10) days prior to the date of such meeting. If no record date
is fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at

                                      -3-



<PAGE>

the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting.

         Section 12. List of Stockholders. It shall be the duty of the Secretary
         ----------  --------------------
or other officer of the Corporation who shall have charge of the stock records,
either directly or through a transfer agent appointed by the Board of Directors,
to prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such meeting
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

         Section 13.  Inspectors of Elections.
         ----------   -----------------------

                      (a)  Appointment of Inspectors of Election. In advance of
                           -------------------------------------
any meeting of  stockholders,  the Board of Directors may appoint one or more
persons, other than nominees for office, as inspectors of election  to act at
such meeting or any adjournment thereof. If inspectors of election are  not so
appointed, the chairman of any such meeting may, and on the request of any
stockholder or his proxy shall, appoint inspectors of election at the meeting.
In case any person appointed as inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment by the Board of Directors in
advance of the meeting, or at the meeting by the person acting as chairman.

                      (b)  Duties of Inspectors.  The inspectors of election
                           --------------------
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies and ballots, receive votes,
ballots or consents, count and tabulate all votes and ballots, determine the
results, retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, certify their
determination of the number of shares represented at the meeting and their count
of all votes and ballots, and do such acts as may be proper to conduct the
election or vote with fairness to all stockholders. The inspectors of election
shall perform their duties impartially, in good faith, to the best of their
ability and as expeditiously as is practical.

                      (c)  Vote of Inspectors.  If there are more than one
                           ------------------
inspectors of election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all.

                      (d)  Report of Inspectors.  On request of the chairman
                           --------------------
of the meeting or of any stockholder or his proxy, the inspectors shall make a
report in writing of any challenge or question or matter determined by them and
execute a certificate of any fact found by them. Any report or certificate made
by them is prima facie evidence of the facts stated herein.


                                   ARTICLE III
                                   -----------

                               Board of Directors
                               ------------------

         Section 1.    General Powers.  The business and affairs of the
         ---------     --------------
Corporation shall be managed



                                      -4-


<PAGE>


by or under the direction of the Board of Directors except as otherwise provided
by law, the Certificate of Incorporation of the Corporation or these by-laws.

         Section 2. Number, Term and Qualification. The Board of Directors of
         ---------  ------------------------------
the Corporation shall consist of at least three (3) but not more than seven (7)
members, which number shall be determined, from time to time, by resolution
adopted by the Board of Directors. The directors shall be classified, with
respect to the time for which they severally hold office, into three (3)
classes, as nearly equal in number as possible as determined by the Board of
Directors, with one class to be elected annually, at a meeting of the
stockholders by a plurality of the votes of the shares present in person or by
proxy and entitled to vote on the election of directors.

         The directors of the Corporation shall be divided into three classes as
nearly equal in size as is practicable, hereby designated Class I, Class II and
Class III. The term of office of the initial Class I directors shall expire at
the first regularly-scheduled annual meeting of the stockholders following the
effective date of these Bylaws (the "Effective Date"), the term of office of the
initial Class II directors shall expire at the second annual meeting of the
stockholders following the Effective Date and the term of office of the initial
Class III directors shall expire at the third annual meeting of the stockholders
following the Effective Date. At each annual meeting of stockholders, commencing
with the first regularly-scheduled annual meeting of stockholders following the
Effective Date, each of the successors elected as directors of a Class whose
term shall have expired at such annual meeting shall be elected to hold office
until the third annual meeting next succeeding his or her election and until his
or her respective successor shall have been duly elected and qualified. If the
number of directors is hereafter changed, any newly created directorships or
decrease in directorships shall be so apportioned among the classes as to make
all classes as nearly equal in number as is practicable, provided that no
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.

         Each director shall hold office until the next annual meeting of
stockholders at which his term expires and until his successor is elected and
qualified, or until his earlier death, resignation or removal pursuant to these
by-laws. Directors need not be residents of the State of Delaware or
stockholders of the Corporation.

         Section 3. Removal. Except as provided in the Certificate of
         ---------  -------
Incorporation or under applicable law, directors may be removed from office only
with cause by a vote of the holders of a majority of the shares of capital stock
of the Corporation then entitled to vote at an election of directors.

         Section 4. Resignation. Any director of the Corporation may resign at
         ---------  -----------
any time by giving written notice to the Chairman of the Board, the Chief
Executive Officer or the Secretary of the Corporation. Such resignation shall be
effective upon the giving of such notice or at such later time as shall be
specified therein. The acceptance of such resignation shall not be necessary to
make it effective.

         Section 5. Vacancies. Any vacancies occurring on the Board of Directors
         ---------  ---------
for any reason (including death, resignation, disqualification, removal or other
causes) and any newly created directorships resulting from an increase in the
authorized number of directors may be filled only by vote of a majority of the
remaining members of the Board of Directors, even if less than a quorum, at any
meeting of the Board of Directors. Notwithstanding the immediately preceding
sentence, the Board of Directors may by resolution determine that any such
vacancies or newly created directorships shall be filled by the stockholders of
the Corporation. Any director elected in accordance with the foregoing

                                      -5-



<PAGE>


provisions shall hold office until the next annual meeting of stockholders and
until his successor is elected and qualified, or until his earlier resignation
or removal pursuant to these by-laws.

         Section 6. Compensation. Directors and members of committees may
         ---------  ------------
receive such compensation, if any, for their services as such and may be
reimbursed for expenses of attendance at meetings of the Board of a committee as
may be fixed or determined by resolution of the Board of Directors. Any director
may serve the Corporation in any other capacity and receive compensation
therefor.

                                   ARTICLE IV
                                   ----------

                              Meetings of Directors
                              ---------------------

         Section 1. Annual Meetings. The annual meeting of the Board of
         ---------  ---------------
Directors for the purpose of electing officers and transacting such other
business as may be brought before the meeting shall be held immediately
following the annual meeting of the stockholders at the place where such meeting
is held. Notice of annual meetings shall not be required.

         Section 2. Regular Meetings. The Board of Directors may by resolution
         ---------  ----------------
provide for the holding of regular meetings of the Board on specified dates and
at specified times. If any date for which a regular meeting is scheduled shall
be a legal holiday, the meeting shall be held on the next business day that is
not a legal holiday. Regular meetings of the Board of Directors shall be held at
the principal executive office of the Corporation or at such other place as may
be determined by resolution of the Board of Directors. Notice of regular
meetings shall not be required.

         Section 3. Special Meetings. Special meetings of the Board of Directors
         ---------  ----------------
may be called by or at the request of the Chairman of the Board, the Chief
Executive Officer, the Secretary or a majority of the number of directors
constituting the full Board of Directors. Such meetings shall be held at the
time and place designated in the notice of the meeting.

         Section 4. Notice of Special Meetings. Notice of the time and place of
         ---------  --------------------------
special meetings shall be given to each director (a) in a writing mailed not
less than five days before such meeting addressed to the residence or usual
place of business of a director, (b) by telecopy or telegram sent not less than
two days before such meeting to the residence or usual place of business of a
director or (c) in person or by telephone delivered not less than one day before
such meeting. Attendance by a director at a meeting for which notice is required
shall constitute a waiver of notice, except where a director attends the meeting
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called. Except as otherwise herein provided, neither
the business to be transacted at, nor the purpose of, any special meeting of the
Board of Directors need be specified in the notice of such meeting.

         Section 5. Quorum. A majority of the number of directors fixed from
         ---------  ------
time to time by the Board of Directors shall constitute a quorum for the
transaction of business at a meeting of the Board of Directors. If a quorum is
initially present, the Board of Directors may continue to transact business,
notwithstanding the withdrawal of enough directors to leave less than a quorum,
if any action taken is approved by a majority of the directors initially
constituting a quorum for that meeting.

         Section 6. Adjourned Meeting. A majority of the directors present,
         ---------  -----------------
whether or not constituting a quorum, may adjourn any meeting of the Board of
Directors to another time and place. Notice of the time and place of holding an
adjourned meeting of the Board of Directors need not be given unless the meeting
is adjourned for more than forty-eight (48) hours. If the meeting is adjourned
for more

                                      -6-


<PAGE>

than forty-eight (48) hours, then notice of the time and place of the
adjourned meeting shall be given before the adjourned meeting takes place, in
the manner specified in Article IV, Section 4 of these by-laws, to the directors
who were not present at the time of the adjournment.

         Section 7. Manner of Acting. Except as otherwise provided by law, these
         ---------  ----------------
by-laws or the Certificate of Incorporation of the Corporation, the act of the
majority of the directors present at a duly held meeting at which a quorum is
present shall be the act of the Board of Directors.

         Section 8. Action Without Meeting. Any action required or permitted to
         ---------  ----------------------
be taken at any meeting of the Board of Directors may be taken without a meeting
if all members of the Board of Directors consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors, whether done before or after the action is taken. Such unanimous
written consent shall have the same force and effect as a unanimous vote at a
meeting, and may be stated as such in any articles, certificates or documents
filed with the Secretary of State of Delaware, or any other state wherein the
Corporation may do business.

         Section 9. Meeting by Use of Conference Telephone. Any one or more
         ---------  --------------------------------------
directors may participate in a meeting of the Board of Directors by means of a
conference telephone or similar communications device which allows all persons
participating in the meeting to hear each other, and such participation in a
meeting shall be deemed presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.

                                    ARTICLE V
                                    ---------

                                   Committees
                                   ----------

         Section 1. Designation of Committees. The Board of Directors may, by
         ---------  -------------------------
resolution passed by a majority of the whole Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, to the extent
provided in these by-laws or in the resolution of the Board of Directors
establishing the same, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation; provided, however, that no such committee shall have the power or
authority to (a) amend the Certificate of Incorporation of the Corporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors as provided in Section 151(a) of the General Corporation Law of the
State of Delaware, fix the designations and any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), (b) adopt an agreement of merger or consolidation under Sections
251, 252, 254 through 258, 263 or 264 of the General Corporation Law of the
State of Delaware, (c) recommend to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets, (d)
recommend to the stockholders a dissolution of the Corporation or a revocation
of a dissolution or (e) amend these by-laws; and, unless the resolution, these
by-laws or the Certificate of Incorporation of the Corporation expressly so
provides, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the General Corporation Law of
the State of Delaware. Such

                                      -7-


<PAGE>

committees or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.

         Section 2. Minutes. Each committee shall keep minutes of its
         ---------  -------
proceedings and shall report thereon to the Board of Directors when required.

         Section 3. Meetings and Action of Committees. Meetings and actions of
         ---------  ---------------------------------
committees shall be governed by, and held in accordance with, the following
provisions of Article IV of these by-laws: Section 2 (regular meetings), Section
3 (special meetings), Section 4 (notice of special meetings), Section 5
(quorum), Section 6 (adjourned meeting), Section 7 (manner of acting), Section 8
(action without meeting) and Section 9 (meeting by use of conference telephone),
with such changes in the context of such by-laws as are necessary to substitute
the committee and its members for the Board of Directors and its members;
provided, however, that the time of regular meetings of committees may be
determined either by resolution of the Board of Directors or by resolution of
the committee, that special meetings of committees may also be called by
resolution of the Board of Directors, and that notice of special meetings of
committees shall also be given to all alternative members, who shall have the
right to attend all meetings of the committee. The Board of Directors may adopt
rules for the governance of any committee not inconsistent with the provisions
of these by-laws.

                                   ARTICLE VI
                                   ----------

                                    Officers
                                    --------

         Section 1. Titles. The officers of the Corporation shall be elected by
         ---------  ------
the Board of Directors and shall consist of a Chairman of the Board, a Chief
Executive Officer, a President, a Chief Financial Officer, a Secretary, and a
Treasurer. The Board of Directors may also elect a Controller and one or more
Vice Presidents and Assistant Secretaries, Assistant Treasurers and such other
officers as it shall deem necessary. Except as otherwise provided in these
by-laws, the additional officers shall have the authority and perform the duties
as from time to time may be prescribed by the Board of Directors. Any two or
more offices may be held by the same individual, but no officer may act in more
than one capacity where action of two or more officers is required.

         Section 2. Election and Term. The officers of the Corporation shall be
         ---------  -----------------
elected by the Board of Directors at the annual meeting of the Board held each
year immediately following the annual meeting of the stockholders, and each
officer shall hold office until the next annual meeting at which officers are to
be elected and until his successor is elected and qualified, or until his
earlier resignation or removal pursuant to these by-laws.

         Section 3. Removal. Any officer or agent elected or appointed by the
         ---------  -------
Board of Directors may be removed, with or without cause, by the Board of
Directors, but removal shall be without prejudice to any contract rights of the
individual removed. Election or appointment of an officer or agent shall not of
itself create contract rights.

         Section 4. Resignation. Any officer of the Corporation may resign at
         ---------  -----------
any time by giving written notice to the Corporation. Such resignation shall be
effective upon the giving of such notice or at such later time as shall be
specified therein. The acceptance of such resignation shall not be necessary to
make it effective.

         Section 5. Vacancies. Any vacancies among the officers for any reason
         ---------  ---------
(including death, resignation, disqualification, removal or other causes) may be
filled by the Board of Directors in the

                                      -8-



<PAGE>

manner prescribed in these by-laws for regular elections to that office.

         Section 6. Compensation.  The compensation of the officers shall be
         ---------  ------------
fixed by or under the direction of the Board of Directors. No officer shall be
prevented from receiving such compensation by reason of the fact that such
officer is also a director of the Corporation.

         Section 7. Chairman of the Board. The Chairman of the Board of
         ---------  ---------------------
Directors shall preside at meetings of the Board of Directors. The Chairman of
the Board may but need not be an employee of the Corporation. If not elected
Chief Executive Officer, the Chairman of the Board shall have such other
authority and shall perform such other duties as may from time to time be
conferred upon him herein or by the Chief Executive Officer.

         Section 8. Chief Executive Officer. The Chief Executive Officer shall
         ---------  -----------------------
have general charge of the business and affairs of the Corporation, shall have
final decision-making authority in the conduct of all business affairs of the
Corporation, and shall preside at meetings of the stockholders. The Chief
Executive Officer may perform such acts, not inconsistent with the applicable
law or the provisions of these by-laws, usually performed by the principal
executive officer of a corporation and may sign and execute all authorized
notes, bonds, contracts and other obligations in the name of the Corporation.
The Chief Executive Officer shall have such other powers and perform such other
duties as the Board of Directors shall designate or as may be provided by
applicable law or elsewhere in these by-laws.

         Section 9. President. The President shall have responsibility for the
         ---------  ---------
day-to-day operations of the business of the Corporation and shall report to the
Chief Executive Officer. The President may perform such acts, not inconsistent
with the applicable law or the provisions of these by-laws, usually performed by
the chief operating officer of a corporation and may sign and execute all
authorized notes, bonds, contracts and other obligations in the name of the
Corporation. The President shall have such other powers and perform such other
duties as the Board of Directors shall designate or as may be provided by
applicable law or elsewhere in these by-laws, and in the event of the disability
or death of the Chief Executive Officer, he shall perform the duties of the
Chief Executive Officer unless and until a new Chief Executive Officer is
elected by the directors.

         Section 10. Chief Financial Officer. The Chief Financial Officer of the
         ----------  -----------------------
Corporation shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times be open to
inspection by any director for a purpose reasonably related to his position as a
director. The Chief Financial Officer shall render to the Chief Executive
Officer and Board of Directors, whenever they may request it, an account of the
transactions of the Corporation and of the financial condition of the
Corporation. The Chief Financial Officer shall have such other powers and
perform such other duties as the Board of Directors shall designate or as may be
provided by applicable law or elsewhere in these by-laws.

         Section 11.  Vice  Presidents.  Each Vice President shall have such
         ----------   ----------------
powers and perform such duties as shall be assigned to him by the Board of
Directors.

         Section 12. Secretary. The Secretary shall keep, or cause to be kept,
         ----------  ---------
accurate records of the acts and proceedings of all meetings of stockholders and
of the Board of Directors and shall give all notices required by law and by
these by-laws. The Secretary shall have general charge of the corporate books
and records and of the corporate seal and shall affix the corporate seal to any
lawfully executed instrument requiring it. The Secretary shall have general
charge of the stock transfer books of the

                                      -9-


<PAGE>

Corporation and shall keep, or cause to be kept, at the principal office of the
Corporation a record of stockholders, showing the name and address of each
stockholder and the number and class of the shares held by each stockholder. The
Secretary shall sign such instruments as may require the signature of the
Secretary, and in general may perform such acts, not inconsistent with the
applicable law or the provisions of these by-laws, usually performed by the
secretary of a corporation. The Secretary shall have such other powers and
perform such other duties as the Board of Directors shall designate from time to
time.

         Section 13. Assistant Secretaries. Each Assistant Secretary shall have
         ----------  ---------------------
such powers and perform such duties as may be assigned by the Board of
Directors, and the Assistant Secretaries shall exercise the powers of the
Secretary during that officer's absence or inability to act.

         Section 14. Treasurer. The Treasurer shall have the custody of the
         ----------  ---------
corporate funds and securities and shall keep and maintain, or cause to be kept
and maintained, full and accurate accounts of receipts and disbursements. The
Treasurer shall deposit all monies and other valuables in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. The Treasurer shall disburse funds of the Corporation as may be
ordered by the Board of Directors, the Chief Executive Officer or the President,
taking proper vouchers for such disbursements. The Treasurer shall also have
such powers and perform such duties incident to the office as may be assigned
from time to time by the Board of Directors.

         Section 15. Assistant Treasurers. Each Assistant Treasurer shall have
         ----------  --------------------
such powers and perform such duties as may be assigned by the Board of
Directors, and the Assistant Treasurers shall exercise the powers of the
Treasurer during that officer's absence or inability to act.

         Section 16. Controller and Assistant Controllers. The Controller shall
         ----------  ------------------------------------
have charge of the accounting affairs of the Corporation and shall have such
other powers and perform such other duties as the Board of Directors shall
designate. The Controller shall report to the Chief Financial Officer. Each
Assistant Controller shall have such powers and perform such duties as may be
assigned by the Board of Directors, and the Assistant Controllers shall exercise
the powers of the Controller during that officer's absence or inability to act.

         Section 17. Voting Upon Stocks. Unless otherwise ordered by the Board
         ----------  ------------------
of Directors, the Chief Executive Officer shall have full power and authority on
behalf of the Corporation to attend, act and vote at meetings of the
stockholders of any Corporation in which this Corporation may hold stock, and at
such meetings shall possess and may exercise any and all rights and powers
incident to the ownership of such stock and which, as the owner, the Corporation
might have possessed and exercised. The Board of Directors may by resolution
from time to time confer such power and authority upon any other person or
persons.

                                   ARTICLE VII
                                   -----------

                                  Capital Stock
                                  -------------

         Section 1. Certificates. Certificates for shares of the capital stock
         ---------  ------------
of the Corporation shall be in such form not inconsistent with the certificate
of incorporation of the Corporation as shall be approved by the Board of
Directors. The certificates shall be consecutively numbered or otherwise
identified. The name and address of the persons to whom they are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
records of the Corporation. Each certificate shall be signed by the Chief
Executive Officer or President and by the Secretary or any Assistant Secretary;

                                      -10-


<PAGE>


provided, that where a certificate is signed by a transfer agent of the
Corporation, the signatures of such officers of the Corporation upon the
certificate may be by facsimile, engraved or printed. Each certificate shall be
sealed with the seal of the Corporation or a facsimile thereof.

         Section 2. Transfer of Shares. Transfer of record of shares of stock of
         ---------  ------------------
the Corporation shall be made on the stock transfer books of the Corporation
only upon surrender of the certificate for the shares sought to be transferred
by the record holder or by a duly authorized agent, transferee or legal
representative. All certificates surrendered for transfer shall be cancelled
before new certificates for the transferred shares shall be issued.

         Section 3. Restrictions on Transfer of Shares. The Corporation shall
         ---------  ----------------------------------
have the power to enter into and perform any agreement with any stockholders of
the Corporation to restrict the transfer of shares of stock of the Corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of the State of Delaware.

         Section 4. Transfer Agent and Registrar. The Board of Directors may
         ---------  ----------------------------
appoint one or more transfer agents and one or more registrars of transfers and
may require all stock certificates to be signed or countersigned by the transfer
agent and registered by the registrar of transfers.

         Section 5. Regulations.  The Board of Directors shall have power and
         ---------  -----------
authority to make rules and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of capital stock of
the Corporation.

         Section 6. Lost Certificates. The Board of Directors may authorize the
         ---------  -----------------
issuance of a new certificate in place of a certificate claimed to have been
lost or destroyed, upon receipt of an affidavit from the person explaining the
loss or destruction. When authorizing issuance of a new certificate, the Board
of Directors may require the claimant to give the Corporation a bond in a sum as
it may direct to indemnify the Corporation against loss from any claim with
respect to the certificate claimed to have been lost or destroyed; or the Board
of Directors may, by resolution reciting that the circumstances justify such
action, authorize the issuance of the new certificate without requiring a bond.


                                  ARTICLE VIII
                                  ------------

                               General Provisions
                               ------------------

         Section 1.  Dividends.  The Board of Directors may from time to time s
         ---------   ---------
declare, and the Corporation may pay, dividend out of its earned surplus on its
outstanding shares in the manner and upon the terms and conditions provided by
law.

         Section 2. Record Date for Purposes Other Than Stockholder Notice. The
         ---------  ------------------------------------------------------
Board of Directors may fix a date as the record date for the purpose of
determining stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to exercise
any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action. Such record date shall not precede the date
upon which the resolution fixing the record date is adopted and shall not be
more than sixty (60) days prior to such action. If no record date is fixed by
the Board of Directors, the record date for determining stockholders for any
such purpose shall be at the close of business on the date on which the Board of
Directors adopts the resolution relating thereto.

         Section 3. Seal. The seal of the Corporation shall have inscribed
         ---------  ----
thereon the name of the

                                      -11-

<PAGE>

Corporation and "Delaware" around the perimeter, and the words "Corporate Seal"
in the center.

         Section 4. Waiver of Notice. Whenever notice is required to be given to
         ---------  ----------------
a stockholder, director or other person under the provisions of these by-laws,
the certificate of incorporation of the Corporation or by applicable law, a
waiver in writing signed by the person or persons entitled to the notice,
whether before or after the time stated in the notice, shall be equivalent to
giving the notice.

         Section 5. Depositories and Checks. All funds of the Corporation shall
         ---------  -----------------------
be deposited in the name of the Corporation in such bank, banks or other
financial institutions as the Board of Directors may from time to time designate
and shall be drawn out on checks, drafts or other orders signed on behalf of the
Corporation by such person or persons as the Board of Directors may from time to
time designate.

         Section 6. Bond. The Board of Directors may by resolution require any
         ---------  ----
or all officers, agents and employees of the Corporation to give bond to the
Corporation, with sufficient sureties, conditioned on the faithful performance
of the duties of their respective offices or positions, and to comply with such
other conditions as may from time to time be required by the Board.

         Section 7. Loans to Officers.  The Corporation may lend money to, or
         ---------  -----------------
guarantee any obligation of, or otherwise assistany officer or other employee of

the Corporation or of its subsidiaries, including any officer or employee who is
a director of the Corporation or its subsidiaries, whenever, in the judgment of
the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the Corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the Corporation. Nothing in these by-laws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation at
common law or under any statute.

         Section 8. Fiscal Year. The fiscal year of the Corporation shall be the
         ---------  -----------
period ending on December 31 of each year or such other period as the Board of
Directors shall from time to time determine.

         Section 9. Indemnification of Directors and Officers.
         ---------  -----------------------------------------

                    (a) Right to Indemnification. The Corporation shall, to the
                        ------------------------
maximum extent and in the manner permitted by the General Corporation Law of the
State of Delaware as the same now exists or may hereafter be amended,
indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit or proceeding
in which such person was or is a party or is threatened to be made a party by
reason of the fact that such person is or was a director or officer of the
Corporation. For purposes of the foregoing provisions, a "director" or "officer"
of the Corporation shall mean any person (a) who is or was a director or officer
of the Corporation, (b) who is or was serving at the request of the Corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise or (c) who was a director or officer of a corporation
which was a predecessor corporation of the Corporation or of another enterprise
at the request of such predecessor corporation. The Corporation shall be
required to indemnify a director or officer in connection with an action, suit
or proceeding (or part thereof) initiated by such director or officer only if
the initiation of such action, suit or proceeding (or part thereof) by the
director or officer was authorized by the Board of Directors of the Corporation.
The Corporation shall pay the expenses (including attorneys' fees) incurred by a
director or officer of the Corporation entitled to indemnification hereunder in
defending any action, suit or proceeding referred to in the immediately
preceding paragraph in advance of its final disposition;


                                      -12-


<PAGE>

provided, however, that payment of expenses incurred by a director or officer of
the Corporation in advance of the final disposition of such action, suit or
proceeding shall be made only upon receipt of an undertaking by the director or
officer to repay all amounts advanced if it shall ultimately be determined that
the director or officer is not entitled to be indemnified under this Article
VIII, Section 9 or otherwise. Any repeal or modification of the foregoing
provisions of these by-laws shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.

                     (b)  Right of Indemnitee to Bring Suit.  If a claim under
                          ---------------------------------

paragraph (a) of this Section is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the person claiming indemnification
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in any such suit
or in a suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be entitled to be
paid also the expense of prosecuting or defending such suit. In any suit brought
by a person claiming indemnification to enforce a right to indemnification
hereunder (but not in a suit brought by any such person to enforce a right to an
advancement of expenses), it shall be a defense that such  person has not met
the applicable  standard of conduct set forth in the General Corporation Law of
the Stateof Delaware. In any suit by the Corporation to recover an advancement
ofexpenses pursuant to the terms of an undertaking, the Corporation shall be
entitled to recover such expenses upon a final adjudication that such person has
not met the applicable standard of conduct set forth in the General Corporation
Law of the State of Delaware. Neither the failure of the Corporation (including
its Board of Directors, independent legal counsel or its stockholders) to have
made a determination prior to the commencement of any such suit that
indemnification is proper in the circumstances because the person claiming
indemnification has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor an actual determination by
the Corporation (including its Board of Directors, independent legal counsel or
its stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by a
person claiming indemnification, be a defense to such suit. In any suit brought
by a person claiming indemnification to enforce a right hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that such person is not entitled to be
indemnified or to such advancement of expenses under this Section or otherwise
shall be on the Corporation.

                           (c)  Non-Exclusivity of Rights.  The rights to
                                --------------------------
indemnification and to the advancement of expenses conferred in this Section
shall not be exclusive of any other right which any person may have or hereafter
acquire under any statute, the certificate of incorporation of the Corporation,
these by-laws, by agreement, by vote of stockholders or disinterested directors
or otherwise.

                           (d)  Insurance.  The Corporation may maintain
                                ---------
insurance, at its expense, to protect itself and any director, officer, employee
or agent of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss under the
General Corporation Law of the State of Delaware.

                           (e)  Indemnification of Agents of the Corporation.
                                --------------------------------------------
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Section with respect to the indemnification and advancement
of expenses of directors and officers of the Corporation.


                                      -13-



<PAGE>



         Section 10. Amendments. Except as otherwise provided herein, these
         ----------  ----------
by-laws may be amended or repealed and new by-laws may be adopted by the
affirmative vote of the holders of a majority of the capital stock issued and
outstanding and entitled to vote at any meeting of stockholders or by resolution
adopted by the affirmative vote of not less than a majority of the number of
directors of the Corporation. The provisions of Article II-Section 9, Article
III-Section 2, Article VIII-Section 9, and this Article VIII-Section 10 may only
be altered, amended or repealed by the affirmative vote of the holders of at
least two-thirds (2/3) of the outstanding shares of Common Stock.

                                      -14-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>4
<FILENAME>dex101.txt
<DESCRIPTION>AMEND. TO EMPLOYMENT AGREEMENT STEPHEN P. JAFFERY
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.1

                        AMENDMENT TO EMPLOYMENT AGREEMENT

         THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made effective
as of the 3rd day of May, 2002, by and between Clarus Corporation, a Delaware
corporation (the "Company") and Stephen P. Jeffery, a Georgia resident,
("Employee").

         WHEREAS, the Company and Employee have entered into an Employment
Agreement dated as of January 1, 2000 (the "Employment Agreement"); and

         WHEREAS, the Company and Employee desire to amend the Employment
Agreement as provided herein.

         NOW THEREFORE, in consideration of the foregoing, the mutual promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:

1.       Amendment.
         ----------

(a)      Section 2 of the Employment Agreement is hereby deleted in its entirety
and replaced with the following:

         "Term. The initial term of this Agreement will commence on the date set
         forth above and will terminate on December 31, 2002, unless said
         Agreement is terminated at an earlier date as provided herein. The
         Agreement shall thereafter automatically renew for identical and
         successive one (1) year term(s) unless either party notifies the other
         of its intention not to renew the Agreement at least 30 days prior to
         the expiration of the initial term or the one year renewal term then in
         effect; provided, however, that all post-termination obligations under
         Sections 4, 5, 6 and 7 shall survive termination or expiration of this
         Agreement as provided herein. Notwithstanding anything to the contrary
         herein, the election by the Company not to renew this Agreement at the
         end of the initial or any renewal term hereunder shall constitute
         termination without Cause, and Employee shall be entitled to receive
         the payments and other benefits provided under Section 4(c)."

(b)      The first sentence of Section 4(c) is hereby deleted in its entirety
and replaced with the following:

         "In the event the Company terminates this Agreement without Cause or
         elects not to renew this Agreement at the end of the initial or any
         renewal term, then Employee shall be entitled to (i) severance pay in
         the form of continuation of his annualized Base Salary for a period of
         one (1) year from the date of such termination, which shall be paid in
         accordance with the Company's regular payroll practices and subject to
         any and all withholdings pursuant to applicable law, and (ii) a pro
         rata portion of his incentive bonus, if any, contemplated by Section
         3(a) for the quarter in which his employment terminated based upon the
         number of days in the quarter elapsed prior to such termination."

The remainder of Section 4(c) remains in effect as provided in the Employment
Agreement.

                                       1

<PAGE>

(c)      Section 7 of the Employment Agreement is hereby deleted in its entirety
and replaced with the following:

         "7. Employee's Obligations Upon Termination. Upon the termination of
Employee's employment hereunder for whatever reason, Employee automatically
tenders Employee's resignation from any office Employee may hold with the
Company; provided that neither the provisions of this Section 7 nor anything in
this Agreement shall require Employee to tender his resignation from the
Company's Board of Directors at any time, it being specifically understood that
Employee may continue to serve in such capacity following termination of this
Agreement".

2.       Continued Effect of Agreement. Except as specifically set forth in this
Amendment, the Employment Agreement continues in full force and effect in
accordance with its terms. All references in the Employment Agreement to the
"Agreement" shall be deemed to mean the Employment Agreement as amended hereby.

3.       Miscellaneous. The provisions of Sections 10 of the Employment
Agreement shall apply also to this Amendment.

IN WITNESS WHEREOF, the parties hereto have hereunto affixed their hands and
seals as of the date first above written.

THE COMPANY:                                    EMPLOYEE:

CLARUS CORPORATION


By:      /s/ Stephen P. Jeffery                 /s/ Stephen P. Jeffery
         ----------------------------------     --------------------------------
Title:   Chairman, Chief Executive Officer,     Stephen P. Jeffery
           President
         ----------------------------------

                                       2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>5
<FILENAME>dex102.txt
<DESCRIPTION>AMEND. TO EMPLOYMENT AGREEMENT-STEVEN M. HORNYAK
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.2

                        ADDENDUM TO EMPLOYMENT AGREEMENT

         THIS ADDENDUM TO EMPLOYMENT AGREEMENT ("Agreement") is entered into and
made effective as of the 19th day of February, 2002 between Clarus Corporation,
a Delaware corporation ("Company"), and Steven M. Hornyak, a resident of Georgia
("Employee") (collectively, the "Parties").

         WHEREAS, Employee is employed by the Company and the Parties have
         previously entered into that certain Employment Agreement between
         Employee and the Company dated as of April 1, 2001 (the "Employment
         Agreement"), and the parties desire to modify certain agreements
         concerning such employment as set forth herein.

         NOW THEREFORE, in consideration of the foregoing, the payment set forth
below, the mutual promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereto, intending to be legally bound, agree as follows:

         1.    Payment to Employee.  Subject to the  provisions  below,  the
               Parties  acknowledge  that the  Employee's  employment  with the
               Company will continue until the earlier of (i) March 7, 2003, or
               (ii) such time as Employee commences new employment (as defined
               below). From and after the date hereof and until termination of
               Employee's employment with the Company, Employee's full time
               duties will include such services as may be requested by the
               Chief Executive Officer of the Company from time to time, it
               being understood that it is not required that Employee perform
               such duties at the offices of the Company. The Company agrees
               that in the event that Employee's employment with the Company
               terminates prior to March 7, 2003, the Company will continue to
               pay to Employee his current base salary as severance until July
               7, 2002, and thereafter until the earlier of: (x) March 7, 2003,
               or (y) such date on which Employee commences new employment. For
               purposes of this Agreement, commencement of new employment shall
               mean that Employee has undertaken contract employment or service
               as a consultant or independent contractor of greater than 20
               hours per week and/or full time employment, but shall
               specifically not include volunteer work for no compensation.
               Payments made hereunder shall be payable on a semi-monthly basis
               in accordance with the Company's regular payroll practices and
               subject to any and all withholdings pursuant to applicable law,
               and will be mailed to Employee at his most recent home address as
               reflected by the Company's personnel/payroll files. Employee will
               also be paid a prorata portion of any incentive compensation
               earned by Employee for the first quarter 2002, per Employee's
               2001 Compensation Plan, prorated through March 8, 2002, but will
               not be entitled to any additional incentive compensation after
               such date.

         2.    Stock  Options.  The  parties  acknowledge  that  Employee  will
               have a  period  of  ninety  days  following  the date of the
               termination of his employment to exercise any Company

<PAGE>

               stock options that are, or become vested prior to the termination
               of his employment with the Company.

         3.    Employee Benefits. The Parties understand and agree that
               effective with the termination of Employee's employment with the
               Company, all of Employee's benefits with the Company will
               terminate, subject only to any notice and continuation
               requirements established by applicable law. Notwithstanding the
               foregoing, the Parties acknowledge that Employee may elect to
               continue under COBRA the medical, dental, and/or other health
               insurance coverage(s) in which Employee is enrolled as of the
               date hereof, and the Company will continue to pay that portion of
               the premiums therefor which is currently paid by the Company
               until the earlier of (a) March 7, 2003, or (b) the last day of
               the month in which Employee becomes enrolled and insured under
               new insurance coverage.

         4.    Release and Waiver. As of the date hereof and as of the date of
               termination of Employee's employment with the Company (which
               shall be affirmed at such time by Employee's acceptance of any
               severance payment hereunder), Employee hereby irrevocably and
               unconditionally releases and forever discharges the Company and
               each of its employees, agents, directors, officers, shareholders,
               partners, trustees, predecessors or successors in interest,
               assigns, attorneys, representatives, and those companies
               affiliated with or related to the Company or such aforementioned
               individuals of the Company (and all persons acting by, through,
               under, or in concert with any of them) from any and all claims,
               complaints, demands, rights, actions, causes of action of any and
               every kind, damages, losses, liabilities, obligations, and
               costs/expenses of any and every kind, whether known or unknown,
               foreseen or unforeseen, direct or indirect, fixed or contingent,
               suspected or unsuspected, and whether or not liquidated, that may
               have existed or accrued or which is based on any action, fact,
               occurrence or omission at any time on or before the execution of
               this Agreement. Specifically, Employee acknowledges that such
               claims or potential claims include (but are not limited to) those
               that may have arisen from or were related to:

               (a)  his employment with the Company;
               (b)  the cessation of his employment with the Company;
               (c)  salary, pay, compensation, commissions/incentive
                    compensation, bonuses of any kind, severance pay, insurance,
                    stock awards and options, employee benefits and/or plans,
                    relocation and other business expenses;
               (d)  any contract, tort, wrongful or constructive discharge or
                    workers' compensation theory;
               (e)  relating to any alleged violation of or alleged harassment
                    or discrimination on the basis of sex (gender), race, age,
                    color, religion, disability/handicap, national origin, or
                    "protected activity" under the National Labor Relations Act,
                    as amended, Title VII of the Civil Rights Act of 1964 as
                    amended, 42 U.S.C. ss. 2000(e) et seq., the Civil Rights Act
                    of 1991, Section 1981 of the Civil Rights Act of 1866, as
                    amended, the Americans with Disabilities Act,

                                       2

<PAGE>

                    the Rehabilitation Act of 1973, the Age Discrimination in
                    Employment Act, the Equal Pay Act, the Family and Medical
                    Leave Act (FMLA), 29 U.S.C. ss. 2611 et seq., Executive
                    Order 11246, the Employee Retirement Income Security Act of
                    1974 (ERISA), the Veterans' Reemployment Rights Act, 38
                    U.S.C. ss.ss. 22021-26, the Fair Labor Standards Act, or the
                    Occupational Safety and Health Act, including any amendments
                    and/or revisions to those laws, and any other similar
                    federal, state, or local anti-discrimination laws;

               (f)  any other terms and conditions of employment, any employment
                    practices related thereto, or any contract with or
                    contractual obligation of the Company.

               The Employee hereby covenants not to sue the Company (or any
               other person or entity listed above) on account of any claim
               released hereby, excluding any claim that may arise out of
               compliance with or enforcement of this Agreement.

         5.    Confidentiality. Employee acknowledges and agrees to keep the
               existence and terms of this Agreement strictly confidential.
               Employee further agrees not in any way to reference, use,
               publish, distribute, or disclose any information or document
               regarding this Agreement or any of its contents or terms to any
               entity or person whatsoever (including any current or former
               employees of the Company), unless compelled by a court of
               competent jurisdiction.

         6.    No Admission of Liability. No part of this Agreement or any
               action on the part of either Party in resolving the matters set
               forth herein Party shall be considered or shall constitute an
               admission by said Party of any wrongful conduct or violation of
               any law or that said Party was at any time entitled to relief for
               any action or conduct of the other Party (or any agent or
               employee thereof). The Parties further agree that they continue
               by this Agreement to maintain and affirm that their respective
               conduct (and that of any agent or employee) has not been in any
               way wrongful or in violation of any law. The Parties also agree
               that the actions agreed to be undertaken in this Agreement, as
               well as the fact of resolution itself, shall not have any
               precedential effect whatsoever.

         7.    Non-Disparagement. Employee agrees that he shall not undertake
               any disparaging or harassing conduct directed at the Company
               and/or its directors, managers, supervisors, employees, agents,
               predecessors/successors/assigns, or their respective
               products/services and that he shall refrain from making any
               disparaging or harassing statements concerning such entities,
               individuals, or products/services to any third party. Company
               agrees that it will not undertake any disparaging or harassing
               conduct directed at Employee and that it shall provide positive
               reference information as reasonably requested by Employee.

         8.    Affirmation of Protective Covenants. Employee affirms that he
               remains bound by and agrees that he shall fully comply with all
               post-termination covenants and obligations contained in the
               Employment Agreement including, specifically those covenants

                                       3

<PAGE>

               contained in Paragraphs 5(a), (b), (c) and (d) of said Employment
               Agreement, which Employee acknowledges, by the terms thereof,
               will survive the cessation and termination of Employee's
               employment with the Company. All such obligations and covenants
               contained in said Employment Agreement are hereby incorporated by
               express reference as if fully set forth herein.

               Employee further acknowledges that by virtue of his position with
               the Company, Employee has been given an opportunity to
               participate in strategic planning with respect to competitors of
               the Company and has been made privy to the Company's marketing
               strategy, product development, pricing, timing and other matters
               specifically designed to address market competition. Employee
               further acknowledges that the use and/or disclosure by him of
               such secret information and knowledge would be inevitable in the
               event Employee were to become engaged by such a competitor of the
               Company in a capacity similar to the capacity in which Employee
               is employed by the Company. Employee therefore specifically
               hereby affirms the post-termination restrictive covenants set
               forth in Section 5(a) of the Employment Agreement and agrees to
               fully comply with the terms thereof.

         9.    Return of Company Property. Employee acknowledges that he has
               returned to the Company all Company property that he has received
               in the course of his employment, including but not limited to all
               confidential information and materials, computer or
               computer-related equipment and software, office equipment and
               supplies, files and records, credit cards, keys, and any other
               computer property in his possession; provided that Employee shall
               be entitled to retain his laptop computer.

         10.   Legality and Severability. The Parties covenant and agree that
               the provisions contained herein are reasonable and are not known
               or believed to be in violation of any federal, state, or local
               law, rule or regulation. In the event a court of competent
               jurisdiction finds any provision herein (or subpart thereof) to
               be illegal or unenforceable, the Parties agree that the court
               shall modify said provision(s) (or subpart(s) thereof) to make
               said provision(s) (or subpart(s) thereof) and this Agreement
               valid and enforceable. Any illegal or unenforceable provision (or
               subpart thereof), or any modification by any court, shall not
               affect the remainder of this Agreement, which shall continue at
               all times to be valid and enforceable.

         11.   Entire Agreement; Modification; Governing Law. This Agreement
               (including the continuing and surviving covenants or obligations
               contained in the Employment Agreement that have been incorporated
               by express reference as if fully set forth herein pursuant to
               Paragraph 7 above) constitutes the entire understanding between
               the Parties regarding the subject matters addressed herein and
               supersedes any prior oral or written agreements between the
               Parties. To the extent of any conflict between the provision of
               Sections 2 and 3 of this Agreement and the terms of the
               Employment Agreement, the parties agree that this Agreement shall
               control. This Agreement can only be modified by

                                       4

<PAGE>

               a writing signed by both Parties, and shall be interpreted in
               accordance with and governed by the laws of the State of Georgia
               without regard to the choice of law provisions thereof.
               Notwithstanding the foregoing, said continuing and surviving
               covenants and obligations contained in Paragraph 7 hereof and
               contained in Paragraph 5 of the Employment Agreement shall be
               governed and enforced in accordance with the laws of the state in
               which enforcement of such provisions is sought.

         12.   Negotiated Agreement. Employee and the Company agree that this
               Agreement shall be construed as drafted by both of them, as
               parties of equivalent bargaining power, and not for or against
               either of them as drafter.

         13.   Review and Voluntariness of Agreement. Employee acknowledges
               Employee has had an opportunity to read, review, and consider the
               provisions of this Agreement, that Employee has in fact read and
               does understand such provisions, and that Employee has
               voluntarily entered into this Agreement.

         14.   Attorneys' Fees; Repayment. In the event that either Party
               breaches this Agreement and the other Party successfully prevails
               in a claim or action against said Party regarding such breach,
               the non-prevailing Party in any such claim or action shall pay,
               in addition to such sums as may be due or such other relief
               (including any appropriate injunctive relief) to which the
               prevailing Party may be entitled, reasonable attorneys' fees and
               related costs of the prevailing Party as to such claim or action.
               Furthermore, and without limiting any right or remedy available
               to the Company, Employee agrees that should he breach this
               Agreement, the Company shall be relieved of any obligation to
               provide the aforementioned consideration/compensation and shall
               be entitled to recovery thereof to the extent such has already
               been provided.

         15.   Preamble Incorporation. All of the warranties and representations
               in the preamble of this Agreement are hereby incorporated into
               and made a material part of this Agreement.

         16.   Non-Waiver. The failure of the Company or Employee to insist upon
               or enforce strict performance of any provision of this Agreement
               or to exercise any rights or remedies thereunder will not be
               construed as a waiver by the Company or Employee to assert or
               rely upon any such provision, right or remedy in that or any
               other instance.

         17.   Forum; Enforcement. In the event of litigation arising from this
               Agreement, Employee hereby expressly consents to jurisdiction and
               venue in any State or Federal Court sitting in Fulton County,
               State of Georgia, and waives any objections to such jurisdiction
               and venue. Employee further agrees that if Employee were to
               breach the provisions of Paragraph 7 hereof or Paragraphs 5 of
               said Employment Agreement, the Company would be irreparably
               harmed and therefore, in addition to any other remedies available
               at law, the Company shall be entitled to equitable relief,
               including without limitation, specific

                                       5

<PAGE>

               performance and temporary, preliminary, and/or permanent
               injunctive relief, against any breach or threatened breach
               thereof, without having to post bond.

         IN WITNESS WHEREOF, the Parties have read, understand, and do
voluntarily execute this Addendum to Employment Agreement.

                                       EMPLOYEE

                                       /s/ Steven M. Hornyak
                                       ------------------------------
                                       Steven M. Hornyak

                                       Date:    2/19/02
                                              -----------


                                       COMPANY

                                       Clarus Corporation

                                       By: /s/ Stephen P. Jeffery
                                           --------------------------
                                           Stephen P. Jeffery

                                       Date:     2/20/02
                                              ------------

                                       6

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>6
<FILENAME>dex103.txt
<DESCRIPTION>AMEND. EMPLOYMENT AGREEMENT-SEAN FEENEY
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.3

                        AMENDMENT TO EMPLOYMENT AGREEMENT

         THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made effective
as of the 20th day of May, 2002, by and between Clarus Corporation, a Delaware
corporation (the "Company") and Sean E. Feeney, a Georgia resident,
("Employee").

         WHEREAS, the Company and Employee have entered into an Employment
Agreement dated as of August 15, 2001 (the "Employment Agreement"); and

         WHEREAS, the Company and Employee desire to amend the Employment
Agreement as provided herein.

         NOW THEREFORE, in consideration of the foregoing, the mutual promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:

1.       Amendments.

(a)      Section 2 of the Employment Agreement is hereby deleted in its entirety
and replaced with the following:

         "Term. The initial term of this Agreement will commence on the date set
         forth above and will terminate on December 31, 2002, unless said
         Agreement is terminated at an earlier date as provided herein. The
         Agreement shall thereafter automatically renew for identical and
         successive one (1) year term(s) unless either party notifies the other
         of its intention not to renew the Agreement at least 30 days prior to
         the expiration of the initial term or the one year renewal term then in
         effect; provided, however, that all post-termination obligations under
         Sections 4, 5, 6 and 7 shall survive termination or expiration of this
         Agreement as provided herein. Notwithstanding anything to the contrary
         herein, the election by the Company not to renew this Agreement at the
         end of the initial or any renewal term hereunder shall constitute
         termination without Cause, and Employee shall be entitled to receive
         the payments and other benefits provided under Section 4(c)."

The remainder of Section 2 shall remain in effect as provided in the Employment
Agreement.

(b)      The first two sentences of Section 4(c) of the Employment Agreement are
hereby deleted in their entirety and replaced with the following:

         "In the event the Company terminates this Agreement without Cause or
         elects not to renew this Agreement at the end of the initial or any
         renewal term, then Employee shall be entitled to (A) severance pay in
         the form of continuation of his annualized Base Salary until the
         earlier of (i) a period of six months from the date of such
         termination, or (ii) Employee's earlier commencement of employment with
         any other entity; plus (B) a pro rata portion of his incentive bonus,
         if any, contemplated by Section 3(a) of this Agreement for the quarter
         in which his employment terminated based upon the number of days in the
         quarter elapsed prior to such termination. Any such severance pay shall
         be

                                       1

<PAGE>

         paid in accordance with the Company's regular payroll practices and
         subject to any and all withholdings pursuant to applicable law."

The remainder of Section 4(c) shall remain in effect as provided in the
Employment Agreement.

2.       Continued Effect of Agreement.  Except as specifically set forth in
this Amendment, the Employment Agreement continues in full force and effect in
accordance with its terms. All references in the Employment Agreement to the
"Agreement" shall be deemed to mean the Employment Agreement as amended hereby.

3.       Miscellaneous.    The provisions of Sections 10 of the Employment
Agreement shall apply also to this Amendment.

IN WITNESS WHEREOF, the parties hereto have hereunto affixed their hands and
seals as of the date first above written.

THE COMPANY:                                   EMPLOYEE:

CLARUS CORPORATION


By:      /s/ Stephen P. Jeffery                /s/ Sean E. Feeney
         -----------------------------         ---------------------------------
Title:   Chief Executive Officer               Sean E. Feeney
         -----------------------------


                                       2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>7
<FILENAME>dex991.txt
<DESCRIPTION>CERTIFICATION OF CHIEF EXECUTIVE OFFICER
<TEXT>
<PAGE>


                                                                   EXHIBIT 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Clarus Corporation (the
"Company") on Form 10-Q for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen
P. Jeffery, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

     1.   The Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   The information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company as of and for the period covered by the Report.


                                       /s/ Stephen P. Jeffery
                                       -----------------------
                                       Chief Executive Officer
                                       August 14, 2002




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>8
<FILENAME>dex992.txt
<DESCRIPTION>CERTIFICATION OF CHIEF FINANCIAL OFFICER
<TEXT>
<PAGE>

                                                                   EXHIBIT 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Clarus Corporation (the
"Company") on Form 10-Q for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, James
J. McDevitt, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

     1.   The Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   The information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company as of and for the period covered by the Report.


                                       /s/ James J. McDevitt
                                       -----------------------
                                       Chief Financial Officer
                                       August 14, 2002


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
