CLARUS CORP, POS AM, 1999-04-16

CLARUS CORP
POS AM, 1999-04-16
PREPACKAGED SOFTWARE

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As filed with the Securities and Exchange Commission on April 16, 1999

Registration No. 333-46685
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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POST-EFFECTIVE AMENDMENT NO. 2
To
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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CLARUS CORPORATION
(Exact name of Registrant as specified in its charter)

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<S> <C> <C>
Delaware 7372 58-1972600
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
ofincorporation or organization) Classification Code Number) Identification No.)
</TABLE>

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Clarus Corporation

3970 Johns Creek Court, Suite 100
Suwanee, Georgia 30024
(770) 291-3900
(Address and telephone number of Registrant's principal executive offices)

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The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
(302) 658-7581
(Name, address and telephone number of agent for service)

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Copies to:
G. Donald Johnson, Esq.
Sharon L. McBrayer, Esq.
Elizabeth O. Derrick, Esq.
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
(404) 872-7000

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]

If the delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [_]

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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.

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RESALE
PROSPECTUS

LOGO OF CLARUS CORPORATION APPEARS HERE

Issuer

522,395 SHARES OF COMMON STOCK

<TABLE>
<C> <S>
Clarus Corporation We develop, market and support
3970 Johns Creek Court client/server financial, human resource
Suite 100 and corporate service software
applications.
Suwanee, Georgia 30024 This is a resale Prospectus. The 522,395
(770) 291-3900 shares of our common stock offered by this
Prospectus are being sold by certain of
our stockholders. We will not receive any
proceeds from the sale of these shares.
</TABLE>

The Offering

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<CAPTION>
Per
Share Total
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<S> <C> <C>
Offering Price.......................................... $6.00 $3,134,370
</TABLE>

The offering price is based on recent prices of our common stock as quoted on
the NASDAQ National Market. There are no underwriters involved in this
offering.

Trading Symbol:

NASDAQ National Market-CLRS

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See "Risk Factors" commencing on page 5 for a discussion of certain factors
that you should consider before purchasing our common stock.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

April , 1999
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TABLE OF CONTENTS

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Page
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<S> <C>
SUMMARY................................................................... 1
RISK FACTORS.............................................................. 5
USE OF PROCEEDS........................................................... 18
SELLING STOCKHOLDERS...................................................... 18
MARKET PRICES............................................................. 21
DIVIDEND POLICY........................................................... 21
DILUTION.................................................................. 21
SELECTED HISTORICAL AND FINANCIAL DATA.................................... 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 23
BUSINESS.................................................................. 37
MANAGEMENT................................................................ 50
PRINCIPAL STOCKHOLDERS.................................................... 60
CERTAIN TRANSACTIONS...................................................... 63
CAPITAL STOCK............................................................. 64
SHARES ELIGIBLE FOR FUTURE SALE........................................... 67
PLAN OF DISTRIBUTION...................................................... 69
EXPERTS................................................................... 70
LEGAL MATTERS............................................................. 70
WHERE YOU CAN FIND MORE INFORMATION....................................... 70
INDEX TO FINANCIAL STATEMENTS............................................. 72
</TABLE>
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SUMMARY

Because this is a summary it does not contain all the information that may be
important to you. You should read the entire Prospectus carefully before you
decide to purchase our common stock.

Clarus Corporation

We develop, market, and support Web-based electronic commerce applications and
client/server financial and human resources applications. Our applications
enable organizations to gain control of their operational resources and reduce
the total cost of ownership by minimizing the time, costs, and risks associated
with implementing, changing, and upgrading the applications. Almost all of our
products are sold as applications suites. On occasion, we will sell individual
applications to our existing customers.

Our Clarus(TM) Commerce line of products leverages Web technology to connect
large populations of employees, management, and suppliers in continuous
planning, monitoring, and control of resources.

Our Clarus(TM) line of products are based on a flexible, open architecture
called Active Architecture(R) which allows for seamless, rapid changes and
upgrades without modifying the source code. Our software provides organizations
with the broad functionality of custom-designed applications without the high
total cost of ownership traditionally associated with such applications. By
providing broad functionality, a flexible open architecture, and minimized
implementation and modification time, we address the needs of a wide range of
organizations while giving end users more control of their work environment.

We offer Web-commerce solutions and applications that allow companies to
proactively manage their business resources. Our solutions are designed to
provide a closed-loop management process enabling companies to plan, control,
and analyze their operational, financial, and human resources in a real-time
manner. Our solutions are designed to provide open enterprise integration by
employing a message-based integration layer between our operational resource
systems, our budgeting and planning systems, our analysis and control systems,
and traditional enterprise resource planning solutions, including that of other
enterprise resource planning vendors. Our solutions are also designed with
Clarus View, a personalized real-time view of the business operating
environment that facilitates proactive control.

Our Clarus(TM) product line also includes a full suite of financial and human
resource applications and a growing suite of corporate service applications.
These applications cover the full range of financial and accounting functions,
including general accounting, expense accounting, revenue accounting and human
resources. We license a series of modules, our Graphical Architects(R), that
are designed to extend, enhance, integrate and change the look and feel of our
core applications. Through a visual point-and-click interface, the Graphical
Architects(R) modules allow users to personalize and configure our applications
without any source code programming.

We have recently introduced our growing suite of Corporate Service
Applications, including Clarus(TM) HRPoint(TM), Clarus(TM) Budget, Clarus(TM)
OLAP and Clarus(TM) E-Procurement. In
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addition, we provide dedicated implementation services as an integral part of
our solution, and believe that these services result in a high level of
customer satisfaction, strong customer references and long relationships. We
provide ongoing support services to assist customers in maintaining and
updating their systems, training their employees and adding functionality as
the customers' businesses grow and their requirements change.

Our objective is to become a leading provider of Web-commerce financial and
human resources and corporate service applications to non-industrial
organizations. The key elements of our strategy are:

. to expand our Web-based commerce applications;

. to extend our technology leadership;

. to leverage our expertise in financial and human resource applications;

. to capitalize on middle market opportunities;

. to leverage our installed customer base; and

. to expand our sales and marketing channels.

We license our products and services primarily through a direct sales force in
the United States and Canada. We focus our sales and marketing efforts on value
buyers in mid-sized non-industrial organizations, including divisions of larger
companies, which represent the fastest growing segment of the financial
applications market. Since we started our business we have had more than 275
customers, including leading organizations such as National Railroad Passenger
Corporation, Blue Cross and Blue Shield of Alabama, Chartwell Re Holdings
Corporation, First Data Corporation, Land's End, Inc., T. Rowe Price
Associates, Inc., Shaw Industries, Inc., and Toronto-Dominion Bank.

We were incorporated in Delaware in 1991. On May 26, 1998, we completed an
initial public offering of our common stock and sold 2.5 million shares which
resulted in net proceeds of approximately $22.0 million. On November 6, 1998,
we acquired ELEKOM Corporation in a merger. ELEKOM's business is now operated
in our subsidiary, Clarus CSA, Inc. Unless the context otherwise requires,
references in this Prospectus to "us or we" refer to Clarus Corporation and our
wholly-owned consolidated subsidiaries: Clarus Professional Services, L.L.C.,
SQL Financials Europe, Inc. and Clarus CSA, Inc. Clarus Professional Services,
L.L.C. includes the operations through which we provide dedicated
implementation services. We plan to merge these operations into Clarus
Corporation in the second quarter of 1999. SQL Financials Europe, Inc. has no
operations.

The Offering

Our stockholders are offering a total of 522,395 shares of our common stock for
sale. We will not receive any of the proceeds from the sale of these shares of
common stock. You should read the Risk Factors section, beginning on page 5, as
well as the other cautionary statements throughout the entire Prospectus to
ensure you understand the risks associated with an investment in our common
stock before purchasing any shares.
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Summary Consolidated Financial Data
(In thousands, except per share data)

We are providing the following financial information to aid you in your
analysis of our financial condition. We derived this information from audited
financial statements for 1994 through 1998.

<TABLE>
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Year Ended December 31,
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1994 1995 1996 1997 1998
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<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues.................. $ 3,821 $ 8,190 $13,056 $25,988 $ 41,640
Operating income (loss)......... (5,157) (7,987) (7,658) (3,358) (11,078)
Net income (loss)............... (5,140) (8,049) (7,879) (4,110) (10,702)
Income (loss) per common share:
Basic......................... (5.65) (6.19) (5.74) (2.97) (1.70)
Diluted....................... (5.65) (6.19) (5.74) (2.97) (1.70)
Weighted average common shares
outstanding:
Basic......................... 910 1,300 1,373 1,386 6,311
Diluted....................... 910 1,300 1,373 1,386 6,311
</TABLE>

<TABLE>
<CAPTION>
At
December 31,
1998
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<S> <C>
Balance Sheet Data:
Cash and cash equivalents.......................................... $14,799
Working capital.................................................... 9,001
Total assets....................................................... 40,082
Long-term debt, net of current portion............................. 245
Total stockholders' equity......................................... 22,111
</TABLE>

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Forward-Looking Statement

This Prospectus contains certain forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995, including or related to our
future results including certain projections and business trends.

These and other statements, which are not historical facts, are based largely
on current expectations and assumptions of management 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" beginning on page 5 herein. Assumptions related to
forward-looking statements include that we will continue to price and market
our products competitively; that competitive conditions within our markets will
not change materially or adversely; that the demand for our products will
remain strong; and that we will retain key personnel.

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 Prospectus, the words "estimate," "project," "intend," 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,
therefore, there can be no assurance that the results contemplated in the
forward-looking information will be realized. Management decisions are
subjective in many respects and susceptible to interpretations and periodic
revisions based on actual experience and business developments, the impact of
which may cause us to alter our business strategy or capital expenditure plans
which may, in turn, affect our results of operations. In light of the
significant uncertainties inherent in the forward-looking information included
herein, the inclusion of such information should not be regarded as our
representation that any strategy, objectives or other plans will be achieved.
The forward-looking statements contained in this Prospectus speak only as of
the date of this Prospectus as stated on the front cover, and we do not have
any obligation to publicly update or revise any of these forward-looking
statements.

Trademarks

Active Architecture(R), Graphical Architects(R), World Class Applications . . .
Breakthrough in Time(R) and ELEKOM(R) are our trademarks registered with the
U.S. Patent and Trademark Office. Data Exchange/Graphical Architect(TM),
Solution/Graphical Architect(TM), Workload/Graphical Architect(TM),
Workflow/Graphical Architect(TM), Business Controls/Graphical Architect(TM),
and Clarus(TM) are our trademarks. All other trademarks and registered
trademarks used in this Prospectus are the property of their respective owners.

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RISK FACTORS

In addition to the other information in this Prospectus, you should consider
carefully the following risk factors.

History of Operating Losses

We have incurred significant net losses in each year since our formation. As of
December 31, 1998, we had an accumulated deficit of approximately $38.7
million. These losses have occurred, in part, because of the substantial costs
we incurred to develop our products, expand our product research, and hire and
train our direct sales force. Although we have achieved revenue growth and
recent profitability for the quarters ended September 30, 1997, December 31,
1997, June 30, 1998, and September 30, 1998, we may not be able to generate the
substantial additional growth in revenues that will be necessary to sustain
profitability.

Uncertainty of Future Operating Results; Impact of Year 2000 Issues

Future spending for software applications in general and for our applications
is uncertain due to the approach of the Year 2000. Many industry experts have
predicted that software sales may decline in 1999 due to customer concerns over
the Year 2000 issue and the time remaining to implement system replacements.
Recently a number of vendors have warned of slowing market conditions, which we
began to experience during the fourth quarter of 1998, and continue to
experience in the first quarter of 1999. Because this issue is unprecedented,
we cannot forecast the expected impact of the Year 2000 issue on our quarterly
revenue. However, if the anticipated decline in demand continues, as is
expected through 1999, our operations may be adversely affected. Additionally,
should the market for our products further decline, our revenue may not be
sufficient to maintain the infrastructure and number of employees which have
resulted from prior growth.

Revenues from our financial and human resources applications accounted for a
substantial portion of revenue during 1998, and are expected to continue to
account for a substantial portion of our product revenues for the foreseeable
future. Therefore, any factor, including the Year 2000 issue, adversely
affecting sales or pricing levels of these applications will have a material
adverse effect on our business, results of operations, and financial condition.
Other factors that may affect market acceptance include the availability and
price of competing products and technologies and the success of our sales
efforts.

Our future performance will also depend in part on whether we are successful in
developing, introducing, and gaining market acceptance of new and enhanced
products, including the Clarus Commerce suite of products. Our new or enhanced
products may not be successfully developed, introduced, or marketed. The
failure to do so would have a material adverse effect on our business, results
of operations and financial condition. In pursuing a strategy of
diversification, on November 6, 1998, we acquired ELEKOM and its electronic
procurement product. ELEKOM was a development stage enterprise that had a
limited operating history upon which an evaluation of its business and
prospects could be based. Prior to the merger, ELEKOM had generated minimal
operating revenues, had incurred significant losses, and had experienced
substantial negative cash flow from operations.

Our prospect of success with the ELEKOM products must be considered in light of
the considerable risks, expenses, and difficulties frequently encountered by
companies in their early stage of development, particularly technology-based
companies operating in unproven markets with unproven

5
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products. We expect to incur substantial additional costs to complete the
development of the Clarus(TM) Commerce suite of products, including the Clarus
E-Procurement product, to integrate the ELEKOM Procurement software in its
existing stage of development with our Clarus Purchasing Control module, and to
market and support this product. Our investments in ELEKOM's products and
technologies may not achieve the desired returns.

Limited Period of Public Trading; Volatility of Stock Price

Prior to May 1998, there was no public market for the shares of our common
stock. An active public market for the shares of our common stock may not be
sustained. The market price of the shares of common stock has been and may
continue to be highly volatile. The market price could be subject to wide
fluctuations in response to variations in results of operations, announcements
of technological innovations of our new products or new products of our
competitors, changes in our financial estimates, changes in financial estimates
by securities analysts or other events or factors. In addition, the financial
markets have experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of many high
technology companies. These fluctuations often have been unrelated to the
operating performance of such companies or have resulted from the failure of
the operating results of such companies to meet market expectations in a
particular quarter. Additionally, broad market fluctuations or any failure of
our operating results in a particular quarter to meet market expectations may
adversely affect the market price of the shares of our common stock.

In the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted
against such a company. Any securities litigation involving us could result in
substantial costs and a diversion of management's attention and resources. The
market price of our common stock has declined and has been highly volatile
since our initial public offering in May 1998.

Financial Impact of Merger

Our results of operations were negatively impacted by the accounting treatment
for the acquisition of ELEKOM. We recognized a write-off of acquired in-process
research and development of approximately $10.5 million and will amortize the
remainder of approximately $6.9 million over a period ranging from three months
to ten years. Such amortization will adversely affect our results of operations
through 2008. The amounts allocated under purchase accounting to developed
technology and in-process research and development in the merger involve
valuations utilizing estimations of future revenues, expenses, operating
profit, and cash flows. The actual revenues, expenses, operating profit, and
cash flows from the acquired technology recognized in the future may vary
materially from such estimates. If the in-process research and development
product is not successfully developed, our sales and profitability may be
adversely affected in future periods. Additionally, the value of other
intangible assets acquired may become impaired. We expect to begin to benefit
from the purchased in-process technology in the second quarter of 1999.

Fluctuations in Quarterly Operating Results

We have experienced, and expect to continue to experience, significant
fluctuations in quarterly operating results caused by many factors, including,
but not limited to:

. changes in the demand for our products;

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. the timing, composition, and size of orders from our customers;

. lengthy sales cycles;

. spending patterns and budgetary resources of our customers;

. our success in generating new customers;

. a general economic downturn caused by the Year 2000 impact;

. introductions or enhancements of our products;

. changes in our pricing policies or those of our competitors;

. our ability to anticipate and effectively adapt to developing markets
and rapidly changing technologies;

. our ability to attract, retain and motivate qualified personnel;

. changes in the mix of products sold;

. the publication of opinions or reports about us and our products, or our
competitors and their products, by industry analysts, or others; and

. changes in general economic conditions.

The loss of a large sale, or the deferral of a large sale to a subsequent
quarter, could have a material adverse effect on current quarter operating
results and could cause significant fluctuations in revenues and earnings from
quarter to quarter. Additionally, because we derive a smaller percentage of our
revenues from maintenance contracts than many software companies with a longer
history of operations, we do not have a significant ongoing revenue stream that
may tend to mitigate quarterly fluctuations in operating results.

We also have experienced, and expect to experience, a high degree of
seasonality, and in recent years have recognized proportionately greater
percentage of our total revenues in the fourth quarter than in any other
quarter during such year. Fourth quarter revenues in 1996, 1997, and 1998 were
33.6%, 32.5% and 26.3%, of total revenues for those years. As a result of this
seasonality, we may experience reduced net income, or net losses.

Consistent with software industry practice, we typically ship our software
promptly following receipt of a firm order. We operate with minimal backlog. As
a result, quarterly sales and operating results depend generally on the volume
and timing of orders within the quarter, the tendency of sales to occur late in
fiscal quarters, and our ability to fill orders received within the quarter,
all of which are difficult to forecast and manage. Our expense levels are based
in part on our expectations of future orders and sales. A substantial portion
of our operating expenses are related to personnel, facilities, and sales and
marketing programs. This level of spending for such expenses cannot be adjusted
quickly and is; therefore, relatively fixed in the near term. Accordingly, any
significant shortfall in demand for our products in relation to our
expectations would have an immediate and material adverse financial effect on
us.

Due to all of these factors, we believe that our quarterly operating results
are likely to vary significantly in the future. Therefore, our results of
operations may fall below the expectations of securities analysts and
investors. In such event, or in the event that such result is perceived by
market analysts to have occurred, the trading price of our common stock would
likely be materially adversely affected.

7
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Limited Experience, and Risks Associated, with Internet Commerce

The success of our Clarus Commerce suite of Internet-based computer software
applications, including Clarus E-Procurement, depends upon the development and
expansion of the market for Internet-based software applications, in particular
electronic commerce applications. This market is new and rapidly evolving. The
acceptance of electronic commerce generally, and the Internet specifically, as
a forum for corporate procurement is uncertain and subject to a number of
risks. Many significant issues relating to such use of the Internet (including
security, reliability, cost, ease of use, quality of service, and government
regulation) remain unresolved and could delay or prevent the necessary growth
of the Internet. 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 success of Clarus E-Procurement and other
Clarus Commerce products would be materially adversely affected, as well as,
potentially, our overall business, operating results, and financial condition.

The adoption of the Internet for corporate procurement and other commercial
transactions requires acceptance of new ways of transacting business. In
particular, enterprises with established patterns of purchasing goods and
services that have already invested substantial resources in other means of
conducting business and exchanging information may be particularly reluctant to
adopt a new strategy that may make some of their existing personnel and
infrastructure obsolete. Also, the security and privacy concerns of existing
and potential users of Internet-based products and services may impede the
growth of online business generally and the market's acceptance of our products
and services in particular. A functioning market for such products may not
emerge or be sustainable. If the market for Internet-based packaged procurement
applications fails to develop or develops more slowly than we anticipate, or if
Clarus E-Procurement and any other Internet-based products developed by us do
not achieve market acceptance, our business, operating results, and financial
condition could be materially adversely affected.

Dependence on Direct Sales Model

To date, we have sold our products exclusively through our direct sales force.
We intend to continue to differentiate ourselves from many of our competitors
by relying principally on our direct sales model. As a consequence of this
strategy, our ability to achieve significant revenue growth in the future will
depend in large part on our success in recruiting, training, and retaining
additional direct sales and consulting personnel and on the continuing success
of the direct sales force. Our financial success will depend in large part on
the ability of our direct sales force to increase sales to levels necessary to
sustain profitability. In order to increase sales, we must hire, train, and
deploy a continually increasing staff of competent sales personnel. We believe
that there is a shortage of, and significant competition for, direct sales
personnel with the advanced sales skills and technological knowledge necessary
to sell our products. Our inability to hire, or failure to retain, competent
sales persons would have a material adverse effect on our business, results of
operations, and financial condition.

In addition, by relying primarily on a direct sales force model, we may fail to
leverage the additional sales capabilities that might be available through
other sales distribution channels. This may place us at a disadvantage with
respect to our competition. In the future, we intend to develop indirect

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distribution channels through third-party distribution arrangements. We may not
be successful in establishing third-party distribution arrangements. Any
expansion of our indirect distribution channels may not result in increased
revenues.

Reliance on Third-Party Software

We maintain nonexclusive license agreements with Microsoft Corporation, Oracle,
and Sybase, Inc. that allow us to integrate our products with relational
database management systems provided by these companies. If our customers
experience significant problems with these database management systems and such
problems are not corrected by the database system provider, there can be no
assurance that our customers will be able to continue to use our products.
Additionally, our inability, if any, to maintain upward compatibility with a
new database management system release could impact the ability of our
customers to use our products.

We maintain a nonexclusive license agreement with Centura Corporation that
allows us to use their software development tools and operating environment.
Centura has announced that it does not intend to further enhance its
development technology, which is one of the primary technologies used to create
our financial and human resources applications. This will require us to spend
significant amounts of time and money over the next few years to re-architect
these applications. Re-architecting the applications will divert resources from
the development of new and enhanced products and other business requirements.
However, the failure to re-architect these products to a different development
language could result in our inability to continue to market these products,
resulting in a substantial loss of revenue, which would materially and
adversely affect our business, financial condition, and results of operations.
Also, the customer's inability to use our products would affect customer's
renewal of software maintenance for such products, which would have a material
adverse effect on our business, results of operations, and financial condition.

We rely on nonexclusive license agreements with Hyperion Solutions Corporation,
Centura, FRx Software Corporation, and others for third-party software that we
distribute. The loss of, or inability to maintain, any of these software
licenses would result in delays or reductions in product shipments until
equivalent software could be identified, licensed, or developed. Any such
delays could have a material adverse effect on our business, operating results,
and financial condition. Further, in some instances, we only receive object
code from our licensors, causing us to be reliant on software support services
from third parties. If these third parties fail to satisfy their maintenance
obligations to us, then we would likely fail to satisfy our software support
obligations to our customers. Any such failure would have a material adverse
effect on our business, results of operations, and financial condition.

We have also entered into agreements with various other third-party licensors
for products which are used as tools with our products, which are licensed as
complementary products to our products, or which are integrated with and
enhance the operation of our products. These agreements contain customary
warranty, software maintenance, and infringement indemnification terms for the
third-party software that we distribute. In most cases, we are dependent upon
the third party to maintain, support, update, and enhance their products. The
failure of any third party to do so or the loss or inability to maintain any of
these software licenses could result in delays or reductions in product
shipments until equivalent software could be identified, licensed, or
developed. Any such delays could have a material adverse effect on our
business, operating results, and financial condition.

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The expiration or termination of any such licenses or the failure of any of
these third-party licensors to adequately maintain, support, or update their
products could delay the shipment of certain of our products while we seek to
implement software offered by alternative sources. Any required replacement
licenses could prove costly. While it may be necessary or desirable in the
future to obtain licenses of alternative or new products relating to one or
more of our products, or relating to current or future technologies, there can
be no assurance that we will be able to do so on commercially reasonable terms,
or at all.

Competition

The market for Internet procurement applications, such as Clarus E-Procurement
and electronic commerce technology generally, is rapidly evolving and intensely
competitive. Clarus E-Procurement is designed to compete with prepackaged
electronic commerce software, software tools for developing electronic commerce
applications, system integrators, and business application software. In
addition, potential customers may elect to develop their own electronic
commerce solutions.

We will face competition from other electronic procurement providers such as
ARIBA, Commerce One, TRADE'ex, Intelisys, and Trilogy. We will also face
competition from larger corporations, such as Netscape and Harbinger, who have
entered the electronic procurement market. In addition, we believe we will
experience increased competition from travel and expense software companies,
such as Extensity, Captura, and Concur (formerly Portable Software),which
acquired 7Software, a direct competitor. We also anticipate increased
competition from some of the larger enterprise resource planning software
vendors, such as SAP, with its Business-to-Business Procurement solution. Other
potential competitors in this category include Oracle, PeopleSoft, and Baan.
Other companies who have a stated interest in electronic procurement include
Microsoft Corporation, IBM, Aspect Development, and Requisite Technologies.

The market for financial and human resources applications is intensely and
increasingly competitive. Our applications are designed for use in
client/server environments utilizing Windows NT and Unix servers. Principal
competitors that offer products that run on Windows NT or Unix servers in
client/server environments include PeopleSoft, Oracle, and Lawson. In 1997,
J.D. Edwards & Company introduced financial applications for use on Windows NT
or Unix servers in competition with us. We also face indirect competition from
companies that sell financial software applications for use mainly on
proprietary mid-range computing systems, from suppliers of custom-developed
financial applications software systems, from the consulting groups of major
accounting firms, and from the IT departments of potential customers that
choose to develop systems internally.

The majority of our principal current and potential competitors have
significantly greater financial, technical, and marketing resources and name
recognition than we do. In addition, because of relatively low barriers to
entry and relatively high availability of capital in today's markets, we
believe that new competitors will emerge in our markets. We anticipate that we
may face pricing pressures and that one or more companies in our markets may
face financial failure. In the past, a number of software markets have become
dominated by one or a small number of suppliers, and a small number of
suppliers or even a single supplier may dominate our markets. If we do not
offer products that continue to achieve success in their respective markets in
the short term, we could suffer a loss in market share and brand name
acceptance. Moreover, any material reduction in the

10
<PAGE>

price of our products would negatively affect margins as a percentage of net
revenues and would require us to increase sales or reduce costs to maintain or
increase net income. The occurrence of any of the foregoing would result in a
material adverse effect on our business, results of operations, and financial
condition. We may not compete effectively with current and future competitors.

Rapid Technological Change; Risks Associated with New Products and Product
Enhancements

The market for financial, human resources, and Web-commerce applications is
characterized by rapid technological change, frequent introductions of new and
enhanced products, changes in customer demands, and evolving industry and
financial accounting standards and practices. The introduction of products
embodying new technologies and functionality can render existing products
obsolete and unmarketable. As a result, our future success will depend, in
part, upon our ability to continue to enhance our existing products and develop
and introduce new products that keep pace with technological developments, and
satisfy customer requirements and preferences, while remaining price
competitive and achieving market acceptance. We may not identify new product
opportunities and develop and bring new products to the market in a timely and
cost-effective manner. Products, capabilities, or technologies developed by
others may render our products or technologies obsolete or noncompetitive or
shorten life cycles of our products. In particular, Clarus E-Procurement has a
limited product implementation history. Clarus E-Procurement may not be
successfully and efficiently developed and marketed. In addition to the
potential acquisition of other applications or technologies in the future, we
intend to continue to address product development and enhancement initiatives
through our internal research and development staff and through the licensing
of third-party technologies.

Risk of Limited Life Cycle of Versions of Products

Because of these potentially rapid changes in the financial, human resources,
and Web-commerce applications markets, the life cycle of our technology is
difficult to estimate. Our future success will depend upon our ability to
address the increasingly sophisticated needs of our customers by developing and
introducing enhancements to our products and technologies on a timely basis
that keep pace with technological developments, emerging industry standards,
and customer requirements. We may not be successful in developing and marketing
enhancements to existing products or in developing new products that respond to
technological changes, evolving industry or accounting standards or practices,
or customer requirements. Our failure to successfully develop and bring new or
enhanced products to market that offer advanced technology and functionality
adequate to compete with other available products could have a material adverse
effect on our business, results of operations, and financial condition.

Risk of Inability to Manage Growth

We have experienced significant growth in our sales and operations and in the
complexity of our products and product distribution channels. We increased our
sales by approximately 407% from approximately $8.2 million during 1995 to
approximately $41.6 million during 1998. We increased the number of our
employees from 105 on December 31, 1995, to 343 on March 1, 1999. Our prior
growth, coupled with the rapid evolution of our markets, has placed, and is
likely to continue to place, significant strains on our administrative,
operational, and financial resources and increase

11
<PAGE>

demands on our internal systems, procedures, and controls. Additionally, should
the market for our products further decline, our revenue may not be sufficient
to maintain the infrastructure and number of employees which have resulted from
prior growth. If we are unable to manage future growth effectively, our
business, results of operations, and financial condition could be materially
adversely affected.

Dependence on Key Personnel

Our performance is substantially dependent on the performance of our key
management, sales, support, and technical personnel, substantially all of whom
are employed at will and are not bound by employment agreements to continue in
our employ. The loss of the services of any of such personnel could have a
material adverse effect on our business, results of operations, and financial
condition. We do not maintain key person life insurance policies on any of our
employees or consultants.

Ability to Hire and Retain Personnel

In completing the development of Clarus E-Procurement and the Clarus Commerce
suite of products, we anticipate that we will rely heavily on the efforts of a
number of former employees of ELEKOM, who are now employees of Clarus CSA.
Substantially all of these employees are employed at will and can terminate
their services to Clarus CSA at any time. The failure to employ and retain the
necessary personnel from ELEKOM could have a material adverse effect upon the
development of the Clarus Commerce suite, including Clarus E-Procurement, and
potentially, upon our overall business, financial condition, and results of
operations.

Our success also is highly dependent on our continuing ability to identify,
hire, train, motivate, and retain highly qualified management, technical, and
sales and marketing personnel. Competition for such personnel is intense. We
believe that there is a shortage of qualified personnel with the skills
required to manage, develop, sell, and market financial, human resources, and
Web-commerce applications and enhancements in today's highly competitive
environment. Accordingly, there can be no assurance that we will be able to
attract, assimilate, or retain highly qualified personnel. Our inability to
attract and retain the necessary personnel would have a material adverse effect
on our business, results of operations, and financial condition.

Risk of Performance Degradation of Clarus E-Procurement in High Volume
Environments

Clarus E-Procurement was designed for use in environments that include, without
limitation, a large number of users, large amounts of catalog and other data,
and potentially high peak transaction volumes. The product currently operates
as designed in existing customer sites. The final product; however, may not
operate as designed when deployed. Therefore, when deployed, Clarus E-
Procurement and the third-party computer software and hardware on which Clarus
E-Procurement is dependent may not operate as designed. Any failure by Clarus
E-Procurement to adequately perform in a high volume environment could have a
material adverse affect on the market for Clarus E-Procurement and on our
business, results of operations, and financial condition.

Lengthy Sales Cycles

A customer's decision to license and implement our financial, human resources,
and Web-commerce applications presents significant enterprise-wide implications
and involves a substantial commitment

12
<PAGE>

of the customer's management attention and resources. We believe that the
period between initial customer contact and the customer's purchase commitment
typically ranges from four to seven months for our applications. As companies
achieve Year 2000 compliance, and as our products and competing products become
increasingly sophisticated and complex, sales cycles are likely to increase in
the future. Our future sales cycle could extend beyond current levels as a
result of lengthy evaluation and approval processes that typically accompany
major initiatives or capital expenditures, including delays over which we have
little or no control. The loss of individual orders due to increased sales and
evaluation cycles, or delays in the sale of even a limited number of systems,
could have a material adverse effect on our business, results of operations,
and financial condition and, in particular, could contribute to significant
fluctuations in our operating results on a quarterly basis.

Proprietary Rights and Licensing

Our success depends significantly upon our internally-developed proprietary
intellectual property and intellectual property licensed from others. We rely
on a combination of copyright, trademark, and trade secret laws as well as on
confidentiality procedures and licensing arrangements, to establish and protect
our proprietary rights in our products. We currently have no patents or patent
applications pending, and existing trade secret and copyright laws provide only
limited protection of our proprietary rights. We have registered or applied for
registration for certain copyrights and trademarks. We will continue to
evaluate the registration of additional copyrights and trademarks. Despite our
efforts to protect our products' respective proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Third parties may also independently
develop products similar to our products. In addition, the laws of some foreign
countries do not protect proprietary rights to the same extent as the laws of
the United States.

We enter into license agreements with our customers which give the customer the
non-exclusive right to use the object code version of our products. The license
agreements prohibit the customer from disclosing to third parties or reverse
engineering our products and disclosing our confidential information. In
certain rare circumstances, typically for the earliest releases of our
products, we have granted our customers a source code license, solely for the
customer's internal use.

Although we do not believe that we are infringing the intellectual property
rights of others, claims of infringement are becoming increasingly common as
the software industry matures and expanded legal protections are applied to
software products. Third parties may assert infringement claims against us with
respect to our proprietary technology and intellectual property licensed from
others. Generally, our third-party software licensors indemnify us from claims
of infringement. However, there is no assurance that our licensors will be able
to fully indemnify us for such claims, if at all. Infringement claims against
us could cause product release delays, require us to redesign our products, or
require us to enter into royalty or license agreements, which agreements may
not be available on terms acceptable to us or at all. Furthermore, litigation,
regardless of the outcome, could result in substantial cost to us, divert
management attention, and delay or reduce customer purchases. Any infringement
claim against us could have a material adverse effect on our business, results
of operations, and financial condition.

13
<PAGE>

Third-Party Patent and Other Intellectual Property Rights

We may receive notice of claims of infringement of third-party patent rights in
the normal course of business. Although we do not believe that our technology
infringes any third-party rights, the cost of defending any such claim,
regardless of its validity, can be substantial and result in significant
expenses and diversion of resources, which could materially and adversely
affect our business and financial condition. One or more of our products may,
in the future, be found to infringe the patent rights of one or more third
parties. Because knowledge of a third party's patent rights is not required for
a determination of patent infringement and because new patents are being issued
by the U.S. Patent and Trademark Office on an ongoing basis, this is an ongoing
risk for us.

In addition to the risk of infringing a third party's patent rights, there is a
risk that our products may infringe upon other intellectual property rights of
third parties (e.g., copyrights, trademarks and trade secrets). We have taken
steps to ensure that our employees and contractors have assigned to us all of
their third parties' rights in and to any of the computer software, inventions,
and other work product created by third parties for or on behalf of us. In
addition, we have taken steps to ensure that they have the proper licenses in
place for the use and distribution of all third-party company software included
in or with our products.

If it is later determined that a third party's patent or other intellectual
property rights apply to a product of ours, there is a material risk that the
revenue from the sale of such product will be significantly reduced or
eliminated as we may have to:

. pay licensing fees or royalties to such third party in order to continue
selling the product;

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

. stop selling the product.

In addition, if a product is adjudged to be infringing a third party's patent
or other intellectual property rights, then we may be liable to such third
party for actual damages and attorneys' fees. If the infringement of a third
party's patent were found to be willful on our part, then the third party might
be able to recover treble damages plus attorneys' fees and costs.

Risk of Product Defects; Product Liability

As a result of their complexity, software products may contain undetected
errors or failures when first introduced or as new versions are released.
Despite our testing and use by current and potential customers, errors may be
found in new applications after commencement of commercial shipments. If
discovered, we cannot guarantee that we will successfully correct such errors
in a timely manner or at all. We could, in the future, lose revenues as a
result of software errors or other product defects. Our products and future
products are intended for use in applications that may be critical to a
customer's business. As a result, our customers and potential customers might
have a greater sensitivity to product defects than the market for software
generally. The occurrence of errors and failures in our products could result
in the loss of or delay in market acceptance of our applications, and
alleviating such errors and failures could require us to expend significant
capital and other

14
<PAGE>

resources. The consequences of such errors and failures could have a material
adverse effect on our business, results of operations, and financial condition.

Our financial applications are used by our customers for financial reporting
and analysis, and payroll processing. Accordingly, any design defects, software
errors, misuse of our products, incorrect data from network elements, or other
potential problems within or out of our control that may arise from the use of
our products could result in financial or other damages to our customers.
Clarus E-Procurement is used by our customers for procurement processing and
analysis. Any design defects, software errors, misuse of this product,
incorrect data from network elements, or other potential problems within or out
of our control that may arise from the use of this product could also result in
financial or other damages to our customers.

Although our license agreements with our customers typically contain provisions
designed to limit our exposure to potential claims as well as any liabilities
arising from such claims, such provisions may not effectively protect us
against such claims and the liability and costs associated therewith. We do not
maintain product liability insurance. Accordingly, any such claim could have a
material adverse effect upon our business, results of operations, and financial
condition. We provide warranties for our products after the software is
purchased for the period in which the customer maintains our support of the
product. We generally support only current releases and the immediately prior
releases of our products. Our license agreements generally do not permit
product returns by the customer, and product returns and warranty expense for
1996, 1997, and l998 represented less than 4.9%, 1.2%, and 2.1% of total
revenues during each respective period. However, product returns may increase
as a percentage of total revenues in future periods.

Year 2000 Compliance

Our applications are designed to be Year 2000 compliant. However, we are in the
process of determining the extent to which third-party licensed software
distributed by and used in our products is Year 2000 compliant, as well as the
impact of any non-compliance on us and our customers. If the relational
database management systems used with our software is not Year 2000 compliant,
our customers will not be able to continue to use our products. We do not
currently believe that the effects of any Year 2000 non-compliance in our
installed base of software will result in a material adverse impact on our
business or financial condition. However, our investigation with respect to
third-party software is in its preliminary stages. We may be exposed to
potential claims resulting from system problems associated with the century
change.

Reliance on Microsoft Technologies

We have entered into partnership and marketing arrangements with Microsoft. Our
products operate with or are based on Microsoft's proprietary products such as:
Windows NT, Visual C++, Foundation Classes, Active X, OLE/COM, SQL Server, and
Visual Basic. We have designed our products and technology to be compatible
with new developments in Microsoft technology. Although we believe that
Microsoft technologies are currently widely utilized by businesses of all
sizes, businesses may not continue to adopt such technologies as anticipated,
may migrate from older Microsoft technologies to newer Microsoft technologies,
or may adopt alternative technologies that we do not support.

15
<PAGE>

Risks Associated with Government Regulation and Legal Uncertainties

We are not currently subject to direct regulation by any government agency,
other than regulations applicable to businesses generally, and there are
currently few laws or regulations specifically addressing commerce on the
Internet. Due to the increasing use and growth of the Internet; however, it is
possible that such laws and regulations may be adopted covering issues such as
user privacy, pricing, and characteristics and quality of products and
services. The Telecommunications Act of 1996, which was enacted in January
1996, prohibits the transmission over the Internet of certain types of
information and content. The scope and applicability of this statute are
currently unsettled, but the imposition upon us of potential liability for
information carried on or disseminated through our application systems by this
or other laws could require us to reduce our exposure to such liability. This
could require us to make significant expenditures, or to discontinue certain
services. The adoption of any such laws or regulations also could slow the
growth of the Internet, which could in turn adversely affect our business,
operating results, or financial condition. Moreover, the applicability to the
Internet of existing laws governing issues such as property ownership, libel,
and personal privacy is uncertain.

As a result of customer demand, it is possible that Clarus E-Procurement will
be required to incorporate encryption technology, the export of which is
regulated by the United States government. Export regulations, either in their
current form or as they may be subsequently enacted, may limit our ability to
distribute our software outside the United States. Moreover, legislation or
regulation may further limit levels of encryption or authentication technology
that we are able to utilize in our software. Any revocation or modification of
our export authority, unlawful exportation of our software, or adoption of new
legislation or regulation relating to exportation of software and encryption
technology could have a material adverse effect on the prospects for Clarus
E-Procurement and, potentially, on our business, financial condition, and
operating results as a whole.

Risks Associated with Encryption Technology

A significant barrier to commerce involving the Internet is the secure exchange
of valued and confidential information over public networks. It is anticipated
that Clarus E-Procurement will rely on encryption and authentication technology
to provide the security and authentication necessary to render secure the
exchange of valued and confidential information. Advances in computer
capabilities, discoveries in the field of cryptography, or other events or
developments may result in a compromise of any encryption methods employed in
Clarus E-Procurement to protect transaction data. If any compromise of security
were to occur, it could have a material adverse effect on our business,
financial condition, and operating results.

Shares Eligible for Future Sale

The market price for our common stock could drop as a result of sales of a
large number of shares of our common stock in the market or the perception that
such sales could occur. The holders of the stock options granted during the
period of January 1, 1998, through March 31, 1998, whose options have been
fully vested, have entered into lock-up agreements restricting the sale or
transfer of such shares for a four-year period following the date of the
initial public offering. Of these shares, 25% will be released from such
restriction on each anniversary of May 26, 1998. We have filed a

16
<PAGE>

Registration Statement on Form S-8 that has made eligible for sale
approximately 2.6 million additional shares issuable upon the exercise of stock
options. Of these 2.6 million shares, approximately 284,000 shares are subject
to the four-year lock-up described above.

The former holders of Series A Preferred Stock and Series B Preferred Stock of
ELEKOM and Norman N. Behar have agreed with us not to sell any shares of our
common stock received by them in connection with the merger until August 6,
1999. After that date, approximately 1.4 million additional shares will be
freely tradable, subject to the rules of the Securities and Exchange
Commission.

Potential Issuance of Preferred Stock; Antitakeover Provisions

Our Certificate of Incorporation permits us to issue up to 5.0 million shares
of preferred stock and permits the Board of Directors to fix the rights,
preferences, privileges, and restrictions of such shares without any further
vote or action by our stockholders. Although we have no current plans to issue
new shares of preferred stock, the potential issuance of preferred stock may
have the effect of delaying, deferring, or preventing a change in our control.
The potential issuance may also discourage bids for the common stock at a
premium over the market price of the common stock and may adversely affect the
market price of, and the voting and other rights of the holders of common
stock. Our Board of Directors is divided into three classes, each of which
serves for a staggered three-year term. Such staggered board may make it more
difficult for a third party to gain control of our Board of Directors. In
addition, certain provisions of our corporate charter and by-laws and of
Delaware corporate law may have an anti-takeover effect and may discourage
takeover attempts not first approved by the Board of Directors including
takeovers which stockholders may deem to be in their best interest.

17
<PAGE>

USE OF PROCEEDS

We will not receive any proceeds from the sale of the shares of common stock
offered by the selling stockholders.

SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of our common stock by each selling stockholder.

<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering(1) After Offering(1)
--------------------------- ---------------------------
Percent of Percent of
Number of Shares Common Shares to be Number of Shares Common
Name and Address of Common Stock Stock Sold of Common Stock Stock
---------------- ---------------- ---------- ------------ ---------------- ----------
<S> <C> <C> <C> <C> <C>
Roy Armitage............ 1,005 * 1,005 -- --%
1377 Lake James Drive
Virginia Beach, VA
2364
Judith Bassoul.......... 600 * 600 -- --
5265 Linnadine Way
Norcross, Georgia
30092
Scott J. Brady.......... 104,350 * 89,100 15,250 *
6154 Poplar Bluff
Circle
Norcross, Georgia
30092
Michael P. Caffyn....... 1,005 * 1,005 -- --
2201 Bierce Drive
Virginia Beach, VA
23454
Gerald E. Cassidy....... 1,740 * 1,740 -- --
135 Bittersweet Drive
Hershey, Pennsylvania
17033
Gregory M. Corley....... 390 * 390 -- --
83 Waddell Street.,
N.E.
Atlanta, Georgia 30307
Mary B. Flock........... 75 * 75 -- --
1511 S.W. Park Avenue,
#1303
Portland, OR 97201
Jeffrey A. Fourman...... 1,680 * 1,680 -- --
1212 N. Grove
Oak Park, IL 60302
Robert J. Fousch, Jr ... 45 * 45 -- --
4617 Howell Farms
Drive
Acworth, Georgia 30101
Wesley C. Hewatt........ 45 * 45 -- --
5694 Kilrush Court
Mableton, Georgia
30126
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering(1) After Offering(1)
--------------------------- ---------------------------
Percent of Percent of
Number of Shares Common Shares to be Number of Shares Common
Name and Address of Common Stock Stock Sold of Common Stock Stock
---------------- ---------------- ---------- ------------ ---------------- ----------
<S> <C> <C> <C> <C> <C>
Laurie Maceyko Hood..... 150 * 150 -- --
110 Huntington Road,
N.E.
Atlanta, Georgia 30309
Tracey D. Jackson....... 900 * 900 -- --
510 Shale Court
Alpharetta, Georgia
30202
Jeffrey M. Kirby........ 600 * 600 -- --
21 Beacon Street
Apt. 5-S
Boston, MA 02108
John M. McCall.......... 7,500 * 7,500 -- --
3019 Blandwood Drive
Valdosta, Georgia
31601
Rudolph Russell McCall.. 7,500 * 7,500 -- --
3019 Blandwood Drive
Valdosta, Georgia
31601
James Patrick McVey..... 300 * 300 -- --
4037 Dream Catcher
Drive
Woodstock, Georgia
30189
Denise L. Miles......... 615 * 615 -- --
3346 Muscadine Trail
Kennesaw, Georgia
30144
Ronnie D. Philpot....... 342 * 342 -- --
212 Melrah Hill
Peachtree City, GA
30269
Gary J. Rogers.......... 8,400 * 8,400 -- --
17534 Charity Lane
Germantown, MD 20874
Janet V. Smith.......... 390 * 390 -- --
7315 Chattahoochee
Bluff Drive
Atlanta, Georgia 30350
Noreen M. Snellman...... 1,800 * 1,800 -- --
1100 Oakhaven Drive
Roswell, Georgia 30075
Nancy W. Swager......... 33 * 33 -- --
5345 Myras Court
Cumming, Georgia 30040

Technology Ventures,
L.L.C. ................ 528,950 4.8% 397,700 131,250 1.1%
Two Ravinia Drive,
Suite 1090
Atlanta, Georgia 30346
Attn: Joseph S. McCall
</TABLE>

19
<PAGE>

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are
currently exercisable or that are or may become exercisable within 60 days
of February 15, 1999, are deemed outstanding. Such shares, however, are not
deemed outstanding for the purposes of computing the percentage ownership
of any other person. Each Selling Stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite
such selling stockholder's name.

Technology Ventures, L.L.C. ("Tech Ventures") is controlled by Joseph S.
McCall. The common stock was issued to Tech Ventures on February 5, 1998, in
connection with our purchase of Tech Ventures' 20% ownership interest in Clarus
Professional Services, L.L.C. (formerly, SQL Financials Services L.L.C.) (the
"Services Subsidiary"). Mr. McCall founded Clarus Corporation in November 1991
and has previously served as its Chairman, President, and Chief Executive
Officer and served as a member of the Board of Directors from 1991 until
December 1998. Mr. McCall founded McCall Consulting Group, Inc. in 1986 and he
currently serves as its President.

Alan Bond served as Vice President of Finance from May 1996 to December 1997.
Gary Rogers served as Vice President of Sales from February 1996 to October
1997.

All the shares of common stock beneficially owned by the selling stockholders
may be offered and sold in accordance with this Prospectus.

20
<PAGE>

MARKET PRICES

Market Prices

The Company Common Stock has been listed on the Nasdaq/NMS under the symbol
"SQLF" from May 26, 1998, the effective date of the Company's initial public
offering. On August 28, 1998, the Company changed its name to Clarus
Corporation and effective September 2, 1998 changed its Nasdaq/NMS symbol from
"SQLF" to "CLRS." Prior to May 26, 1998, there was no established trading
market for the Company Common Stock. The following table sets forth, for the
indicated periods, the high and low closing sales prices for the Company Common
Stock as reported by the Nasdaq/NMS for quarters since May 26, 1998.
<TABLE>
<CAPTION>
Sales Price
-------------
Calendar Period High Low
--------------- ------ ------
<S> <C> <C>
1998
Second Quarter (beginning May 27, 1998).................. $10.00 $7.625
Third Quarter............................................ $ 9.62 $ 3.50
Fourth Quarter........................................... $ 8.63 $ 2.75
1999
First Quarter............................................ $ 6.00 $ 3.31
Second Quarter (through April 12, 1999).................. $ 5.81 $ 5.13
</TABLE>

DIVIDEND POLICY

We currently anticipate that we will retain all future earnings for use in our
business and do not anticipate that we will pay any cash dividends in the
foreseeable future. The payment of any future dividends will be at the
discretion of our Board of Directors and will depend upon, among other things,
our results of operations, capital requirements, general business conditions,
contractual restrictions on payment of dividends, if any, legal and regulatory
restrictions on the payment of dividends, and other factors our Board of
Directors deems relevant. In addition, our line of credit prohibits the payment
of dividends without prior lender approval.

DILUTION

As of December 31, 1998, our net tangible book value was approximately $10.1
million or $0.93 per share.

After giving effect to the sale of the 522,395 shares of common stock offered
hereby our pro forma net tangible book value as of December 31, 1998, would
have been approximately $9.9 million, or $0.91 per share. The following table
illustrates this net tangible book value.

<TABLE>
<S> <C>
Net tangible book value per share at December 31, 1998................ $0.93
Decrease in pro forma net tangible book value per share due to the
sale of common stock by stockholders................................. $0.02
-----
Pro forma net tangible book value per share at December 31, 1998...... $0.91
=====
</TABLE>

As of December 31, 1998, we have outstanding options to acquire a total of
2,084,105 shares of common stock at exercise prices ranging from $0.67 to
$10.00 per share and a weighted average exercise price of $4.79 per share. The
exercise of a material number of these options would have the effect of
increasing the pro forma net tangible book value dilution per share to new
investors. See "Principal Stockholders."

21
<PAGE>

SELECTED HISTORICAL AND FINANCIAL DATA

Our selected combined financial data set forth below should be read in
conjunction with our Consolidated Financial Statements, including the Notes
thereto, and "Management's Discussion and Analysis of Financial Conditions and
Results of Operations." The statement of operations data for the years ended
December 31, 1994, 1995, 1996, 1997 and 1998 and the balance sheet data as of
December 31, 1994, 1995, 1996, 1997 and 1998 have been derived from, and are
qualified by reference to, our financial statements audited by Arthur Andersen
LLP, independent public accountants.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1994 1995 1996 1997 1998
------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
License fees............... $ 2,568 $ 5,232 $ 6,425 $ 13,506 $ 17,372
Services fees.............. 836 1,737 3,984 7,786 16,477
Maintenance fees........... 417 1,221 2,647 4,696 7,791
------- -------- -------- -------- --------
Total revenues........... 3,821 8,190 13,056 25,988 41,640
Cost of revenues:
License fees............... 98 291 416 1,205 1,969
Services fees.............. 860 1,421 2,904 5,338 10,353
Maintenance fees........... 277 655 1,350 1,973 3,599
------- -------- -------- -------- --------
Total cost of revenues... 1,235 2,367 4,670 8,516 15,921
Operating expense:
Research and development... 2,130 3,882 5,360 6,690 6,335
Purchased research and
development............... 0 0 0 0 10,500
Sales and marketing........ 2,718 6,636 7,191 9,515 11,802
General and administrative. 2,733 2,923 2,368 3,161 5,126
Depreciation and
amortization.............. 162 369 1,125 1,406 2,154
Non-cash compensation...... 0 0 0 58 880
------- -------- -------- -------- --------
Total operating expenses. 7,743 13,810 16,044 20,830 36,797
Operating income (loss)...... (5,157) (7,987) (7,658) (3,358) (11,078)
Interest expense (income),
net......................... (17) 2 6 274 (412)
Minority interest............ 0 (60) (215) (478) (36)
------- -------- -------- -------- --------
Net income (loss)............ $(5,140) $ (8,049) $ (7,879) $ (4,110) $(10,702)
======= ======== ======== ======== ========
Income (loss) per common
share:
Basic...................... $ (5.65) $ (6.19) $ (5.74) $ (2.97) $ (1.70)
======= ======== ======== ======== ========
Diluted.................... $ (5.65) $ (6.19) $ (5.74) $ (2.97) $ (1.70)
======= ======== ======== ======== ========
Weighted average common
shares outstanding:
Basic...................... 910 1,300 1,373 1,386 6,311
======= ======== ======== ======== ========
Diluted.................... 910 1,300 1,373 1,386 6,311
======= ======== ======== ======== ========
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1994 1995 1996 1997 1998
------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.... $ 492 $ 3,333 $ 3,279 $ 7,213 $ 14,799
Working capital (deficit).... (1,424) (2,555) (3,422) (453) 9,001
Total assets................. 1,506 5,865 8,525 14,681 40,082
Long-term debt, net of
current portion............. 143 93 1,093 497 245
Total stockholders' (deficit)
equity...................... (8,732) (15,927) (23,837) (27,910) 22,111
</TABLE>

22
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We develop, market, license, and support Web-based applications for managing
operational resources together with financial and human resources applications
for mid- to large-sized companies. Our applications create high lifetime value
by delivering sophisticated functionality, while substantially reducing the
time required for implementation, maintenance, and upgrades.

During 1998 and 1997, we introduced a series of modules and product
enhancements. Specifically, in the third quarter of 1998, we introduced our
Web-commerce applications, which include E-Procurement, a business-to-business
buy-side Web-based solution designed for the acquisition of non-industrial
goods and services, Clarus Budget, and a 32-bit version of our human resources
applications. In the first quarter of 1997, we introduced our human resources
applications, which included the Personnel, Benefits, and Payroll modules. In
1997, we introduced a 32-bit version of our financial applications called the
Denver Release, which included two new modules, Purchasing Control and
Solution/Graphical Architect.

We currently market our products in the United States and Canada through a
direct sales force, and we have licensed our applications to more than 275
customers in a variety of industry segments, including insurance, financial
services, communications, retail, printing and publishing, transportation, and
manufacturing. We also offer fee-based implementation, training and upgrade
services, and ongoing maintenance and support of our products for a 12-month to
three-year renewable term.

On November 6, 1998, we completed the acquisition of ELEKOM Corporation
("ELEKOM") for approximately $15.7 million, consisting of $8.0 million in cash
and approximately 1.4 million shares of our common stock. ELEKOM was merged
with and into Clarus CSA, Inc., a wholly owned subsidiary of ours, and the
separate existence of ELEKOM ceased. Immediately following consummation of the
Merger, the former holders of ELEKOM common and preferred stock (the "ELEKOM
Shareholders") owned approximately 13% of our outstanding common stock. Certain
former ELEKOM Shareholders have agreed not to sell any of their shares of our
common stock for a period ending on August 6, 1999. We recorded, as additional
purchase price, (i) payments of $500,000 made to fund the operations of ELEKOM
from October 1, 1998, through the closing date, and (ii) expenses of
approximately $1.0 million to complete the merger. We also recorded $10.5
million of the purchase price as purchased in-process research and development.

On May 26, 1998, we completed an initial public offering of our common stock in
which we sold 2.5 million shares for approximately $22.0 million after
deducting offering expenses and underwriting discounts.

Our revenue consists of revenues from the licensing of software and fees from
consulting, implementation, training, and maintenance services. Through 1997,
we recognized software license revenue in accordance with the provisions of
American Institute of Certified Public Accountants Statement of Position
("SOP") NO. 91-1, "Software Revenue Recognition."

23
<PAGE>

Accordingly, software license revenue was recognized upon shipment of the
software following execution of a contract, provided that no significant vendor
obligations remain outstanding, amounts are due within one year, and collection
is considered probable by management. If significant post-delivery obligations
exist, the revenue from the sale of the software license, as well as other
components of the contract, was recognized using percentage of completion
accounting.

Effective January 1, 1998, we adopted SOP No. 97-2, "Software Revenue
Recognition," that supersedes SOP No. 91-1, "Software Revenue Recognition."
Under SOP No. 97-2, we recognize software license revenue when the following
criteria are met:

. a signed and executed contract is obtained,

. shipment of the product has occurred,

. the license fee is fixed and determinable,

. collectibility is probable, and

. remaining obligations under the license agreement are insignificant.

The adoption of this SOP has not had a significant impact on our consolidated
financial statements. Revenues from software licenses have been recognized upon
delivery of our product if there are no significant obligations on our part
following delivery, and collection of the related receivable, if any, is deemed
probable by management. Revenues from service fees relate to implementation,
training, and upgrade services performed by us and have been recognized as the
services are performed. Maintenance fees relate to customer maintenance and
support and have been recognized rateably over the term of the software support
agreement, which is typically 12 months. A majority of our customers renew the
maintenance and support agreements after the initial term. Revenues that have
been prepaid or invoiced, but that do not yet qualify for recognition under our
policies, are reflected as deferred revenue.

Cost of license fees includes royalties and software duplication and
distribution costs. We recognize these costs as the applications are shipped.
Cost of services fees include personnel and related costs incurred to provide
implementation, training, and upgrade services to customers. These costs are
recognized as the services are performed. Cost of maintenance fees includes
personnel and related costs incurred to provide the ongoing support and
maintenance of our products. These costs are recognized as incurred.

Research and development expenses consist primarily of personnel costs. We
account for software development costs under Statement of Financial Accounting
Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed." Research and development expenses are
charged to expense as incurred until technological feasibility is established,
after which remaining costs are capitalized. We define technological
feasibility as the point in time at which we have a working model of the
related product. 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. Accordingly,
we charge all internal software development costs to expense as incurred.

24
<PAGE>

Sales and marketing expenses consist primarily of salaries, commissions, and
benefits to sales and marketing personnel, travel, trade-show participation,
public relations, and other promotional expenses. General and administrative
expenses consist primarily of salaries for financial, administrative and
management personnel, and related travel expenses, as well as occupancy,
equipment, and other administrative costs.

We had net operating loss carryforwards ("NOL's") of approximately $26.3
million at December 31, 1998, which begin expiring in 2007. We established a
valuation allowance equal to the NOL's and all other deferred tax assets. The
benefits from these deferred tax assets will be recorded when realized, which
will reduce our effective tax rate for future taxable income, if any. Our
ability to benefit from certain NOL carryforwards is limited under Section 382
of the Internal Revenue Code, as we are deemed to have had an ownership change
of more than 50%, as defined. Accordingly, certain NOL's may not be realizable
in future years due to the limitation.

Affiliate Relationships

In March 1995, we, along with Technology Ventures, L.L.C. ("Technology
Ventures"), which is controlled by Joseph S. McCall, a former director of ours,
formed Clarus Professional Services, L.L.C. (formerly SQL Financial Services,
L.L.C.; the "Services Subsidiary") to provide implementation, training, and
upgrade services exclusively for our customers. On February 5, 1998, Technology
Ventures sold its 20% interest in the Services Subsidiary to us in exchange for
225,000 shares of our common stock, a warrant to purchase an additional 300,000
shares of our common stock at a price of $3.67 per share, and a non-interest-
bearing promissory note in the principal amount of $1.1 million. The purchase
of the remaining 20% of the Services Subsidiary was accounted for using the
purchase method of accounting and resulted in goodwill in the amount of $4.2
million, which is being amortized over 15 years.

In the second quarter of 1998, we accelerated the vesting of certain employee
stock options issued in the first quarter of 1998, for approximately 283,000
shares of common stock, at an exercise price ranging from $3.67 per share to
$8.00 per share. As a result of this accelerated vesting, we recognized, as
non-cash compensation, a non-cash, non-recurring charge of approximately
$705,000 during the quarter ended June 30, 1998, representing the previously
remaining unamortized deferred compensation recorded on these options.

Summary of the Effects of the Merger

We anticipate the integration and consolidation of ELEKOM will require
substantial management, financial, and other resources. The acquisition of
ELEKOM involves a number of significant risks including potential difficulties
in assimilating the technologies, services, and products of ELEKOM or in
achieving the expected synergies and cost reductions, as well as other
unanticipated risks and uncertainties. As a result, there can be no assurance
as to the extent to which the anticipated benefit with respect to the Merger
will be realized, or the timing of any such realization.

The Merger lowered our net earnings during 1998 as a result of a substantial
increase in amortization of intangible and other long-lived assets and various
other adjustments resulting from purchase accounting. The 1998 unaudited pro
forma net loss before non-recurring charges would have been approximately $3.8
million, compared to a net income before one-time charges of $503,000 for 1998.

25
<PAGE>

The 1997 unaudited pro forma net loss before non-recurring charges would have
been approximately $10.8 million, a net loss which is approximately 162%
greater than our actual historical results for 1997. We believe that earnings
beyond 1998 should improve as a result of the Web-based, electronic procurement
market presence and recognition afforded us as a result of the completion of
the Merger. We cannot predict or guaranty the amount or timing of such benefit,
if any, that may actually be realized or that any such growth may occur.

The Merger was accounted for as a purchase. Under purchase accounting, the
total purchase cost and fair value of liabilities assumed were allocated to the
tangible and intangible assets of ELEKOM based upon their respective fair
values as of the closing. The remainder of the excess of the purchase price
over the tangible assets acquired of approximately $6.9 million was assigned to
trade names, workforce, and goodwill and is being amortized over a period
ranging from three months to ten years.

Under purchase accounting, the total acquisition cost was allocated to ELEKOM's
assets and liabilities based on their relative fair values. Our analysis, based
on an independent appraisal, resulted in an allocation of $10.5 million to in-
process acquired research and development which, under generally accepted
accounting principles, was expensed immediately after the Merger was completed.
The pro forma net losses for 1997 and 1998 reflected above exclude the effects
of the charge due to its non-recurring nature.

The Merger was accounted for as a purchase in accordance with Accounting
Principles Board Opinion No. 16, "Business Combinations." The intangible assets
of approximately $6.9 million noted above are being amortized over periods
ranging from three months to ten years. Based on the independent third-party
appraisal, approximately $10.5 million of the purchase price represented
purchased in-process technology that had not yet reached technological
feasibility and had no alternative future use. This amount was expensed as a
non-recurring, non-tax-deductible charge immediately after the acquisition was
completed.

The existence of purchased research and development was determined by a third-
party independent appraisal identifying computer software code under
development by ELEKOM since 1995. The value was determined by estimating the
remaining costs to develop the purchased in-process technology into a
commercially viable product, estimating the resulting net cash flows from the
project based on the level of completion of the project on the date of
acquisition, and discounting the net cash flows back to their present value.

The nature of the efforts to develop the purchased research and development
into a commercially viable product principally relate to the completion of all
planning, designing, programming, and testing activities that are necessary to
establish that the product can be produced to meet its design specifications
including functions, features, and technical performance requirements. The
efforts to develop the purchased in-process technology also include determining
the compatibility and interoperability with other applications. The estimated
remaining costs to be incurred to develop the purchased in-process research and
development into a commercially viable product is approximately $2.0 million.

26
<PAGE>

The resulting net cash flows from the project is based on management's
estimates of revenues, cost of sales, research and development costs, selling,
general and administrative costs, and income taxes from the project. These
estimates are based on the following assumptions:

. The estimated revenues project a compounded annual revenue growth rate
of approximately 48% from 1999 through 2002. Estimated revenue for 1999
is projected to be $5.3 million, compared to virtually no revenue in
1998. Estimated total revenues from the purchased research and
development peaks in the year 2002 and declines rapidly in 2003 through
2005 as other new products are expected to enter the market. These
projections are based on management's estimates of market size and
growth, expected trends in technology, and the nature and expected
timing of new product introductions by ELEKOM and its competitors. These
estimates also include growth related to our utilizing certain ELEKOM
technologies in conjunction with our products, marketing and
distributing the resulting products through our direct sales force, and
enhancing the market's response to ELEKOM's products by providing
incremental financial support and stability.

. The estimated cost of sales as a percentage of revenues is expected to
be 5%. This percentage is somewhat lower than the annual cost of license
fees percentage for us due to the lower royalty rates on certain third-
party software used by ELEKOM compared to our third-party software.

. The estimated research and development expenses were based on the
estimated time associated with the remaining cost to develop the in-
process research and development. Research and development expenses
represent 33% of revenue in 1999 due to the anticipated release of the
product in 1999.

. Sales and marketing and general and administrative expenses in the early
years are expected to more closely approximate our 1998 expense
structure. Sales and marketing expenses are expected to benefit from the
savings as a result of the distribution of the ELEKOM product through
our direct sales force as well as through consolidated marketing and
advertising campaigns.

. Income tax expense is estimated using a 38% tax rate, consistent with
our anticipated tax rate.

. Discounting the net cash flows back to their present values is based on
the present value discount rate. The present value discount rate used in
the analysis represents the weighted average cost of capital ("WACC")
for ELEKOM plus 2%. The WACC calculation produces the average required
rate of return of an investment in an operating enterprise, based on
various required rates of return from investment in various areas of
that enterprise. The WACC assumed for ELEKOM, as a corporate business
enterprise, is approximately 25%. Therefore, the discount rate used in
discounting the net cash flows from purchased in-process technology is
approximately 27%. The discount rate is higher than the WACC due to the
inherent uncertainties in the estimates described above. These
uncertainties include the uncertainty surrounding the successful
development of the purchased in-process technology, the useful life of
such technology, the profitability levels of such technology, and the
uncertainty of technological advances that are unknown at this time.

27
<PAGE>

If this project is not successfully developed, our sales and profitability may
be adversely affected in future periods. Additionally, the value of other
intangible assets acquired may become impaired. We expect to begin to benefit
from the purchased in-process technology in the second quarter 1999.

Results of Operations

The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Revenues:
License fees.......................................... 49.2 % 52.0 % 41.7 %
Services fees......................................... 30.5 30.0 39.6
Maintenance fees...................................... 20.3 18.0 18.7
----- ----- -----
Total revenues...................................... 100.0 100.0 100.0
Cost of revenues:
License fees.......................................... 3.2 4.6 4.7
Services fees......................................... 22.3 20.5 24.9
Maintenance fees...................................... 10.3 7.6 8.6
----- ----- -----
Total cost of revenues.............................. 35.8 32.7 38.2
Operating expenses:
Research and development.............................. 41.1 25.7 15.2
Purchased research and development.................... 0.0 0.0 25.2
Sales and marketing................................... 55.1 36.6 28.4
General and administrative............................ 18.1 12.3 12.3
Depreciation and amortization......................... 8.6 5.4 5.2
Non-cash compensation................................. 0.0 0.2 2.1
----- ----- -----
Total expenses...................................... 122.9 80.2 88.4
Operating loss.......................................... (58.7) (12.9) (26.6)
Interest income......................................... 0.0 0.0 1.5
Interest expense........................................ 0.0 (1.1) (0.5)
Minority interest....................................... (1.6) (1.8) (0.1)
----- ----- -----
Net income (loss)....................................... (60.3)% (15.8)% (25.7)%
===== ===== =====
Gross margin on license fees............................ 93.5 % 91.1 88.7 %
Gross margin on services fees........................... 27.1 31.4 37.2
Gross margin on maintenance fees........................ 49.0 58.0 53.8
</TABLE>

Year Ended December 31, 1998, Compared to Year Ended December 31, 1997

Revenues

Total Revenues. Total revenues increased 60.2% to $41.6 million in 1998 from
$26.0 million in 1997. This increase was attributable to substantial increases
in license fees, services fees, and maintenance fees.

License Fees. License fees increased 28.6% to $17.4 million, or 41.7% of total
revenues, in 1998 from $13.5 million, or 52.0% of total revenues, in 1997. The
increase in license fees resulted primarily from an increase in the number of
licenses sold, and to a lesser extent, an increase in the average customer
transaction size. The decrease as a percentage of total revenue is a reflection
of the

28
<PAGE>

continued strong demand for our professional services and the continued growth
of maintenance customers.

Services Fees. Services fees increased 111.6% to $16.5 million, or 39.6% of
total revenues, in 1998 from $7.8 million, or 30.0% of total revenues, in 1997.
The increase in services fees was primarily due to increased demand for
professional services associated with an increase in the number of licenses
sold.

Maintenance Fees. Maintenance fees increased 65.9% to $7.8 million, or 18.7% of
total revenues, in 1998 from $4.7 million, or 18.0% of total revenues, in 1997.
The increase in maintenance fees was primarily due to the signing of license
agreements with new customers and the renewal of maintenance and support
agreements with existing customers.

Cost of Revenues

Total Cost of Revenues. Cost of revenues increased 87.0% to $15.9 million, or
38.2% of total revenues, in 1998 from $8.5 million, or 32.7% of total revenues,
in 1997. The increase in the cost of revenues was primarily due to an increase
in personnel and related expenses and increased royalty expenses. The increase
as a percentage of total revenues is primarily a result of the increase in the
revenue mix toward services fees, which historically has a higher cost of
revenue than license or maintenance fees.

Cost of License Fees. Cost of license fees increased to $2.0 million, or 11.3%
of total license fees, in 1998 compared to $1.2 million, or 8.9% of total
license fees, in 1997. The increase in the cost of license fees and the
increase as a percentage of total license fees were primarily attributable to
increases in royalty expenses on new products introduced in 1997 and 1998,
components of which are licensed from third parties.

Cost of Services Fees. Cost of services fees increased 93.9% to $10.4 million,
or 62.8% of total services fees, in 1998 compared to $5.3 million, or 68.6% of
total services fees, in 1997. The increase in the cost of services fees was
primarily attributable to an increase in the personnel and related costs to
provide implementation, training, and upgrade services. Cost of services fees
as a percentage of total services fees decreased due to increased utilization
of services personnel.

Cost of Maintenance Fees. Cost of maintenance fees increased 82.4% to $3.6
million, or 46.2% of total maintenance fees, in 1998 compared to $2.0 million,
or 42.0% of total maintenance fees, in 1997. The increase in the cost of
maintenance fees was primarily due to an increase in personnel and related
costs required to provide support and maintenance. Cost of maintenance fees as
a percentage of total maintenance fees increased as we invested in personnel to
support the maintenance customer base.

Research and Development

Research and development expenses decreased 5.3% to $6.3 million, or 15.2% of
total revenues, in 1998 from $6.7 million, or 25.7% of total revenues, in 1997.
Research and development expenses decreased primarily due to decreased
personnel and contractor fees related to the effort required in 1997 to develop
the Denver Release, which was substantially completed by September 1997. The

29
<PAGE>

decrease in research and development as a percentage of revenue for 1998
compared to 1997 is primarily due to the completion of the Denver Release,
coupled with the economies of scale realized through the growth in our
revenues. We intend to continue to devote substantial resources toward research
and development efforts.

Purchased Research and Development

During the fourth quarter of 1998, we completed the acquisition of electronic
procurement pioneer, ELEKOM Corporation, strategically positioning us as a
leader in the high-growth electronic procurement market. The consideration for
the acquisition was approximately 1.4 million shares of our common stock and
$8.0 million in cash.

We initially expected to recognize a write-off for in-process research and
development of $14.0 million as a result of this acquisition. In response to
recent SEC interpretative guidance, we took the initiative to adjust our
accounting for the acquisition-related in-process research and development
charge. Accordingly, we reduced this write-off to $10.5 million from the $14.0
million write-off we anticipated recording in the fourth quarter of 1998. The
$3.5 million reduction in the write-off of the in-process research and
development has been capitalized and will be amortized primarily over a ten-
year period.

Sales and Marketing

Sales and marketing expenses increased 24.0% to $11.8 million in 1998 from $9.5
million in 1997. As a percentage of total revenues, sales and marketing
expenses decreased to 28.4% in 1998 from 36.6% in 1997. The increase in
expenses was primarily attributable to the costs associated with additional
sales and marketing personnel and promotional activities. The decrease in sales
and marketing as a percentage of revenues for 1998 compared to 1997 reflects
the higher productivity of our sales force.

General and Administrative

General and administrative expenses increased 62.2% to $5.1 million in 1998
from $3.2 million in 1997. As a percentage of total revenues, general and
administrative expenses remained at 12.3% for 1998 and 1997. The increase in
general and administrative expenses was primarily attributable to increases in
personnel and related costs. We believe that our general and administrative
expenses will continue to increase in future periods to accommodate anticipated
growth and expenses associated with our responsibilities as a public company.

Depreciation and Amortization

Depreciation of tangible equipment and amortization of intangible assets
increased 53.2% to $2.2 million, or 5.2% of total revenues, in the year ending
December 31, 1998, from $1.4 million, or 5.4% of total revenues, in the
comparable period in 1997. This increase in depreciation and amortization
expense is due to increases in the purchases of intangible assets, the
acquisition of ELEKOM, and increases in capital expenditures resulting from our
significant growth.

30
<PAGE>

Non-cash Compensation

Non-cash compensation expense increased to $880,000, or 2.1% of total revenues,
in 1998 compared to $58,000 in 1997. This increase was primarily due to
accelerated vesting, in the second quarter of 1998, of certain employee stock
options issued in the first quarter of 1998. These stock options were for
approximately 283,000 shares of our common stock, at exercise prices ranging
from $3.67 to $8.00 per share. As a result of this accelerated vesting, we
recognized, as non-cash compensation, a non-cash, non-recurring charge of
approximately $705,000. This charge represented the previously remaining
unamortized deferred compensation recorded on these options.

Interest Income

Interest income increased to $636,000 in 1998 from $34,000 in 1997. On May 26,
1998, we completed an initial public offering of our common stock in which we
sold 2.5 million shares, which resulted in net proceeds of approximately $22.0
million. The increase in interest income was primarily due to the results of
the investment of the funds from the initial public offering.

Interest Expense

Interest expense decreased 27.3% to $224,000 in 1998 from $308,000 in 1997.
This decrease is primarily due to lower average levels of debt in 1998 as
compared to 1997.

Minority Interest

Minority interest decreased 92.5% to $36,000 in 1998 from $478,000 in 1997.
This decrease in minority interest is related to our purchase of the remaining
20% of the Services Subsidiary on February 5, 1998, which eliminated the
minority interest related to the Services Subsidiary.

Income Taxes

As a result of the operating losses incurred since our inception, we have not
recorded any provision or benefit for income taxes in 1998 and in 1997. See
"Notes to Consolidated Financial Statements" included elsewhere herein.

Year Ended December 31, 1997, Compared to Year Ended December 31, 1996

Revenues

Total Revenues. Total revenues increased 99.1% to $26.0 million in 1997 from
$13.1 million in 1996. This increase was attributable to substantial increases
in license fees, services fees, and maintenance fees.

License Fees. License fees increased 110.2% to $13.5 million, or 52.0% of total
revenues, in 1997 from $6.4 million, or 49.2% of total revenues, in 1996.
increases in license fees resulted primarily from an increase in the number of
licenses sold, and to a lesser extent, the increase in the average customer
transaction size.

Services Fees. Services fees increased 95.4% to $7.8 million, or 30.0% of total
revenues, in 1997 from $4.0 million, or 30.5% of total revenues, in 1996. The
increase in services fees was primarily

31
<PAGE>

due to increased demand for professional services associated with an increase
in the number of licenses sold.

Maintenance Fees. Maintenance fees increased 77.4% to $4.7 million, or 18.0% of
total revenues, in 1997 from $2.7 million, or 20.3% of total revenues, in 1996.
The increase in maintenance fees was primarily due to the signing of license
agreements with new customers and the renewal of maintenance and support
agreements with existing customers.

Cost of Revenues

Total Cost of Revenues. Cost of revenues increased 82.4% to $8.5 million, or
32.7% of total revenues, in 1997 from $4.7 million, or 35.8% of total revenues,
in 1996. The increase in the cost of revenues was primarily due to an increase
in personnel and related expenses and increased royalty expenses. The decrease
as a percentage of total revenues primarily reflects increased utilization of
personnel.

Cost of License Fees. Cost of license fees increased to $1.2 million, or 8.9%
of total license fees, in 1997 compared to $416,000, or 6.5% of total license
fees, in 1996. The increase as a percentage of total license fees is primarily
attributable to increases in royalty expense on new products introduced in
1997, components of which are licensed from third parties.

Cost of Services Fees. Cost of services fees increased 83.8% to $5.3 million,
or 68.6% of total services fees, in 1997 compared to $2.9 million, or 72.9% of
total services fees, in 1996. The increase in the cost of services fees was
primarily attributable to an increase in the personnel and related costs to
provide implementation, training, and upgrade services. Cost of services fees
as a percentage of total services fees decreased due to increased utilization
of personnel.

Cost of Maintenance Fees. Cost of maintenance fees increased 46.1% to $2.0
million, or 42.0% of total maintenance fees, in 1997 compared to $1.4 million,
or 51.0% of total maintenance fees, in 1996. The increase in the cost of
maintenance fees was primarily due to an increase in personnel and related
costs required to provide support and maintenance. Cost of maintenance fees as
a percentage of total maintenance fees decreased primarily due to more
productive use of personnel to support the maintenance customer base.

Research and Development

Research and development expenses increased 24.8% to $6.7 million, or 25.7% of
total revenues, in 1997 from $5.4 million, or 41.1% of total revenues, in 1996.
Research and development expenses increased primarily due to increased
personnel and contractor fees related to the effort required to develop the
Denver Release, which was released in September 1997. During the first half of
1997, we began to reduce development personnel and third-party consultant costs
as this project approached completion. The decrease in research and development
as a percentage of revenue for 1997 compared to 1996 is primarily due to the
completion of the Denver Release, coupled with the economies of scale realized
through the growth in our revenue. We intend to continue to devote substantial
resources toward research and development efforts.

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Sales and Marketing

Sales and marketing expenses increased 32.3% to $9.5 million in 1997 from $7.2
million in 1996. As a percentage of total revenues, sales and marketing
expenses decreased to 36.6% in 1997 from 55.1% in 1996. The increase in
expenses was primarily attributable to the costs associated with additional
sales and marketing personnel and promotional activities. During 1997, we also
incurred substantial marketing expenditures to design and implement a
promotional campaign, including marketing collateral, trade shows, and seminar
presentations intended to promote our new market positioning. The decrease in
sales and marketing as a percentage of revenues for 1997 compared to 1996
reflects the higher productivity of our sales force.

General and Administrative

General and administrative expenses increased 33.5% to $3.2 million in 1997
from $2.4 million in 1996. As a percentage of total revenues, general and
administrative expenses decreased to 12.3% in 1997 from 18.1% in 1996. The
increase in general and administrative expenses was primarily attributable to
increases in personnel and related costs. Also, we incurred increased rent and
equipment expenses associated with the relocation of our headquarters in August
1997. We believe that our general and administrative expenses will continue to
increase in future periods to accommodate anticipated growth and expenses
associated with our responsibilities as a public company.

Depreciation and Amortization

Depreciation of tangible equipment and amortization of intangible assets
increased 25.0% to $1.4 million, or 5.4% of total revenues, in the year ending
December 31, 1997, from $1.1 million, or 8.6% of total revenues, in the
comparable period in 1996. This increase in depreciation and amortization
expense is due to increases in the purchases of intangible assets and increases
in capital expenditures resulting from our significant growth.

Interest Expense

Interest expense was $308,000 in 1997, an increase from $6,000 in 1996, due to
borrowings incurred by us under a line of credit agreement during 1997.

Minority Interest

Minority interest increased 122.3% to $478,000 in 1997 from $215,000 in 1996.
The increase was due to the increased profitability of the Services Subsidiary
in 1997.

Income Taxes

As a result of the operating losses incurred since our inception, we have not
recorded any provision or benefit for income taxes in 1997 and in 1996. See
"Notes to Consolidated Financial Statements" included elsewhere herein.

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Liquidity and Capital Resources

On May 26, 1998, we completed an initial public offering of 2.5 million shares
of our common stock at an offering price of $10.00 per share. The proceeds, net
of expenses, from this public offering of approximately $22.0 million were
placed in investment grade cash equivalents. Our working capital position
(deficit) was approximately $9.0 million and $(453,000) at December 31, 1998
and 1997, respectively. We believe that current cash balances and cash flows
from operations will be adequate to provide for our capital expenditures and
working capital requirements for the forseeable future. Although operating
activities may provide cash in certain periods, to the extent we experience
growth in the future, our operating and investing activities may use
significant cash.

On November 6, 1998, we completed the acquisition of ELEKOM for approximately
$15.7 million, consisting of $8.0 million in cash and approximately 1.4 million
shares of our common stock. ELEKOM was merged with and into Clarus CSA, Inc.,
one of our wholly owned subsidiaries, and the separate existence of ELEKOM
ceased. Immediately following consummation of the Merger, the former ELEKOM
Shareholders owned approximately 13% of our outstanding common stock. Certain
former ELEKOM Shareholders have agreed not to sell any of their shares of our
common stock for a period ending on August 6, 1999. We recorded, as additional
purchase price:

. payments of $500,000 made to fund the operations of ELEKOM from October
1, 1998, through the closing date, and

. expenses of approximately $1.0 million to complete the merger. We also
recorded $10.5 million of the purchase price as purchased in-process
research and development.

Cash used in operating activities was approximately $1.8 million and $11,000
during 1998 and 1997, respectively. Cash used by operations during 1998 was
primarily attributable to an increase in accounts receivable, partially offset
by an increase in accounts payable and accrued liabilities. Cash used by
operations during 1997 was primarily attributable to an increase in accounts
receivable, partially offset by increases in accounts payable and accrued
liabilities and deferred revenues.

Cash used in investing activities was approximately $11.4 million and $1.2
million during 1998 and 1997, respectively. The cash used in investing
activities during 1998 was primarily attributable to the purchase of ELEKOM and
purchases of computer equipment and software. The cash used in investing
activities during 1997 was primarily attributable to purchases of computer
equipment and software.

Cash provided by financing activities was approximately $20.8 million and $5.2
million during 1998 and 1997, respectively. The cash provided by financing
activities during 1998 was primarily attributable to our initial public
offering effective May 26, 1998, for net proceeds of approximately $22.0
million. The cash provided by financing activities during 1997 was primarily
attributable to proceeds from the issuance of preferred stock of approximately
$6.0 million, and notes payable and short-term borrowings of approximately
$42.6 million, offset by payments on notes payable and short-term borrowings of
approximately $43.2 million.

In March 1997, we entered into a loan agreement and a master leasing agreement
for an equipment line of credit in the amount of $1.0 million (the "Equipment
Line") with a leasing company. The

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Equipment Line bears interest at rates negotiated with each loan or lease
schedule (generally 22.0% to 22.5%) and is collateralized by all of the
equipment purchased with the proceeds thereof. As of December 31, 1998, the
principal balance on the Equipment Line payable was $463,000.

We have a revolving working capital line of credit and equipment facility with
Silicon Valley Bank. Borrowings outstanding under the line are limited to the
lesser of $3.0 million, or 80% of accounts receivable. Borrowings outstanding
under the equipment facility are limited to $1.0 million. Interest on the
revolving credit facility is at prime rate and on the equipment facility at
prime plus 0.5% and is collateralized by all of our assets. The line of credit
and equipment term facility with Silicon Valley Bank will expire on April 29,
1999. As of December 31, 1998, we had no outstanding balance and had $3.7
million available for future borrowings under this agreement.

We had available NOL's of approximately $26.3 million as of December 31, 1998,
to reduce future income tax liabilities. These NOL's expire from 2007 through
2012 and are subject to review and possible adjustment by the appropriate
taxing authorities. Pursuant to the Tax Reform Act of 1986, the utilization of
NOL's for tax purposes may be subject to an annual limitation if a cumulative
change of ownership of more than 50% occurs over a three-year period. As a
result of this limitation, we will be limited to the use of our NOL's in any
given year. We also had net deferred tax assets before valuation allowances of
approximately $10.3 million at December 31, 1998, comprised primarily of net
operating loss carryforwards. We had fully reserved for these deferred tax
assets at December 31, 1998.

Impact of Year 2000

We have designed and tested the most current versions of our products to be
Year 2000 compliant. Our current products may contain undetected errors or
defects associated with Year 2000 date functions that may result in material
costs to us. Some commentators have stated that a significant amount of
litigation will arise out of Year 2000 compliance issues, and we are aware of a
growing number of lawsuits against other software vendors. Because of the
unprecedented nature of such litigation, it is uncertain whether or to what
extent we may be affected by it.

We are in the process of determining the extent to which third-party licensed
software distributed by us is Year 2000 compliant, as well as the impact of any
non-compliance on us and our customers.

Additionally, in the event relational database management systems used with our
software are not Year 2000 compliant, our customers may not be able to continue
to use our products. We do not currently believe that the effects of any Year
2000 non-compliance in our installed base of software will result in a material
adverse impact on our business or financial condition. However, we may be
exposed to potential claims resulting from system problems associated with the
century change. Such claims would not have a material adverse effect on our
business, financial condition, or results of operations.

With respect to our internal systems, we are taking steps to prepare our
systems for the Year 2000 date change. We have substantially completed our
inventory efforts. We expect remediation and testing efforts to continue
through the third quarter of 1999. We estimate that costs for our Year 2000
compliance efforts will not exceed $150,000. We do not believe that we will
incur any material costs

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or experience material disruptions in our business associated with preparing
our internal systems for the Year 2000. However, unanticipated negative
consequences and/or material costs caused by undetected errors or defects in
the technology used in our internal systems could be experienced. We are
currently unable to estimate the most reasonably likely worst-case effects of
the Year 2000. We are currently preparing contingency plans for any such
unanticipated negative effects.

We are currently unable to estimate whether we are exposed to significant risk
of being adversely affected by Year 2000 non-compliance by third parties. We
are contacting third parties with which we have material relationships,
including our material customers, to attempt to determine their preparedness
with respect to Year 2000 issues and to analyze the risks to us in the event
any such third parties experience significant business interruptions as a
result of Year 2000 non-compliance. We expect to complete this review and
analysis and to determine the need for contingency planning in this regard by
June 30, 1999.

Forward-looking Statement

This Annual Report contains certain forward-looking statements, as defined in
the Private Securities Litigation Reform Act of 1995, including or related to
our future results (including certain projections and business trends).

These and other statements, which are not historical facts, are based largely
on current expectations and assumptions of management 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.
Assumptions related to forward-looking statements include that we will continue
to price and market our products competitively; that competitive conditions
within our markets will not change materially or adversely; that the demand for
our products will remain strong; and that we will retain key personnel.

Assumptions related 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 Annual Report, the words "estimate," "project," "intend,"
"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;
therefore, there can be no assurance that the results contemplated in the
forward-looking information will be realized. Management decisions are
subjective in many respects and susceptible to interpretations and periodic
revisions based on actual experience and business developments, the impact of
which may cause us to alter our business strategy or capital expenditure plans
which may, in turn, affect our results of operations. In light of the
significant uncertainties inherent in the forward-looking information included
herein, the inclusion of such information should not be regarded as our
representation that any strategy, objectives, or other plans will be achieved.
The forward-looking statements contained in this Annual Report speak only as of
the date of this Annual Report, and we do not have any obligation to publicly
update or revise any of these forward-looking statements.

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BUSINESS

General

We develop, market, and support Web-based electronic commerce applications and
client/server financial and human resources applications. Our applications
enable organizations to gain control of their operational resources and reduce
the total cost of ownership by minimizing the time, costs, and risks associated
with implementing, changing, and upgrading the applications. Almost all of our
products are sold as application suites. On occasion, we will sell individual
applications to our existing customers.

Our Clarus(TM) Commerce line of products leverages Web technology to connect
large populations of employees, management, and suppliers in continuous
planning, monitoring, and control of resources.

We license our products and services primarily through a direct sales force in
North America. On March 1, 1999, we had 276 customers including organizations
such as First Data Corporation, MasterCard International, Hyatt Regency
Chicago, T. Rowe Price Associates, Inc., Investment Technology Group, Toronto
Dominion Bank, The Container Store, Blue Cross and Blue Shield, H.D. Vest
Financial Services, Lands' End, and Chartwell Re Holdings Corp.

Our software license revenues accounted for 49.2%, 52.0%, and 41.7% of gross
revenues for 1996, 1997, and 1998, respectively. Services revenues accounted
for 30.5%, 30.0%, and 39.6% of gross revenues for 1996, 1997, and 1998,
respectively. Maintenance revenues accounted for 20.3%, 18.0%, and 18.7% of
gross revenues for 1996, 1997, and 1998, respectively.

On May 26, 1998, we completed an initial public offering of our common stock in
which we sold 2.5 million shares and which resulted in net proceeds to us of
approximately $22.0 million. On November 6, 1998, we acquired ELEKOM
Corporation ("ELEKOM") for approximately $15.7 million, consisting of $8.0
million in cash and approximately 1.4 million shares of our common stock.

We were incorporated in 1991 as a Delaware corporation. Our principal executive
offices are located at 3970 Johns Creek Court, Suwanee, Georgia, 30024, and our
telephone number at that address is (770) 291-3900.

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Industry Background

Electronic Procurement

The electronic procurement industry is a relatively new and rapidly changing
industry that has developed as a result of the acceptance of new technologies
in recent years. Traditionally, the procurement process has been handled
through client/server and mainframe applications that support corporate buyers
and manual requisition routing and approval processes to support front line
employees. The current procurement process in many organizations consists of
the completion of a paper-based requisition form, routing of the request to a
supervisor for approval, and further routing of the paper-based requisition
through other points of authorization within the organization. Once fully
approved, a purchase order is created to purchase the goods and/or services
previously requisitioned.

In addition to the inefficiency and expense associated with manual processes,
the traditional systems largely fail to connect requisitioners with supplier
information. With the growing popularity of business intranets and the
increased use of the Internet as a business tool, these limitations can be
addressed through new Web-based applications. Electronic procurement systems
offer the potential for a rapid return on investment due to reduced process
costs and increased ordering through approved suppliers at a reduced price.

Financial and Human Resources Applications

Increasing global competition has driven organizations of all sizes to improve
operating efficiencies, reduce costs, reduce time to market, and improve
customer satisfaction. To achieve these objectives, organizations have utilized
information technology ("IT") systems to automate repetitive processes, to
facilitate communications throughout various departments, and to process
increasingly sophisticated and detailed information. Organizations face the
challenge of providing this critical information to a broad group of end users
to give them better control of their work environment and to increase
productivity and performance.

Recent advances in computing and communications, including the wide-spread
adoption of distributed computing, and the proliferation of third-party
enterprise software applications, have enabled organizations to provide
relevant information directly to the desktop. Organizations have deployed
enterprise client/server applications addressing the full range of functions
across the enterprise, including "front office" related functions such as sales
force automation, call center management and customer support, help desk
activities, and "back office" operations (including distribution,
manufacturing, production and supply chain planning, and execution activities).
At the core of the enterprise software system are the organization's financial
applications that serve as a critical point of integration for all enterprise
applications and enable users to improve core business processes; monitor,
analyze, and report business results; and make more informed decisions faster.

Traditionally, organizations have had two alternatives when deploying
enterprise financial and human resources applications. These alternatives were
either a highly complex custom-designed application to meet the organization's
specific requirements, or an off-the-shelf application. The highly complex
custom-designed applications were typically developed in a "legacy"
environment. The off-the-shelf applications were designed to be implemented
more rapidly in a distributed computing environment,

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at a perceived lower cost of ownership, although lacking the depth of
functionality of the custom-designed applications.

While custom-designed applications have provided the desired degree of
functionality, their size and complexity generally require very lengthy design,
development, and implementation efforts. Maintaining, updating, and upgrading
these applications requires substantial internal resources and generally
requires the use of outside consultants. In addition, these applications have
limited flexibility to support diverse and changing operations or to respond
effectively to evolving business demands and technologies. The high total cost
of ownership and complexity associated with developing and maintaining custom-
designed applications have limited their utilization to organizations with
significant resources.

In recent years, organizations have increasingly deployed off-the-shelf
client/server financial and human resources applications to leverage their
investment in client/server technologies and provide end users with information
that gives them greater control over their work environment. However,
traditional off-the-shelf applications often require organizations to re-
engineer established business practices to accommodate application constraints
or to customize the applications with labor-intensive reprogramming to fit
their needs. These requirements significantly challenge resource-constrained
organizations and fail to provide the desired lower total cost of ownership.

Limitations of both custom-designed and off-the-shelf applications result in
higher total cost of ownership to the organization. The largest components of
such cost are the necessary labor and programming resources associated with
implementation and maintenance.

Today, organizations acquiring or replacing their financial applications seek
broader functionality, better integration with existing systems and
applications, greater flexibility to change and upgrade, and a lower total cost
of ownership. Key to meeting these expectations are solutions that are
flexible; easy to implement, change, and upgrade; provide information on
demand; and most importantly, put users in control.

The Clarus Solution

We offer Web-commerce solutions and applications that allow companies to
proactively manage their business resources. Our solutions are designed to
provide a closed-loop management process enabling companies to plan, control,
and analyze their operational, financial, and human resources in a real-time
manner. Our solutions are designed to provide open enterprise integration by
employing a message-based integration layer between our operational resource
systems, our budgeting and planning systems, our analysis and control systems,
and traditional Enterprise Resource Planing ("ERP") solutions (including that
of other ERP vendors). Our solutions are also designed with Clarus View, a
personalized real-time view of the business operating environment that
facilitates proactive control.

Our applications match the functionality of custom-designed applications
without the high total cost of ownership traditionally associated with such
applications. We address the needs of a broad range of organizations by
providing broad functionality; a flexible open architecture; minimized

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implementation, modification, and ongoing support time; and enhanced user
control. Our applications offer the following key benefits:

Broad Functionality. Our suite of Web-commerce, financial, and human resources
applications covers a full range of operational, financial, and accounting
functions, including Web-based procurement, general accounting, expense
accounting, revenue accounting, and human resources. Our applications are
particularly suited to address the operational, financial, accounting, and
reporting needs of non-industrial firms. Our Graphical Architects(R) modules
provide additional capabilities, including enhanced interaction with external
software systems, user personalization, job scheduling, analysis capabilities,
and Internet connectivity.

Flexible, Open Architecture. Our applications are based on a flexible, open
architecture to fit with the components of an organization's existing IT
infrastructure. Our financial and human resources applications work with the
popular Microsoft, Oracle, and Sybase databases and run on any operating system
and hardware platforms compatible with these databases, enabling customers to
easily migrate to alternative computing technologies. The flexibility of our
applications, together with the ability to modify the functionality without
changing the source code, results in seamless, rapid changes or upgrades. The
openness of the architecture allows easy integration with third-party
technologies, including products from third-party financial reporting software
companies.

Minimized Implementation, Modification, and Ongoing Support Time. The
implementation of our software can typically be achieved in less than six
months, depending on the number of modules being implemented, and modifications
can be made directly by the end user at the time of, or subsequent to,
implementation. In addition, the time, costs, and risks associated with
changing and upgrading applications are minimized because implementation of our
applications is done without any modification to the underlying source code. We
believe that this results in implementation and post-implementation service
costs well below the industry average.

Enhanced End User Control. Our applications are designed to put users in
control by:

. providing the flexibility to quickly implement applications and
personalize user interfaces;

. providing end users the ability to directly tailor and change
applications during or subsequent to implementation;

. allowing users to upgrade in a minimal amount of time without software
development tools or significant IT personnel involvement;

. allowing integration with other native or external applications in the
users' work environment; and

. delivering information on demand and in the form desired.

Strategy

Our objective is to become a leading provider of Web-commerce, financial, and
human resources applications to non-industrial organizations. The key elements
of our strategy are as follows:

Expand Web-Based Commerce Applications. Clarus has pioneered a new class of
systems, the Clarus(TM) Commerce suite of applications, that enable
organizations to gain and improve control of

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operational resources that include, but are not limited to, the non-production
goods and services that are vital to the operation of every company. Leveraging
Web-commerce technology, Clarus(TM) Commerce connects large populations of
front line employees with the management and control of operational resources
to achieve three key benefits. These benefits are the ability to decrease
costs, act faster, and perform predictably.

Extend Technology Leadership. We believe that extending technology leadership,
rapidly creating additional features, and incorporating new technologies are
important competitive advantages in our marketplace. We believe our active
architecture technology is a key differentiation that provides a significant
advantage over competing products. In addition, we believe we were one of the
first software developers to utilize object wrappers in financial applications
to facilitate tailoring and integration with other applications. We intend to
continue to identify and develop new and emerging technologies for our
applications.

Leverage Expertise in Financial Applications. We intend to leverage our
expertise in financial applications to design, develop, and offer other
financial and financially-related applications focused on meeting the needs of
non-industrial customers.

Leverage Installed Customer Base. We believe that our installed customer base
represents a significant potential market for future sales of our products. We
continually use our customer relationships:

. to sell new products and cross-sell products to multiple offices,
divisions, and departments of a customer's organization;

. as a reference to gain new customers; and

. to focus our efforts on selected vertical markets as a means of
expanding our market share.

Expand Sales and Marketing Channels. We intend to expand our direct sales force
by hiring additional experienced sales personnel. We also intend to establish
indirect distribution channels and relationships with product vendors and
consulting firms, as well as increase our international market penetration by
establishing relationships with stratgic partners with an international
presence. We believe that expanding our existing relationships will provide
increased access to various geographic markets and potential customers.

Continue to Provide High Quality Customer Service. By providing superior
implementation, support, and training services directly to our customers,
rather than through third-party resellers and system integrators, we can
achieve a high level of customer satisfaction, strong customer references, and
long-term relationships. Direct customer service also allows for immediate
feedback which facilitates software improvements. We intend to continue to
increase our customer service and maintenance staff and to make additional
investments in our support infrastructure.

Technology

Our applications are based on an extensible, object-oriented, proprietary
architecture called "Active Architecture." The Active Architecture technology
is designed to achieve the following benefits:

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. flexible, high-end functionality;

. the ability to modify the functionality without changing the source
code;

. the ability to easily integrate applications into a customer's IT
infrastructure;

. the ability to rapidly implement changes and upgrade applications;

. reduced total cost of ownership; and

. placing users in control.

Active Architecture is composed of three elements: the Core Components, the
Graphical Architects modules, and the System Manager module.

Core Components. The core functionality for our applications is defined through
a set of Core Components, the building blocks of the financial and human
resources applications. The Core Components perform financial and accounting
functions in the context of legal and regulatory requirements and generally
accepted accounting principles. Examples of these Core Components include
general ledger posting, accounts payable vouching, account structure
management, and payroll processing. Our fundamental premise is that users
should not need to reprogram the Core Components. Contained within the overall
architectural framework is the ability to modify and seamlessly upgrade our
applications while continuing to maintain the process and data security,
integrity, and reliability of the Core Components. End users can accommodate
their business-specific requirements and technology changes, such as
integrating external software systems, user personalization, job scheduling,
analysis capabilities, and application management through the Graphical
Architect modules. These Graphical Architects require no source code
programming.

Graphical Architects. We have developed Graphical Architects modules that allow
organizations to quickly and easily adapt to business-specific requirements and
changes in technology. We provide the Business Controls/Graphical Architect as
a standard component with all of our applications and license other Graphical
Architects modules with additional functionality. Through Business Controls an
organization can centrally administer its business rules and policies and apply
them across all financial applications. This central control allows for
consistency of management policies and reduced set-up time in each of the
application areas. Business Controls also allows organizations to define and
manage their chart of accounts, analysis codes, default account segments and
overrides, accounting periods, inter-company transactions, tax management,
accounting calendar, cross-validation rules, and multiple currencies.

System Manager. System Manager supports the Active Architecture technology by
integrating, synchronizing, and managing all components of the application.
System Manager is designed to reduce systems and database administration
efforts. The time required to update external applications, as well as upgrade
our applications, is reduced through the use of a visual point-and-click
interface. Through System Manager, the user orchestrates software installation,
database initialization, and software and database upgrades. These tasks are
simplified by System Manager's automated process which does not require scripts
or other programming. In addition, System Manager provides a single point of
control for security across all of our applications. Security information is
automatically maintained and updated during the upgrades.

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Our financial and human resources applications incorporate a multi-tiered,
client/server architecture that supports Microsoft Windows 95 and/or NT
clients, including Netscape and Microsoft Internet Explorer, and most popular
UNIX (AIX, HP-UX, Solaris, VMS, etc.) and Windows NT servers running Microsoft
SQL Server, Oracle, and Sybase database management systems over a variety of
network topologies. For the year ended December 31, 1998, we derived 92% and
8%, respectively, of our license fees from sales of products to customers who
use Windows NT based-servers and UNIX servers. Integration of our applications
with these databases is achieved with a single version of the source code,
allowing users to replace or upgrade their hardware and database systems with
minimal impact to the customer's application. We currently offer 32-bit
versions of our financial and human resources applications for Windows 95 and
Windows NT platforms. The various technologies upon which the Active
Architecture has been built include Microsoft Visual C++ and the Microsoft
Foundation Classes, ActiveX, OLE/COM and Centura.

Products

Our product family includes a suite of Web-commerce applications and a full
suite of financial and human resources applications designed to meet the needs
of a broad range of organizations.

Applications

General Ledger, our flagship financial application, delivers a comprehensive
solution including ledger accounting, consolidation and allocations, multi-
level segment accounts, automatic entry balancing, multiple financial calendars
within a single organization, recurring entries, average daily balances, and
budgeting and profit sharing.

Accounts Payable controls vendor information, invoicing procedures, and payment
activities. Accounts Payable also provides for an unlimited number of bank
accounts, processing foreign currency gains and losses, while automatically
reconciling and balancing inter-company accounts.

Purchasing Control streamlines purchasing processes with end user
requisitioning, quick access to contracts and price lists, automation of
receiving and matching processes, and vendor management.

Accounts Receivable streamlines payment applications, provides management and
reporting of receivables activities, manages customer information and inter-
relationships, tracks the collection process, processes foreign currency gains
and losses, and provides historical information.

Revenue Accounting combines invoice entry and billing applications, provides
user-defined roles for revenue recognition, automatically creates multi-line
tax distributions for multiple taxing authorities, calculates shipping charges
for specific lines of an invoice, supports a multi-catalog pricing structure as
well as user-defined pricing contracts, and tracks customer deposits and down
payments.

Fixed Assets tracks and maintains asset investments and facilitates compliance
with tax and accounting regulations through user-defined depreciation
scheduling, which can be segmented by organization, asset, or book.

Personnel manages employment, compensation, career/succession planning,
position control, health and safety, applicant management, recruiting,
training, government compliance, and business event notification.

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Benefits manages benefit and accrual planning and enables control of auto
enrollment, flexible benefits, flexible spending accounts, cafeteria plans,
defined contributions, beneficiaries, eligibility, COBRA administration, and
leave accrual processing.

Payroll manages control of payment and tax processing functions, and
streamlines payroll processing. Payroll also manages on-demand checks, direct
deposits, and earnings and deductions.

E-Procurement connects buyers and suppliers in a streamlined business-to-
business MRO procurement process, automates the purchasing function, and
aggregates purchasing information for strategic use.

Expense will provide employees with improved expense reporting processes which
reduce reimbursement cycle time and improve control.

View connects decision makers with real time key performance indicators and
facilitates proactive management from the desktop.

Budget connects the management of operating resources with the strategic
planning of the business on a real time basis.

Fusion will connect Clarus' Web-commerce solutions to back office systems and
suppliers. Fusion provides open enterprise integration by employing a message-
based integration layer between our operational resource systems, our budgeting
and planning systems, our analysis and control systems, and traditional
Enterprise Resource Planning ("ERP") solutions (including that of other ERP
vendors). Fusion also provides for heterogeneous version independent
integration.

Graphical Architects

We license a series of modules, our Graphical Architects, that are designed to
extend, enhance, integrate, and change the look-and-feel of our core
applications. Through a visual point-and-click interface, the Graphical
Architects modules allow users to personalize and configure our applications
without any source code programming. In addition to Business Controls, which is
a standard component of all applications, Graphical Architects modules include
the following:

Data Exchange/Graphical Architect defines sources of data for import and export
purposes through a metadata interface for logical mapping of data between our
applications and the customer's other internal systems which simplifies
implementation and streamlines changes to external datasources.

Workload/Graphical Architect enables users to manage and schedule tasks
effectively with job scheduling, resource allocation, process and report
distribution, and e-mail notification. Users can schedule tasks to run on
separate application servers at the most efficient processing time.

Solution/Graphical Architect allows users to personalize the look-and-feel and
the functions of their applications and facilitates the integration of our
applications with other applications without changing the source code.

Analysis/Graphical Architect provides a suite of applications that address an
organization's need for information on demand. Analysis/Graphical Architect
provides users with the following functions and benefits:

44
<PAGE>

<TABLE>
<CAPTION>
Function Benefit
-------- -------
<C> <S>
Quick Find Online access with extensive selection
criteria to quickly locate information.
Quick Reports Report printing of online query results.
Quick Graphs Graphical representations of online query
results.
Standard Reports Templates to simplify users' report
definitions based upon the organization's
requirements.
Financial Statement Generator Flexible financial reporting system enabling
sophisticated financial statements without any
programming.
Drill Down Analysis Intra-application, inter-application, and open
drill down into all supporting detail and
information sources, including information
originated in third-party applications.
Financial Statement Accelerator Integration of Financial Statement Generator
with Arbor Software's Essbase for high
performance reporting.
FRx for Windows Flexible distributed management reporting
solution, utilizing FRx from FRx Software
Corporation, which delivers full drill down
analysis without being connected to the
network.
Clarus Library Centralized report repository to store reports
and make them available to other users in the
organization eliminating redundancy and
improving resource efficiency.
</TABLE>

Sales and Marketing

We sell our software and services primarily through our direct sales force. As
of March 1, 1999, our direct sales force consisted of 42 sales professionals
and 23 marketing personnel, located in 6 offices. We expect to increasingly
develop indirect channels in order to enhance our market penetration and
implementation capabilities. The sales cycle for our software averages between
four to seven months.

Our marketing strategy is to position us as a leading provider of applications
to non-industrial organizations by providing applications with a high level of
functionality and flexibility with minimal implementation time. In support of
this strategy, we engage in a full range of marketing programs focused on
creating awareness and generating qualified leads. These programs include
developing and maintaining business partners, and participating in joint
marketing programs, as well as public relations, telemarketing, developing
databases of targeted customers, and conducting advertising and direct mail
campaigns. In addition, we participate in trade shows and seminars, and
maintain a World Wide Web home page which is integrated with our sales,
marketing, recruiting, and fulfillment operations.

Implementation Services

We provide dedicated implementation services for our customers. We believe that
the provision of superior implementation services in conjunction with ease of
implementation is integral to our success in achieving a high level of customer
satisfaction. By providing these implementation services, we are able to
minimize implementation time by helping customers implement an application
module in an average of four months, generally at a cost approximately equal to
the cost

45
<PAGE>

of the licensed software. As of March 1, 1999, we employed 99 personnel
providing implementation services, which are typically offered to our customers
on a time and materials basis.

We are also developing marketing relationships with companies sharing a
commitment to implementations that deliver high functionality and flexibility,
while minimizing the time required to implement, change, and upgrade them.

Customer Service and Maintenance

We believe that superior customer service and support, including product
support and maintenance, training, and consulting services, are critical to
achieve and maintain customer satisfaction. Our customer service and support
functions include call center and account management, integrated in a single
group. Our customer service organization provides a single point of contact for
customers from execution of the license agreements through post-implementation.
Each of our customers has entered into an annual maintenance contract for the
first year of use, renewable on an annual basis. As of March 1, 1999, we
employed 45 technical post-sales support personnel providing software
maintenance and support, and hotline access. In addition to telephone support,
we also offer support by electronic mail, electronic bulletin board, facsimile,
and over the Internet. We intend to continue to expand our customer service and
maintenance staff and to make additional investments in our support
infrastructure.

Research and Development

Our success is in part dependent on our ability to continue to meet customer
and market requirements with respect to functionality, performance, technology,
and reliability. We invest, and intend to continue to substantially invest in
our research and development efforts. As of March 1, 1999, our research and
development operation employed 65 individuals, located in Atlanta, Georgia, and
19 individuals located in Bellevue, Washington. In addition, we have from time
to time supplemented, and plan to continue to supplement, our core resource
pool through outside contractors and consultants when necessary.

Our research effort is currently focused on identifying new and emerging
technologies and engineering processes, as well as possible technology
alliances. The primary area of focus within the research effort involves
distributed component computing and associated technologies and architectures,
especially with respect to both Internet and intranet transaction processing.

Our development effort is focused primarily on the product delivery cycle and
our associated technologies and software life-cycle processes. The development
operation consists of various functional and technological teams who are
responsible for bringing the various products that we deliver to market. These
teams consist of software engineering, documentation, and quality assurance
personnel. The specific responsibilities of the development operation include:

. enhancing the functionality and performance within the currently
available product line;

. developing new products and/or integrating with strategic third-party
products to strengthen the product line;

. porting the product line to remain current and compatible with new
operating systems, databases, and tools;

46
<PAGE>

. enhancing the adaptability and extensibility of the product line through
the release of new and enhanced Graphical Architects; and

. managing and continuously improving the overall software development
process.

We continually utilize customer feedback in the product design process in order
to meet changing business requirements and are committed to developing
technologies which provide highly functional, integrated solutions in a rapid
and efficient manner.

Research and development expenditures were approximately $5.4 million, $6.7
million, and $6.3 million for 1996, 1997 and 1998, respectively.

Competition

The market for our products is highly competitive and subject to rapid
technological change. Although we have experienced limited competition to date
from products with comparable capabilities, we are experiencing increased
competition and expect competition to continue to increase in the future. We
currently compete principally based on ease of use and reduced time of
implementation, which are a result of:

. the breadth of our products' features;

. the automated, scalable and cost-effective nature of our products; and

. our knowledge, expertise and service ability gained from close
interaction with customers.

While we believe that we currently compete favorably overall with respect to
these factors, there can be no assurance that we will be able to continue to do
so.

In the financial and human resources applications market, we compete directly
or indirectly with a number of competitors that have significantly greater
financial, selling, marketing, technical, and other resources than we have,
including the following companies: PeopleSoft, Lawson, and Oracle. In 1997,
J.D. Edwards & Company introduced financial applications for use on Windows NT
or Unix servers, and additional competitors may enter this market, thereby
further intensifying competition. These competitors may be able to devote
greater resources to the development, promotion, sale, and support of their
products than we will. Moreover, these companies may introduce additional
products that are competitive with or better than ours or may enter into
strategic relationships to offer better products than those currently offered
by us. Our products may not effectively compete with such new products.

In the electronic procurement market, our competitors include other electronic
procurement providers such as ARIBA, Commerce One, TRADE'ex, Intelisys, and
Trilogy. We also face competition from larger corporations, such as Netscape
and Harbinger, which have entered the electronic procurement market. In
addition, we believe we will experience increased competition from travel and
expense software companies, such as Extensity, Captura, and Concur (formerly
Portable Software), which acquired 7Software, a direct competitor. In addition,
we anticipate competition from some of the large enterprise resource planning
software vendors, such as SAP, which announced SAP Business-to-Business
Procurement solution. Other potential competitors in this category include
Oracle, PeopleSoft, and Baan. Other companies who have a stated interest in
electronic procurement include Microsoft Corporation, IBM, Aspect Development,
and Requisite Technologies.

47
<PAGE>

To remain competitive, we must continue to invest in research and development,
sales and marketing, and customer service and support. In addition, as we enter
new markets and utilize different distribution channels, the technical
requirements and levels and bases of competition may be different than those
experienced in our current market. There can be no assurance that we will be
able to successfully compete against either current or potential competitors in
the future.

Proprietary Rights and Licensing

Our success depends significantly on our internally developed intellectual
property and intellectual property licensed from others. We rely primarily on a
combination of copyright, trademark and trade secret laws, as well as
confidentiality procedures and license arrangements to establish and protect
our proprietary rights in our software products.

We have no patents, and existing trade secret and copyright laws afford only
limited protection of our proprietary rights. We have registered or applied for
registration for certain copyrights and trademarks, and will continue to
evaluate the registration of additional copyrights and trademarks as
appropriate. We believe that, because of the rapid pace of technological change
in the software industry, the intellectual property protection of our products
is a less significant factor in our success than the knowledge, abilities, and
experience of our employees, the frequency of our product enhancements, the
effectiveness of our marketing activities, and the timeliness and quality of
our support services.

We enter into license agreements with each of our customers. Our license
agreements provide for the customer's non-exclusive right to use the object
code version of our products. Our license agreements prohibit the customer from
disclosing to third parties or reverse engineering our products and disclosing
our other confidential information. In certain rare circumstances, typically
for the earliest releases of our products, we have granted our customers a
source code license, solely for the customer's internal use.

We have in the past licensed and may in the future license on a non-exclusive
basis third-party software from third parties for use and distribution with our
financial and human resources applications. We have entered into agreements
with our third party licensors with customary warranty, software maintenance
and infringement indemnification terms.

Employees

As of March 1, 1999, we had a total of 343 employees, all except 4 of whom were
based in the United States. Of the total, 99 were employed in implementation
services, 84 were in research and development, 42 were in sales, 45 were in
customer support, 50 were in finance, administration, and operations, and 23
were in marketing. We believe our future performance depends in significant
part upon the continued service of our key development, technical support and
sales personnel, and on our ability to attract or retain qualified employees.
Competition for such personnel is intense. We may not be successful in
attracting or retaining such personnel in the future. None of our employees are
represented by a labor union or are subject to a collective bargaining
agreement. We have not experienced any work stoppages and consider our relation
with our employees to be good.

48
<PAGE>

Facilities

Our corporate office and principal facility is located in Suwanee, Georgia,
where we lease approximately 87,000 square feet of space. This facility
accommodates research and development, sales, finance, administration and
operations, customer support marketing and implementation services. We also
lease a facility in Bellevue, Washington for 13,000 square feet of office space
and six facilities, primarily for regional sales offices, elsewhere in the
United States and Canada.

Legal Proceedings

We are subject to claims and litigation in the ordinary course of business, but
do not believe based on our current assessment of such claims and litigation
that any such claim or litigation will have a material adverse effect on our
consolidated financial position.

49
<PAGE>

MANAGEMENT

Our executive officers and directors are:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Stephen P. Jeffery.......... 43 Chairman, Chief Executive Officer,
President and Director
Joseph E. Bibler............ 39 Vice President, Customer Services
William M. Curran, Jr. ..... 36 Vice President, Sales and Marketing
William A. Fielder, III..... 40 Vice President, Chief Financial Officer
and Treasurer
Sally M. Foster............. 44 Vice President, Operations
Steven M. Hornyak........... 33 Vice President, Strategy and Business
Development
David A. Spicer............. 52 Vice President, Research and Development
Vice President, Corporate Affairs and
Arthur G. Walsh, Jr. ....... 51 Secretary
Norman N. Behar............. 35 Director
Tench Coxe(1)(2)............ 40 Director
Donald L. House............. 57 Director
Mark A. Johnson............. 46 Director
William S. Kaiser(1)(2)..... 43 Director
Said Mohammadioun........... 51 Director
</TABLE>

- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

Stephen P. Jeffery joined us in November 1994 as Vice President of Marketing
and was elected Vice President of Sales and Marketing in June 1995. He was
elected President in October 1995, a Director in October 1997, Chairman of the
Board in December 1997 and Chief Executive Officer in February 1998. Prior to
joining us, Mr. Jeffery was employed by Hewlett-Packard Company, where he
served as the manager of Hewlett-Packard's client/server solutions and partner
programs as well as in a variety of sales and marketing management positions in
the U.S. and Europe for 15 years. Mr. Jeffery also served in sales with
International Business Machines ("IBM") prior to joining Hewlett-Packard.

Joseph E. Bibler joined us in February 1997 as Vice President of our services
subsidiary and was elected President of our services subsidiary in February
1998. In January 1999 he was elected a Vice President of Clarus responsible for
customer services. Prior to joining us, Mr. Bibler spent 15 years with Andersen
Consulting, most recently as an Associate Partner. At Andersen Consulting he
served in a variety of roles, including leadership of one of Andersen's
regional software implementation practices.

William M. Curran, Jr. joined us in February 1996 as a Regional Sales Manager
for the Southern Region. In August 1997, Mr. Curran was elected Vice President
of Sales for the Eastern region and in January 1999 he was elected Vice
President and is currently responsible for all sales and marketing. Prior to
joining us, Mr. Curran was employed by Geac Computer Corp. Ltd (formerly Dun &
Bradstreet Software) ("Geac") from November 1989 until February 1996 as a
Senior Account Executive. From June 1984 until November, 1989, Mr. Curran
served in a variety of sales positions with Unisys Corporation.

50
<PAGE>

William A. Fielder, III joined us in March 1998 as Chief Financial Officer and
Treasurer in January 1999 he was also elected Vice President. Prior to joining
us, Mr. Fielder served as Vice President and Chief Financial Officer of Gray
Communications Systems, Inc. from July 1993 to March 1998. From April 1991 to
July 1993, Mr. Fielder served as Controller of Gray Communications Systems,
Inc. which was the chief financial officer position of that company. From
November 1984 to March 1991, Mr. Fielder was employed with Ernst & Young LLP
where he served a variety of roles in the Columbus, Georgia, office, most
recently as audit manager and computer auditor for a variety of clients in the
Atlanta and West Georgia area.

Sally M. Foster joined us in March 1997 as Vice President of Customer Service.
In January 1999 she was elected Vice President, and is currently responsible
for operations. Prior to joining us, Ms. Foster served in several positions at
Geac from August 1988 until March 1997, most recently as Vice
President/Director of Global Business Operations. From August 1985 until August
1988, Ms. Foster served as the Division Operations Manager for the General
Motors Corporation, Electronic Data Systems Ltd. based in London, England.

Steven M. Hornyak joined us in December 1994 as an Account Executive and was
promoted to Regional Sales Manager for the Northeast region in 1996. In August
1997, Mr. Hornyak was elected in 19 Vice President of Marketing. In January
1999 Mr. Hornyak was elected as Vice President and is currently responsible for
strategy and business development. Prior to joining us, Mr. Hornyak served in a
variety of sales and consulting roles for Oracle Corporation from June 1992
until December 1994. Prior to that, he was employed by Price Waterhouse in its
management consulting services group.

David A. Spicer joined us in August 1998, as Vice President of Development. In
January 1999, he was elected Vice President, and is currently responsible for
research and development. Prior to joining us, Mr. Spicer served as Vice
President of Development for Arbor Software from February 1998 to July 1998.
From April 1992 to February 1998, Mr. Spicer served as Vice President of
Financial Application Development at Oracle Corporation.

Arthur G. Walsh, Jr. joined us in November 1992 as Chief Operating Officer and
Secretary. In October 1995, Mr. Walsh was elected Vice President of Customer
Service and Operations and Secretary/Treasurer. From April 1997 to October
1997, he served as Vice President and Secretary/Treasurer. In October 1997, Mr.
Walsh was elected Vice President of Human Resources and Secretary/Treasurer.
From December 1997 until March 1998, he also served as acting Chief Financial
Officer. In April 1998, Mr. Walsh was elected Vice President of Human Resources
and Secretary, serving in that role until January 1999, when he was elected to
his current positions of Vice President responsible for corporate affairs, and
Secretary. From September 1989 until November 1992, Mr. Walsh was Chief
Operating Officer for Wilson & McIlvaine, a general business Chicago law firm,
where he was responsible for overall management of the firm's business
operations. Before that, he was employed with Andersen Consulting from July
1974 until September 1989, where he served in a variety of roles in Atlanta and
Chicago, lastly as Director of Finance and Administration for the Technical
Services Organization in Chicago World Headquarters.

Norman N. Behar has served as an Executive Vice President of Clarus, CSA one of
our wholly owned subsidiaries and as a member of our Board of Directors since
1998. Prior to joining us and Clarus, CSA, Mr. Behar served as President and
Chief Executive Officer of ELEKOM Corporation.

51
<PAGE>

Prior to joining ELEKOM in January 1998, Mr. Behar served from January 1996 to
December 1997 as President and Chief Executive Officer of Catapult, Inc., a
provider of personal computer training services. From April 1991 to December
1995, Mr. Behar was Chief Operating Officer of Catapult, Inc.

Tench Coxe has served as a member of our Board of Directors since September
1993. Mr. Coxe has served as a managing director of Sutter Hill Ventures, a
venture capital company located in Palo Alto, California, since 1989. From 1984
to 1987, Mr. Coxe served as Director of Marketing and in other management
positions with Digital Communications Associates. Mr. Coxe is currently on the
Board of Directors of Edify Corporation and Nvidia Corporation and several
privately held companies.

Donald L. House served as our Chairman of the Board of Directors from January
1994 through December 1997, and as President and a Director from January 1993
through December 1993. From September 1991 until December 1992, Mr. House
served as President of Prentice Hall Professional Software, Inc., a subsidiary
of Simon and Schuster, Inc. From 1968 through 1987, Mr. House served in a
number of senior executive positions with Management Science America, Inc. Mr.
House is a director of Melita International Corporation, where he serves as
Chairman of the Audit Committee and a member of the Compensation Committee, and
is a director of Carreker-Antinori, Inc., where he is a member of its Audit
Committee. Mr. House also serves as a member of the Board of Directors of BT
Squared Technologies, Inc., Intellimedia Commerce, Inc. and Telinet
Technologies, LLC and TransNexus LLC which are privately held companies.

William S. Kaiser has served on our Board of Directors since November 1992. Mr.
Kaiser joined Greylock Management Corporation, a venture capital company
located in Boston, in 1986 and became a general partner in 1988. From 1983 to
1986, Mr. Kaiser served in a variety of marketing management positions with
Apollo Computer, working primarily with Apollo's third-party suppliers. Mr.
Kaiser is also on the Board of Directors of Open Market, Inc. and several
privately held companies.

Mark A. Johnson has served as a member of our Board of Directors since July
1998. Mr. Johnson has served as the Vice Chairman of CheckFree Corporation, a
supplier of financial electronic commerce services, software and related
products since 1997. He also serves on the Board of Directors of CheckFree
Corporation. From 1982 to 1997 Mr. Johnson has served in various capacities
with CheckFree including as President in 1996 and as Executive Vice President
of Corporate Development of CheckFree Corporation from 1990 to 1996.

Said Mohammadioun has served as a member of our Board of Directors since March
1998. Mr. Mohammadioun has served as Chairman and Chief Executive Officer of
Synchrologic, Inc. since October 1996. From March 1995 to September 1996, he
was a private investor in small technology companies. Mr. Mohammadioun was Vice
President of Lotus Development Corp. from December 1990 to February 1995.

Our executive officers are elected by the Board of Directors and serve until
their successors are duly elected and qualified. There are no family
relationships among any of the executive officers or directors.

Our Board of Directors is divided into three classes, with the members of each
class of directors serving for staggered three-year terms. Messrs. Behar,
Kaiser and Johnson serve in the class the term of which expires in 1999;
Messrs. Coxe and House serve in the class the term of which expires in

52
<PAGE>

2000; and Messrs. Jeffery and Mohammadioun serve in the class the term of which
expires in 2001. Upon the expiration of the term of each class of directors,
directors comprising such class of directors will be elected for a three-year
term at the next succeeding annual meeting of stockholders. Our classified
Board of Directors could have the effect of increasing the length of time
necessary to change the composition of a majority of the Board of Directors.

Committees of the Board of Directors

The Audit Committee consists of Messrs. Coxe and Kaiser. The Audit Committee
reviews, with our independent auditors, the scope and timing of their audit
services and any other services they are asked to perform, the auditor's report
on our financial statements following completion of their audit and our
policies and procedures with respect to internal accounting and financial
controls. In addition, the Audit Committee makes annual recommendations to the
Board of Directors for the appointment of independent auditors for the ensuing
year. The Compensation Committee consists of Messrs. Coxe and Kaiser. The
Compensation Committee reviews and evaluates the compensation and benefits of
all our officers, reviews general policy matters relating to compensation and
benefits of our employees, and makes recommendations concerning these matters
to the Board of Directors. The Compensation Committee also administers our
stock option plans.

Director Compensation

Directors who are not our employees (also referred to as "Outside Directors")
currently include Messrs. Coxe, House, Kaiser, Mohammadioun and Johnson.
Outside Directors do not receive an annual retainer or any fees for attending
regular meetings of the Board of Directors. Outside Directors may participate
in our 1998 Stock Incentive Plan. Effective March 9, 1998, we granted to
Mr. Mohammadioun an option to acquire 11,250 shares of Common Stock at an
exercise price of $8.00 per share. On June 2, 1998, each of the Outside
Directors at that time were granted options to purchase 7,500 shares of Company
Common Stock at an exercise price of $7.63 per share. On July 1, 1998, we
granted Mark A. Johnson options to purchase 18,750 shares of Common Stock at an
exercise price of $9.13 per share.

53
<PAGE>

Executive Compensation

The following table sets forth certain information regarding compensation
earned by Stephen P. Jeffery, our Chief Executive Officer at December 31, 1998,
and our four other most highly compensated executive officers who were serving
as executive officers at the end of 1998 (collectively, the "Named Executive
Officers") for services rendered in all capacities in 1998.

Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation(1) Compensation Awards
-------------------------- ---------------------
Name and Principal Securities Underlying All Other
Position Year Salary($) Bonus($) Options Granted(2) Compensation
- ------------------ ---- --------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Stephen P. Jeffery..... 1998 $240,672 $129,843 112,499 --
President and Chief 1997 175,000(3) 92,621 75,000 --
Executive Officer 1996 166,250(4) 139,535 112,500 --
William M. Curran,
Jr. .................. 1998 142,586 388,512 80,500 --
Vice President, Sales 1997 111,748 197,910 45,000 --
1996 69,436 117,085 15,000 --
Steven M. Hornyak...... 1998 156,177 90,143 40,000 --
Vice President, 1997
Strategy and 111,760 130,822 51,000 $53,394(5)
Business Development 1996 67,500 151,262 6,300 --
Arthur G. Walsh, Jr.... 1998 152,586 60,125 -- --
Vice President,
Corporate 1997 150,900 -- 30,000 --
Affairs and Secretary 1996 150,000 -- -- --
Sally M. Foster........ 1998 147,112 50,715 -- --
Vice President,
Operations 1997 101,893 24,275 60,000 --
1996 -- -- -- --
</TABLE>
- --------

(1) In accordance with the rules of the SEC, the compensation set forth in the
table does not include medical, group life insurance or other benefits,
securities or property that do not exceed the lesser of $50,000 or 10% of
the person's salary and bonus shown in the table.

(2) We did not make any restricted stock awards, grant any stock appreciation
rights or make any long-term incentive payments during 1998, 1997 or 1996
to our executive officers. Options granted to the Named Executive Officers
were granted at fair market value on the date of grant as determined by the
Board of Directors.

(3) Includes $14,583 in deferred compensation earned in 1996.

(4) Includes $51,214 in deferred compensation earned in 1995.

(5) Represents a one-time payment for relocation expenses.

54
<PAGE>

The following table sets forth all individual grants of stock options during
fiscal year 1998 to each of the Named Executive Officers.

Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise or for Option Term(2)
Options Employees in Base Price Expiration ---------------------
Name Granted(1) Fiscal Year Per Share Date 5% 10%
---- ---------- ------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Jeffery...... 112,499 11.212% $ 4.83 02/05/05 723,009 1,210,460
William M. Curran, Jr. . 40,500 4.03% 10.00 05/26/05 164,876 384,230
40,000 3.98% 9.13 07/21/05 176,876 385,056
Steven M. Hornyak....... 40,000 3.98% 9.13 07/21/05 176,876 384,230

Arthur G. Walsh, Jr..... -- -- -- -- -- --

Sally M. Foster......... -- -- -- -- -- --
</TABLE>
- --------

(1) All options were granted pursuant to our 1992 Stock Option Plan or our 1998
Stock Option Plan at an exercise price not less than fair market value on
the date of grant (other than the February grant to Mr. Jeffery) as
determined by the Board of Directors for grants prior to May 26, 1998, or
based on our closing sales price as reported on NASDAQ for grants after May
26, 1998. Options vest in installments over a period of four years with 20%
of the options vested 12 months from the date of grant, 40% vested 24
months after the date of grant, 70% vested 36 months after the date of
grant and 100% vested 48 months after the date of grant. The options expire
seven years after the date of grant.

(2) Amounts reported in this column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration
of their term, assuming that the stock price on the date of grant
appreciates at the specified annual rates of appreciation, compounded
annually over the term of the option. These numbers are calculated based on
rules promulgated by the SEC.

The following table provides information regarding options exercised and
exercisable and unexercisable stock options held as of December 31, 1998 by
each of the Named Executive Officers.

Aggregated Option Exercises in 1998

And Year-End Option Values

<TABLE>
<CAPTION>
Number of Securities
Number of Dollar Underlying Unexercised Value of Unexerised
Shares Value Options at Fiscal Year In-the-Money Options
Acquired on Realized End (#) at Fiscal Year End ($)(2)
Exercise -------- ------------------------- -------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Jeffery...... 67,500 $354,825 127,499 180,000 $166,574 $907,425
William M. Curran, Jr. . -- -- 15,000 125,500 56,772 150,108
Steven M. Hornyak....... -- -- 14,610 85,390 58,050 163,731
Arthur G. Walsh, Jr. ... -- -- 6,000 24,000 17,985 71,940
Sally M. Foster......... 3,000 39,000 9,000 48,000 20,970 143,880
</TABLE>
- --------

(1) Dollar values were calculated based on the difference between the fair
market value of the underlying common stock on the date of exercise and the
exercise price per share.

(2) Dollar values were calculated determining the difference between the fair
market value of the underlying securities at December 31, 1998 ($6.00 per
share) and the exercise price of the options.

55
<PAGE>

Employee Benefit Plans

1992 Stock Option Plan. We adopted our 1992 Stock Option Plan (the "1992 Stock
Option Plan") on November 22, 1992. The aggregate number of shares reserved for
issuance under the 1992 Stock Option Plan is 1,633,938 shares. As of February
28, 1999, options to purchase 1,362,881 shares of common stock were outstanding
under the 1992 Stock Option Plan at exercise prices ranging from $0.67 to
$10.00 per share and a weighted average exercise price of $3.01 per share.
Options granted under the 1992 Stock Option Plan generally vest in installments
over a period of four years with 20% of the options vested 12 months from the
date of grant, 40% vested 24 months from the date of grant, 70% vested 36
months from the date of grant and 100% vested 48 months after the date of
grant. We have accelerated the vesting of certain options granted from January
through March 1998 under the 1992 Stock Option Plan. As of February 28, 1999,
251,471 shares of common stock have been issued pursuant to the exercise of
options granted under the 1992 Stock Option Plan. The purpose of the 1992 Stock
Option Plan is to provide incentives for key employees, officers, consultants
and directors to promote our success, and to enhance our ability to attract and
retain the services of such persons. The majority of all options granted under
the 1992 Stock Option Plan are intended to qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1985 as amended (the "Code").

The 1992 Stock Option Plan is administered by the Compensation Committee of the
Board of Directors. The Compensation Committee has the authority to determine
exercise prices applicable to the options, the eligible officers, directors,
consultants or employees to whom options may be granted, the number of shares
of our common stock subject to each option and the extent to which options may
be exercisable.

1998 Stock Incentive Plan. In February 1998, the Board of Directors adopted and
the stockholders approved the SQL 1998 Stock Incentive Plan (the "1998 Stock
Plan"). Under the 1998 Stock Plan, the Board of Directors, or the Compensation
Committee of the Board of Directors, has the flexibility to determine the type
and amount of awards to be granted to eligible participants. The 1998 Stock
Plan is intended to secure for us and our stockholders the benefits arising
from ownership of our Common Stock by individuals we employ or retain who will
be responsible for the future growth of the enterprise. The 1998 Stock Plan is
designed to help attract and retain superior personnel for

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positions of substantial responsibility with us (including advisory
relationships where appropriate), and to provide individuals with an additional
incentive to contribute to our success.

The Board or the Compensation Committee may make the following types of grants
under the 1998 Stock Plan, each of which will be an "Award": (i) incentive
stock options ("ISOs"); (ii) nonqualified stock options ("NSOs"); (iii)
restricted stock awards ("Restricted Stock Awards"); (iv) stock appreciation
rights ("SARs"); and (v) restricted units ("Restricted Units"). Our officers,
key employees, employee directors, consultants and other independent
contractors or agents who are responsible for or contribute to the management
growth or profitability of our business will be eligible for selection by the
Board of Directors or the Compensation Committee to participate in the 1998
Stock Plan, provided, however, that ISOs may be granted only to a person we
employ.

We have authorized and reserved for issuance an aggregate of 1,000,000 shares
of our common stock under the 1998 Stock Plan. As of February 28, 1999 options
to purchase 845,512 shares of common stock were outstanding under the 1998
Stock Plan with exercise prices ranging from $3.81 to $10.00 per share and a
weighted average exercise price of $7.24 per share. We have accelerated the
vesting of certain options granted from January through March 1998 under the
1998 Stock Plan. The aggregate number of shares of common stock that may be
granted through Awards under the 1998 Stock Plan to any employee in any
calendar year may not exceed 200,000 shares. The shares of common stock or
treasury shares issuable under the 1998 Stock Plan are authorized but unissued
shares. If any of the Awards granted under the 1998 Stock Plan expire,
terminate or are forfeited for any reason before they have been exercised,
vested or issued in full, the unused shares subject to those expired,
terminated or forfeited Awards will again be available for grant under the 1998
Stock Plan. The 1998 Stock Plan will continue in effect until February 2008
unless sooner terminated under the provisions of the 1998 Stock Plan.

The 1998 Stock Plan is administered by the Board of Directors or upon its
delegation to the Compensation Committee of the Board of Directors, by the
Compensation Committee, consisting of not less than two directors who are "non-
employee directors" (within the meaning of SEC Rule 16b-3 promulgated pursuant
to the Securities Exchange Act of 1934, as amended), so long as non-employee
director administration is required under Rule 16b-3, and who are "outside
directors" (as defined in Section 162(m) of the Code), so long as outside
directors are required by the Code. Subject to the foregoing limitations, as
applicable, the Board of Directors may from time to time remove members from
the Compensation Committee, fill all vacancies on the Compensation Committee,
however caused, and may select one of the members of the Compensation Committee
as its chairman. The Compensation Committee may hold meetings at such times and
places as they may determine, will keep minutes of their meetings, and may
adopt, amend and revoke rules and procedures in accordance with the terms of
the 1998 Stock Plan.

401(k) Retirement Savings Plan. We maintain a Section 401(k) Retirement Savings
Plan (the "401(k) Plan"). The 401(k) Plan is intended to be a tax-qualified
defined contribution plan under Section 401(k) of the Code. In general, our
employees who have completed six consecutive months of service with us and are
over 21 years of age may elect to participate in the 401(k) Plan. Under the
401(k) Plan, participants may elect to defer a portion of their compensation,
subject to certain Code limitations. In addition, at the discretion of the
Board of Directors and subject to certain Code limitations, we may make profit
sharing contributions into the 401(k) Plan. We currently do not

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match contributions. A separate account is maintained for each participant in
the 401(k) Plan, which account is 100% vested. Distributions from the 401(k)
Plan may be in the form of a lump-sum payment in cash or property or in the
form of an annuity.

Elekom's 401(k) Retirement Savings Plan is also currently in existence. We
anticipate merging Elekom's 401(k) plan in the 401(k) Plan on January 1, 1999.

Agreements with Employees

In February 1998, we entered into an agreement with Joseph S. McCall whereby
Mr. McCall resigned as our Chief Executive Officer and as Chairman, Chief
Executive Officer and Manager of the Services Subsidiary. Mr. McCall agreed to
remain an employee at his current salary, including incentive compensation,
until the completion of our initial public offering, at which time he became a
consultant to us for a period of one year pursuant to the terms of an
Independent Contractor Agreement. For his consulting services, we will pay
Mr. McCall the sum of $125,000 over the one year period, with the ability to
earn an additional $100,000 in incentive compensation if certain revenue
targets. In recognition of his past services, Mr. McCall's agreement to allow
the termination of the common stock voting trust agreement, and his resignation
as CEO, we paid Mr. McCall a lump sum of $225,000 and will pay Mr. McCall as
severance an additional $75,000 payable in semi-monthly installments over a one
year period beginning on the effective time of the termination of his
employment with us.

We generally enter into confidentiality and nondisclosure agreements with our
employees. Pursuant to the terms of these agreements, employees agree to
confidentiality restrictions, employee and customer nonsolicitation covenants
and assignment of inventions.

Compensation Committee Interlocks and Insider Participation

Our Compensation Committee reviews and approves compensation and benefits for
our key executive officers, administers our stock option plans and makes
recommendations to the Board regarding such matters. No member of the
Compensation Committee serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of our Board or Compensation Committee.

Limitation of Liability and Indemnification of Officers and Directors

Our By-Laws and our Amended and Restated Certificate of Incorporation (the
"Restated Certificate") provide that our directors and officers shall be
indemnified by us to the fullest extent authorized by Delaware law, as it now
exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for us or on our behalf. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons pursuant to the
Restated By-Laws, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. We have obtained insurance which insures
our directors and officers against certain losses and which insures us against
certain of our obligations to indemnify such directors and officers. In
addition, the Restated Certificate provides that our directors will not be

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personally liable for monetary damages to us for breaches of their fiduciary
duty as directors, unless they violated their duty of loyalty to us or our
stockholders, acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors. Such limitations of personal liability
under the Delaware Business Corporation Law do not apply to liabilities arising
out of certain violations of the federal securities laws. While non-monetary
relief such as injunctive relief, specific performance and other equitable
remedies may be available to us, such relief may be difficult to obtain or, if
obtained, may not adequately compensate us for our damages.

There is no pending litigation or proceeding involving any of our directors,
officers, employees or agents where our indemnification will be required or
permitted. We are not aware of any threatened litigation or proceeding that
might result in a claim for such indemnification.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of our common stock as of February 15, 1999, by: (i) each person
known by us to be the beneficial owner of more than 5% of our common stock;
(ii) each of our directors; (iii) each Named Executive Officer who is a
beneficial owner of our common stock (see "Management--Executive
Compensation"); and (iv) all executive officers and directors as a group.

<TABLE>
<CAPTION>
Percentage of
Number of Common Stock
Shares Percentage of Outstanding
Beneficially Common Stock After
Name of Beneficiary Owner Owned(1) Outstanding(2) Offering
------------------------- ------------ -------------- -------------
<S> <C> <C> <C>
Technology Crossover Management,
L.L.C.(3)........................... 1,710,934 15.6% 15.6%
Joseph S. McCall(4).................. 999,713 9.1 4.6
William S. Kaiser(5)................. 992,006 9.1 9.1
Greylock Limited Partnership(5)...... 986,381 9.0 9.0
NationsBank Corporation(6)........... 925,201 8.5 8.5
HarbourVest Partners IV--Direct Fund
L.P.(7)............................. 870,155 7.9 7.9
Sutter Hill Ventures, a California
limited Partnership(8).............. 741,805 6.8 6.8
Highland Capital Partners II Limited
Partnership(9)...................... 594,683 5.4 5.4
HumWin Venture Partners III,
L.P.(10)............................ 590,119 5.4 5.4
Tench Coxe(11)....................... 584,909 5.3 5.3
Norman N. Behar(12).................. 282,543 2.9 2.9
Stephen P. Jeffery(13)............... 201,299 1.8 1.8
Donald L. House(14).................. 81,874 * *
Arthur G. Walsh, Jr.(19)............. 70,254 * *
Said Mohammadioun(15)................ 39,875 * *
William M. Curran, Jr.(17)........... 23,100 * *
Steven M. Hornyak(16)................ 16,260 * *
Sally M. Foster(18).................. 14,000 * *
Mark A. Johnson(20).................. 5,625 * *
All executive officers and directors
as group (14 persons)............... 2,357,989 21.5% 21.5%
</TABLE>
- --------

(1) Beneficial ownership is determined in accordance with the rules of the
SEC. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock issuable
by us pursuant to options held by the respective person or group which may
be exercised within 60 days after February 15, 1999 ("Presently
Exercisable Options") are included. Except as otherwise indicated, each
stockholder named in the table has sole voting and investment power with
respect to the shares set forth opposite such stockholder's name.

(2) Presently Exercisable Options are deemed to be outstanding and to be
beneficially owned by the person or group holding such options for the
purpose of computing the percentage ownership of such person or group but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person or group.

(3) Includes (i) 74,866 shares of common stock owned by Technology Crossover
Ventures II, L.P.; (ii) 647,675 shares of common stock owned by Technology
Crossover Ventures I, L.P. ("TCVLP"); (iii) 51,292 shares of common stock
owned by Technology Crossover Ventures, C.V. ("TCVCV"); (iv) 57,558 shares
of common stock owned by Technology Crossover Ventures (Q), L.P.;
(v) 10,215 shares of common stock owned by Technology Crossover Ventures
II Strategic Partners, L.P.; (v) 11,430 shares of common stock owned by
Technology Crossover Ventures II, C.V.; (vi) 2,431 shares of common stock
owned by Technology Crossover Ventures II, V.O.F.; (vii) 156,500 shares of
common stock owned by Technology Crossover Management II, L.L.C.; and
(viii) 698,967 shares of common stock owned by Technology Crossover
Management, L.L.C. Technology Crossover Management, L.L.C. is the sole
general partner of TCVLP and the sole investment general partner of TCVCV.
The

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<PAGE>

managing members of Technology Crossover Management, L.L.C. are Jay C. Hoag
and Richard H. Kimball. Technology Crossover Ventures' address is 575 High
Street, Suite 400, Palo Alto, California 94301. Information with respect to
Technology Crossover Management, L.L.C. is provided in reliance upon
information included in an amendment to Schedule 13G dated June 17, 1998,
filed with the SEC on February 3, 1999.

(4) Includes 45,000 shares of common stock held in a trust. As the sole
manager, Mr. McCall is also deemed to be the beneficial owner of
Technology Ventures LLC, which owns 628,950 shares of our common stock.

(5) Mr. Kaiser, one of our directors, has voting control over our securities
held by Greylock Limited Partnership. The managing partners of Greylock
Limited Partnership are Robert P. Henderson and Henry McCance. Greylock
Limited Partnership's address is One Federal Street, Boston, Massachusetts
02110. For Mr. Kaiser, includes 5,625 shares of common stock issuable upon
the exercise of Presently Exercisable Options and includes 986,381 shares
held by Greylock Limited Partnership, with which Mr. Kaiser is affiliated.

(6) Consists of 312, 501 shares owned by MS Spitfire LLC, 312,501 shares owned
by Spitfire Capital Partners LP and 393,001 shares owned by NationsBanc
Montgomery Securities LLC. Information with respect to NationsBank
Corporation ("NationsBank") is provided in reliance upon information
included in a Schedule 13G dated September 10, 1998, filed with the SEC by
NationsBank. NationsBank's address is 101 South Tryon Street, NationsBank
Plaza, Charlotte, North Carolina 28255.

(7) Includes 43,507 shares of common stock owned by Falcon Ventures II, L.P.
("Falcon"). Falcon is an affiliate of HarbourVest Partners IV--Direct Fund
L.P. ("HarbourVest"). Both Falcon and HarbourVest are beneficially owned
by Edward W. Kane, D. Brooks Zug, George R. Anson, Kevin Delbridge,
William A. Johnston, Frederick C. Maynard, Ofer Nemirovsky and Robert M.
Wadsworth. HarbourVest's address is One Financial Center, Boston,
Massachusetts 02111. Information with respect to HarbourVest is provided
on reliance upon information included in a Schedule 13G dated December 31,
1998, filed with the SEC on February 3, 1999.

(8) Includes (i) 498,474 shares of common stock owned by Sutter Hill Ventures,
a California Limited Partnership ("Sutter Hill"); (ii) 46,412 shares of
common stock held by TOW Partners, a California Limited Partnership; (iii)
196,919 shares of common stock held of record for other individuals or
entities associated with Sutter Hill (the "Sutter Hill Affiliates"); and
(iv) 21,810 shares owned by Mr. Coxe, a member of our Board of Directors,
who is a Managing Director of the General Partner of Sutter Hill and
shares voting and investment power with respect to the shares of common
stock held by Sutter Hill. Sutter Hill's address is 755 Page Mill Road,
Suite A-200, Palo Alto, California 94304-1005. Information with respect to
Sutter Hill is provided in reliance upon information included in a
Schedule 13G dated December 31, 1998 filed with the SEC on February 9,
1999.

(9) Includes 594,683 shares of common stock owned by Highland Capital Partners
II Limited Partnership ("Highland Capital"). The general partner of
Highland Capital is Highland Management Partners II. The general partners
of Highland Management Partners II are Robert F. Higgins, Paul A. Maeder,
Daniel J. Nova and Wycliff K. Grousbeck. Highland Capital's address is One
International Place, Boston, Massachusetts 02110. Information with respect
to Highland Capital is provided on reliance upon information included in a
Schedule 13G dated December 31, 1998, filed on February 11, 1999.

(10) Includes 29,506 shares owned by HumWin Tech. Fund III, L.P. HumWin Venture
Partners, L.P.'s address is Two South Park, San Francisco, California
94107.

(11) Includes 5,625 shares of common stock issuable upon the exercise of
Presently Exercisable Options and 719,995 shares of common stock held by
Sutter Hill Ventures, a California Limited Partnership ("Sutter Hill") and
its affiliates. Mr. Coxe, a member of our Board of Directors, is a
managing director of the general partner of Sutter Hill and shares voting
and investment power with respect to the shares of common stock held by
Sutter Hill. Mr. Coxe disclaims beneficial ownership of the shares held by
Sutter Hill and affiliates, except as to the shares held of record in his
name and as to his partnership interest in Sutter Hill.

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<PAGE>

(12) Includes 131,999 shares subject to Presently Exercisable Options.

(13) Includes 15,000 shares of common stock issuable upon the exercise of
Presently Exercisable Options.

(14) Includes 5,625 shares of common stock issuable upon the exercise of
Presently Exercisable Options.

(15) Includes 16,875 shares of common stock issuable upon the Exercisable
Options.

(16) Consists of common stock issuable upon the exercise of Presently
Exercisable Options.

(17) Consists of shares of common stock issuable upon the exercise of Presently
Exercisable Options.

(18) Includes 9,000 shares of common stock issuable upon the exercise of
Presently Exercisable Options.

(19) Includes 7,500 shares of common stock issuable upon the exercise of
Presently Exercisable Options.

(20) Consists of common stock issuable upon the exercise of Presently
Exercisable Options.

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<PAGE>

CERTAIN TRANSACTIONS

During 1996 and 1997, McCall Consulting Group, Inc. ("MCG"), an entity owned by
Tech Ventures and controlled by our former Chief Executive Officer and
Director, Joseph S. McCall, provided to us:

. temporary services by administrative employees;

. third-party consulting services in connection with several product
development projects;

. the lease of office equipment and office space in our prior headquarters
facility; and

. services in connection with our sales process.

We paid MCG approximately $1.6 million and $1.4 million, respectively, during
1997 and 1996 for these services. In February 1998, we entered into an
Independent Contractor Agreement with MCG providing for the performance of
services by MCG for us and the assignment to us of the intellectual property
rights associated with the performance of such services. In addition, in
February 1998, we granted to Tech Ventures and MCG a royalty-free license to
use our current products as well as certain of our to-be-adjusted future
products, and agreed to provide to MCG without charge ongoing support services
as long as Tech Ventures owns at least 100,000 shares of our common stock and
has not modified the software. We may terminate this license agreement if a
competitor acquires any interest in either MCG or Tech Ventures.

On February 5, 1998, Tech Ventures sold its 20% interest in the Services
Subsidiary to us in exchange for 225,000 shares of our common stock, a warrant
to purchase an additional 300,000 shares of common stock at an exercise price
of $3.67 per share and a non-interest bearing two-year promissory note in the
principal amount of $1.1 million, giving us 100% ownership of the Services
Subsidiary. We granted Tech Ventures certain registration rights and agreed to
register in initial public offering 497,700 shares of common stock owned by
Tech Ventures (comprised of 272,700 of the 450,000 shares originally issued to
Tech Ventures in March 1995 and 225,000 shares issued on February 5, 1998) and
to maintain the effectiveness of such registration for a period of two years.
In addition, immediately prior to the purchase and sale, the Services
Subsidiary distributed approximately $241,000 to Tech Ventures as their portion
of accumulated unpaid profits earned by the Services Subsidiary prior to
February 5, 1998. All of the material terms of the purchase were agreed upon by
Tech Ventures and us in January 1998, including the number of shares to be
issued to Tech Ventures. The transaction was approved by our Board of Directors
and consummated on February 5, 1998.

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<PAGE>

In February 1998, the Services Subsidiary also paid Tech Ventures approximately
$33,000 as consideration for the termination of the Management Services
Agreement entered into between the parties in March 1995, and Tech Ventures
paid in full to the Services Subsidiary the remaining principal balance and
accrued interest of approximately $33,000 due under the Tech Ventures Note. In
February 1998, we entered into certain severance and related agreements with
Joseph S. McCall in connection with his resignation as our Chief Executive
Officer. In connection therewith, we paid Mr. McCall $225,000, severance in the
amount of $75,000 payable over a one year period beginning on May 26, 1998, and
entered into an Independent Contractor Agreement whereby Mr. McCall will serve
as a consultant to us for one year for $125,000 in compensation, with the
ability to earn an additional $100,000 in incentive compensation. See
"Management--Agreements with Employees." Tech Ventures provided recruiting
services to us from January 1996 through January 1997 in the amount of
$339,302. In addition, pursuant to a Management Services Agreement, Tech
Ventures received $25,000 for certain administrative services rendered to the
Services Subsidiary during each of 1997 and 1996.

We believe that all transactions set forth above were made on terms no less
favorable to us than would have been obtained from unaffiliated third parties.

CAPITAL STOCK

Our authorized capital stock consists of 25,000,000 shares of common stock,
$.0001 par value per share, and 5,000,000 shares of preferred stock, $.0001 par
value per share.

Common Stock

As of March 25, 1999, there were 10,957,229 shares of common stock issued and
outstanding and held of record by 126 stockholders. Holders of common stock are
entitled to one vote for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights. Accordingly, holders of
a majority of the shares of common stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of funds legally available therefor,
subject to any preferential dividend rights of outstanding preferred stock.
Upon the liquidation, dissolution or winding up, the holders of common stock
are entitled to receive ratably our net assets available after the payment of
all debts and other liabilities and subject to the prior rights of any
outstanding preferred stock. Holders of the common stock have no preemptive,
subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock which we may designate and issue in the future.

Preferred Stock

The Board of Directors is authorized, subject to certain limitations prescribed
by law, without further stockholder approval, to issue from time to time up to
an aggregate of 5,000,000 shares of preferred stock in one or more series and
to fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof,
including the

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<PAGE>

dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares constituting any series or
designations of such series. The issuance of preferred stock may have the
effect of delaying, deferring or preventing our change of control. We have no
present plans to issue any shares of preferred stock. We believe that the
preferred stock will provide us with increased flexibility in structuring
possible future financings and acquisitions, and in meeting other corporate
needs that might arise. Having such authorized shares available for issuance
will allow us to issue shares of preferred stock without the expense and delay
of holding a special stockholders' meeting. The authorized shares of preferred
stock, as well as shares of common stock, will be available for issuance
without further action by stockholders, unless such action is required by
applicable law or the rules of any stock exchange or quotation system on which
our securities may be listed or quoted.

Delaware Law and Certain Provisions of Our Restated Certificate and By-Laws

We are subject to Section 203 ("Section 203") of the Delaware General
Corporation Law (the "Delaware Code"), which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder, unless:

. prior to such date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder's becoming an interested stockholder;

. upon consummation of the transaction which resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (a) by persons who are
directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or

. on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.

Section 203 defines business combinations to include:

. any merger or consolidation involving the corporation and the interested
stockholder;

. any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;

. subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;

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<PAGE>

. any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series
of the corporation beneficially owned by the interested stockholder; or

. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an interested
stockholder as an entity or person beneficially owning 15% or more of
the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.

Our Amended and Restated Certificate of Incorporation (the "Certificate")
provides for the classification of our Board of Directors. These and other
provisions could have the effect of making it more difficult to acquire us by
means of a tender offer, proxy contest or otherwise or to remove our incumbent
officers and directors. These provisions may discourage certain types of
coercive takeover practices and encourage persons seeking to acquire control of
us to first negotiate with us. Our Certificate does not provide preemptive
rights to our stockholders.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is First Union National
Bank of North Carolina, N.A.

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

We have approximately 11,000,000 shares of common stock outstanding (assuming
no exercise of outstanding stock options). The 522,395 shares sold in this
offering, will be freely tradable without restriction or further registration
under the Securities Act, except that any shares purchased by our "affiliates,"
as that term is defined in Rule 144 ("Rule 144") under the Securities Act
("Affiliates"), may generally only be sold in compliance with the limitations
of Rule 144 described below.

Lock-up Agreements

All preferred shareholders of Elekom and Norman Behar, who in the aggregate
hold 1,305,985 shares of common stock following the merger have agreed,
pursuant to the Lock-up Agreements, that they will not, without our prior
written consent, offer, sell, contract to sell or otherwise dispose of,
directly or indirectly, any shares of common stock beneficially owned by them
until August 6, 1999. In addition, the holders of stock options granted during
the period January 1, 1998 through April 1, 1998, whose options have been fully
vested have entered into Lock-up Agreements restricting the sale or transfer of
283,343 shares for a four year period following the date hereof, with 25% of
such shares being released from such restriction on each anniversary of May 26,
1998.

Sales of Restricted Shares

In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated with those of others), including an Affiliate, who has
beneficially owned Restricted Shares for at least one year is entitled to sell,
within any three-month period, a number of such shares that does not exceed the
greater of (i) one percent of the then outstanding shares of common stock or
(ii) the average weekly trading volume in the common stock on the Nasdaq
National Market during the four calendar weeks preceding the date on which
notice of such sale is filed. Sales under Rule 144 are also subject to certain
limitations on manner of sale, notice requirements, and availability of current
public information about us. In addition, under Rule 144(k), a person who is
not an Affiliate and has not been an Affiliate for at least three months prior
to the sale and who has beneficially owned Restricted Shares for at least two
years may resell such shares without compliance with the foregoing
requirements. In meeting the one and two year holding periods described above,
a holder of Restricted Shares can include the holding periods of a prior owner
who was not an Affiliate.

Rule 701 under the Securities Act provides that the shares of common stock
acquired on the exercise of currently outstanding options may be resold by
persons, other than Affiliates, subject only to the manner of sale provisions
of Rule 144, and by Affiliates under Rule 144 without compliance with its one-
year minimum holding period, subject to certain limitations.

Stock Options

As of February 28, 1999, an additional 271,057 shares of common stock were
available for future grants under our 1992 Stock Option Plan and 154,488 shares
of common stock were available for future grants under our 1998 Stock Plan. See
"Management--Stock Option Plans and Warrants."

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We have filed a registration statement on Form S-8 under the Securities Act to
register all shares of common stock issuable pursuant to our stock option
plans. Common stock covered by these registration statements will thereupon be
eligible for sale in the public markets, subject to the Lock-up Agreements.

Registration Rights

The holders of approximately 5,800,000 shares of common stock (the "Registrable
Securities") or their transferees (the "Holders"), are entitled to certain
demand and/or piggy-back registration rights with respect to the Registrable
Securities. These rights are provided under agreements between us and the
holders of the Registrable Securities. Such agreements provide that certain of
the holders are entitled, upon the request of the Holders of 50% of the
Registrable Securities, to require us to use our best efforts to register their
Registrable Securities, under the Securities Act (the "Demand Registration
Rights"). In addition, all of the Holders are entitled, subject to certain
limitations, to require us to use our best efforts to include their shares of
common stock in future registration statements filed by us under the Securities
Act (the "Piggyback Registration Rights"). Certain of the Holders of
Registrable Securities are also entitled, to require us to use our best efforts
to register their shares of common stock on Form S-3 (the "S-3 Registration
Rights"). We are not required to effect more than two registrations under the
Demand Registration Rights. Registration of shares pursuant to the exercise of
Demand Registration Rights, S-3 Registration Rights or Piggyback Registration
Rights under the Securities Act would result in such shares becoming freely
tradeable without restriction under the Securities Act immediately upon the
effectiveness of such registration statement.

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<PAGE>

PLAN OF DISTRIBUTION

The common stock may be sold by the selling stockholders, from time to time
while the Registration Statement to which this Prospectus relates is effective,
on the Nasdaq National Market or otherwise at prices and terms prevailing at
the time of sale, at prices and terms related to such prevailing prices and
terms, in negotiated transactions or at fixed prices. Although the selling
stockholders have advised us of the manner in which they currently intend to
sell the shares of common stock, the selling stockholders may choose to sell
all or a portion of such shares from time to time in any manner described
herein. The methods by which the shares may be sold by the selling stockholders
include, without limitation:

. ordinary brokerage transactions, which may include long or short sales,

. transactions which involve crosses or block trades or any other
transactions permitted by the Nasdaq National Market,

. purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this Prospectus,

. ""at the market" to or through market makers or into an existing market
for the common stock,

. in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through
agents,

. through transactions in options or swaps or other derivatives (whether
exchange-listed or otherwise), or

. any combination of any such methods of sale. In effecting sales, brokers
and dealers

engaged by any of the selling stockholders may arrange for other brokers or
dealers to participate. Brokers or dealers may receive commissions or discounts
from the selling stockholders to sell a specified number of shares at a
stipulated price per share, and, to the extent such a broker or dealer is
unable to do so acting as agent for the selling stockholders, may purchase as
principal any unsold shares at the price required to fulfill such broker or
dealer commitment to the selling stockholders. Brokers or dealers who acquire
shares as principals may thereafter resell such shares from time to time in
transactions (which may involve crosses and block transactions and which may
involve sales to and through other brokers or dealers, including transactions
of the nature described above) in the over-the-counter market, in negotiated
transactions or otherwise, at market prices and terms prevailing at the time of
sale, at prices and terms related to such prevailing prices and terms, in
negotiated transactions or at fixed prices and in connection with the methods
as described above. The shares may be sold directly by the selling stockholders
or by pledgees, donees, transferees or other successors in interest.

We will maintain the effectiveness of the registration of the common stock
offered hereby until May 26, 2000, two years from the effective date of our
initial public offering or the date on which the shares offered hereby, in the
opinion of counsel, may be sold by the selling stockholders pursuant to Rule
144 of the Securities Act (without regard to volume limitations). Any shares
which qualify for sale pursuant to Rule 144 under the Securities Act may be
sold under that Rule rather than pursuant to this Prospectus. There can be no
assurance that the selling stockholders will sell any or all of the shares
offered hereby.

69
<PAGE>

We are bearing all of the costs relating to the registration of the shares
including fees of counsel. Any commissions, discounts or other fees payable to
a broker, dealer, underwriter, agent or market maker in connection with the
sale of any of the shares will be borne by the selling stockholders.

In the Acquisition Agreement dated February 5, 1998, we have agreed to
indemnify Tech Ventures, a selling stockholder, any person who controls Tech
Ventures, and any underwriters for Tech Ventures, against certain liabilities
and expenses arising out of or based upon the information set forth in this
Prospectus, and the Registration Statement of which this Prospectus is a part,
including liabilities under the Securities Act, and if such indemnification is
held by a court to be unavailable, to contribute to the amount of such
liabilities and expenses.

The selling stockholders and any brokers participating in such sales may be
deemed to be underwriters within the meaning of Section 2(11) of the Securities
Act. Any commissions paid or any discounts or concessions allowed to any
broker, dealer, underwriter, agent or market maker and, if any such broker,
dealer, underwriter, agent or market maker purchases any of the shares as
principal, any profits received on the resale of such shares, may be deemed to
be underwriting commissions or discounts under the Securities Act.

Because the selling stockholders may be deemed to be underwriters, the selling
stockholders will be subject to prospectus delivery requirements under the
Securities Act. Furthermore, in the event the selling stockholders are deemed
underwriters and a sale of shares is deemed to be a "distribution" or part of a
distribution of the shares, the selling stockholders, any selling broker or
dealer and any "affiliated purchasers" may be subject to Regulation M under the
Exchange Act, which prohibits, with certain exceptions, any such person from
bidding for or purchasing any security which is the subject of such
distribution until his participation in that distribution is completed. In
addition, Regulation M prohibits, with certain exceptions, any "stabilizing
bid" or "stabilizing purchase" for the purpose of pegging, fixing or
stabilizing the price of common stock in connection with this offering.

EXPERTS

Our audited consolidated financial statements and schedule as of December 31,
1998 and 1997 and for each of the three years in the period ended December 31,
1998 included in this Prospectus and elsewhere in this registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports thereto and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

LEGAL MATTERS

Certain legal matters will be passed on by Womble Carlyle Sandridge & Rice,
PLLC, Atlanta, Georgia.

WHERE YOU CAN FIND MORE INFORMATION

At your request, we will provide you, without charge, a copy of any exhibits to
our registration statement. If you want an exhibit or more information, write
or call us at:

Clarus Corporation

3970 John's Creek Court

Suite 100

Suwanee, Georgia 30024

Telephone: (770) 291-4956

Fax: (770) 291-4997

70
<PAGE>

Our fiscal year ends on December 31. We file annual, quarterly, and special
reports, proxy statements and other information with the Securities and
Exchange Commission. You may read and copy any reports, statements or other
information we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at http://www.sec.gov.

71
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Clarus Corporation Financial Statements:
Report of Independent Public Accountants................................... F-1
Consolidated Balance Sheets as of December 31, 1997 and 1998............... F-2
Consolidated Statements of Operations for the Years Ended December 31,
1996, 1997 and 1998....................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 1996, 1997
and 1998.................................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1997 and 1998....................................................... F-6
Notes to Consolidated Financial Statements for the Years Ended December 31,
1996, 1997 and 1998....................................................... F-7
</TABLE>

72
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Clarus Corporation

and Subsidiaries:

We have audited the accompanying consolidated balance sheets of CLARUS
CORPORATION (a Delaware corporation and formerly SQL Financials International,
Inc.) AND SUBSIDIARIES as of December 31, 1997 and 1998 and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the three years in the period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Clarus Corporation
and subsidiaries as of December 31, 1997 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.

/s/ Arthur Andersen LLP

Atlanta, Georgia

January 29, 1999

F-1
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1997 AND 1998

(in thousands, except share and per share amounts)

ASSETS

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................................. $ 7,213 $14,799
Accounts receivable, less allowance for doubtful accounts
of $338 and $401 in 1997 and 1998, respectively........... 4,052 8,998
Prepaid and other current assets........................... 492 553
------- -------
Total current assets..................................... 11,757 24,350
------- -------
PROPERTY AND EQUIPMENT:
Furniture and equipment.................................... 3,094 6,230
Leasehold improvements..................................... 280 351
------- -------
Total property and equipment............................. 3,374 6,581
Less accumulated depreciation.............................. (1,867) (3,127)
------- -------
Property and equipment, net.............................. 1,507 3,454
------- -------
OTHER ASSETS:
Intangible assets, net of accumulated amortization of
$1,127 and $1,967 in 1997 and 1998, respectively.......... 1,267 11,963
Deposits and other long-term assets........................ 150 315
------- -------
Total other assets....................................... 1,417 12,278
------- -------
Total assets............................................. $14,681 $40,082
======= =======
</TABLE>

F-2
<PAGE>

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued liabilities................. $ 4,598 $ 7,417
Accounts payable-related party........................... 54 9
Deferred revenue......................................... 5,717 7,397
Current maturities of long-term debt and capital lease
obligations............................................. 1,841 526
-------- --------
Total current liabilities.............................. 12,210 15,349
LONG-TERM LIABILITIES:
Deferred revenue......................................... 4,480 2,302
Long-term debt and capital lease obligations, net of cur-
rent maturities......................................... 497 245
Other long-term liabilities.............................. 49 75
-------- --------
Total liabilities...................................... 17,236 17,971
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 11)
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY............. 243 0
-------- --------
REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series A, 262,500 shares issued and outstanding in 1997.. 1,050 0
Series B, 454,888 shares issued and outstanding in 1997.. 3,025 0
Series C, 428,572 shares issued and outstanding in 1997.. 3,000 0
Series D, 701,755 shares issued and outstanding in 1997.. 6,000 0
Series E, 697,675 shares issued and outstanding in 1997.. 6,000 0
Series F, 628,809 shares issued and outstanding in 1997.. 6,037 0
-------- --------
Total redeemable convertible preferred stock........... 25,112 0
-------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $1 and $.0001 par value in 1997 and
1998, respectively; 3,500,000 and 5,000,000 shares
authorized in 1997 and 1998, respectively; 3,174,199
shares disclosed above as redeemable convertible
preferred stock issued and outstanding in 1997 and 0
shares issued and outstanding in 1998................... 0 0
Common stock, $.0001 par value; 9,000,000 and 25,000,000
shares authorized in 1997 and 1998, respectively;
1,467,160 and 11,002,508 shares issued in 1997 and 1998,
respectively............................................ 0 1
Additional paid-in capital............................... 489 61,393
Accumulated deficit...................................... (28,019) (38,721)
Warrants................................................. 652 40
Less treasury stock, 75,000 shares at cost............... (2) (2)
Note from stockholder.................................... (612) 0
Deferred compensation.................................... (418) (600)
-------- --------
Total stockholders' equity (deficit)................... (27,910) 22,111
-------- --------
Total liabilities and stockholders' equity (deficit)... $ 14,681 $ 40,082
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-2
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998

(in thousands, except per share amounts)

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
REVENUES:
License fees..................................... $ 6,425 $13,506 $ 17,372
Services fees.................................... 3,984 7,786 16,477
Maintenance fees................................. 2,647 4,696 7,791
------- ------- --------
Total revenues................................. 13,056 25,988 41,640
------- ------- --------
COST OF REVENUES:
License fees..................................... 416 1,205 1,969
Services fees.................................... 2,904 5,338 10,353
Maintenance fees................................. 1,350 1,973 3,599
------- ------- --------
Total cost of revenues......................... 4,670 8,516 15,921
------- ------- --------
OPERATING EXPENSES:
Research and development......................... 5,360 6,690 6,335
Purchased research and development............... 0 0 10,500
Sales and marketing.............................. 7,191 9,515 11,802
General and administrative....................... 2,368 3,161 5,126
Depreciation and amortization.................... 1,125 1,406 2,154
Non-cash compensation............................ 0 58 880
------- ------- --------
Total operating expenses....................... 16,044 20,830 36,797
------- ------- --------
OPERATING LOSS..................................... (7,658) (3,358) (11,078)
INTEREST INCOME.................................... 0 34 636
INTEREST EXPENSE................................... (6) (308) (224)
MINORITY INTEREST.................................. (215) (478) (36)
------- ------- --------
NET LOSS........................................... $(7,879) $(4,110) $(10,702)
======= ======= ========
BASIC NET LOSS PER SHARE........................... $ (5.74) $ (2.97) $ (1.70)
======= ======= ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING......... 1,373 1,386 6,311
======= ======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-3
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998

(in thousands)

<TABLE>
<CAPTION>
Total
Common Stock Additional Treasury Stock Stockholders'
-------------- Paid-in Accumulated ---------------- Note From Deferred Equity
Shares Amount Capital Deficit Warrants Shares Amount Stockholder Compensation (Deficit)
------ ------ ---------- ----------- -------- ------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31,
1995............ 2,181 $ 0 $ 321 $(15,946) $ 612 (810) $ (302) $(612) $ 0 $(15,927)
Issuance costs,
redeemable
convertible
preferred
stock,
Series E....... 0 0 0 (34) 0 0 0 0 0 (34)
Issuance of
stock options.. 0 0 148 0 0 0 0 0 (148) 0
Exercise of
stock options.. 4 0 3 0 0 0 0 0 0 3
Net loss........ 0 0 0 (7,879) 0 0 0 0 0 (7,879)
------ --- ------- -------- ------- ------ ------- ----- ------- --------
BALANCE, DECEMBER
31, 1996........ 2,185 0 472 (23,859) 612 (810) (302) (612) (148) (23,837)
Issuance costs,
redeemable
convertible
preferred
stock,
Series F....... 0 0 0 (50) 0 0 0 0 0 (50)
Issuance of
warrants....... 0 0 0 0 40 0 0 0 0 40
Unamortized debt
discount....... 0 0 (22) 0 0 0 0 0 0 (22)
Issuance of
stock options.. 0 0 328 0 0 0 0 0 (328) 0
Amortization of
deferred
compensation... 0 0 0 0 0 0 0 0 58 58
Retirement of
treasury stock. (735) 0 (300) 0 0 735 300 0 0 0
Exercise of
stock options.. 17 0 11 0 0 0 0 0 0 11
Net loss........ 0 0 0 (4,110) 0 0 0 0 0 (4,110)
------ --- ------- -------- ------- ------ ------- ----- ------- --------
BALANCE, DECEMBER
31, 1997........ 1,467 0 489 (28,019) 652 (75) (2) (612) (418) (27,910)
Issuance of
common stock in
initial public
offering....... 2,500 0 21,962 0 0 0 0 0 0 21,962
Issuance of
stock in
acquisition of
ELEKOM
Corporation.... 1,391 0 7,615 0 0 0 0 0 0 7,615
Issuance of
warrant and
shares in
acquisition of
minority
interest in
Services
Subsidiary..... 225 0 1,800 0 1,400 0 0 0 0 3,200
Conversion of
preferred
stock.......... 4,788 1 25,262 0 0 0 0 0 0 25,263
Conversion of
note payable
for exercise of
warrant........ 300 0 1,012 0 0 0 0 0 0 1,012
Exercise of
warrants....... 132 0 2,012 0 (2,012) 0 0 612 0 612
Issuance of
stock options.. 0 0 1,062 0 0 0 0 0 (1,062) 0
Amortization of
deferred
compensation... 0 0 0 0 0 0 0 0 880 880
Exercise of
stock options.. 200 0 179 0 0 0 0 0 0 179
Net loss........ 0 0 0 (10,702) 0 0 0 0 0 (10,702)
------ --- ------- -------- ------- ------ ------- ----- ------- --------
BALANCE, December
31, 1998........ 11,003 $ 1 $61,393 $(38,721) $ 40 (75) $ (2) $ 0 $ (600) $ 22,111
====== === ======= ======== ======= ====== ======= ===== ======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-4
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998

(in thousands)

<TABLE>
<CAPTION>
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................... $(7,879) $ (4,110) $(10,702)
------- -------- --------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation.................................... 640 840 1,271
Amortization of intangible assets............... 485 566 883
Minority interest............................... 216 478 36
Amortization of debt discount................... 0 18 77
Purchased research and development.............. 0 0 10,500
Non-cash compensation........................... 0 58 880
Loss on sale of property and equipment.......... 0 46 0
Changes in operating assets and liabilities:
Accounts receivable, net....................... (352) (2,062) (5,089)
Prepaid and other current assets............... (31) (402) (66)
Deposits and other long-term assets............ (22) 23 (205)
Accounts payable and accrued liabilities....... 3 2,370 1,228
Deferred revenue............................... 4,180 2,178 (617)
Other long-term liabilities.................... (53) (14) 26
------- -------- --------
Total adjustments............................ 5,066 4,099 8,924
------- -------- --------
Net cash used in operating activities........ (2,813) (11) (1,778)
------- -------- --------
INVESTING ACTIVITIES:
Purchase of ELEKOM Corporation, net of cash
acquired........................................ 0 0 (8,450)
Purchases of property and equipment.............. (958) (1,193) (2,418)
Purchase of minority interest in consolidated
subsidiary...................................... 0 0 (392)
Proceeds from sale of property and equipment..... 0 10 0
Purchases of intangible software rights.......... (2,000) (50) (178)
------- -------- --------
Net cash used in investing activities........ (2,958) (1,233) (11,438)
------- -------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of redeemable convertible
preferred stock................................. 5,966 5,987 150
Proceeds from issuance of common stock in
initial public offering......................... 0 0 21,962
Proceeds from the exercise of options............ 3 11 179
Proceeds from notes payable and short-term
borrowings...................................... 2,472 42,633 1,645
Repayments of notes payable and short-term
borrowings...................................... (490) (43,201) (3,505)
Proceeds from preferred stock bridge financing... 0 2,000 0
Repayment of preferred stock bridge financing.... (2,000) (2,000) 0
Proceeds from exercise of warrants............... 0 0 612
Payments to holder of minority interest.......... 0 0 (241)
Repayment of note receivable from holder of
minority interest............................... 0 38 0
Dividends paid to holder of minority interest.... (234) (290) 0
------- -------- --------
Net cash provided by financing activities.... 5,717 5,178 20,802
------- -------- --------
CHANGE IN CASH AND CASH EQUIVALENTS............... (54) 3,934 7,586
CASH AND CASH EQUIVALENTS, beginning of year...... 3,333 3,279 7,213
------- -------- --------
CASH AND CASH EQUIVALENTS, end of year............ $ 3,279 $ 7,213 $ 14,799
======= ======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest........................... $ 153 $ 330 $ 161
======= ======== ========
NON-CASH TRANSACTIONS:
Issuance of stock in the acquisition of ELEKOM
Corporation (Note 1)............................ $ 0 $ 0 $ 7,615
======= ======== ========
Issuance of 225,000 shares of common stock,
warrants to purchase 300,000 shares of common
stock, and note payable for purchase of the
minority interest in consolidated subsidiary
(Note 3)........................................ $ 0 $ 0 $ 4,300
======= ======== ========
Conversion of preferred stock.................... $ 0 $ 0 $ 25,262
======= ======== ========
Conversion of note payable for exercise of
warrant......................................... $ 0 $ 0 $ 1,100
======= ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-5
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996, 1997, AND 1998

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Clarus Corporation (formerly SQL Financials International, Inc.) (the
"Company") develops, markets, supports, and provides installation and
implementation services for its Web-based commerce application and its
client/server financial software and service applications. The Company markets
its products under the trade name Clarus primarily in the United States and
Canada. The Company operates in a single segment as defined by Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of
an Enterprise and Related Information," and does not have significant
operations in foreign locations.

Completion of Initial Public Offering

On May 26, 1998, the Company completed an initial public offering (the
"Offering") of 2.5 million shares at $10 per share, resulting in net proceeds
of approximately $22.0 million.

On February 19, 1998, the Company's Board of Directors approved a three-for-two
stock split on the Company's common stock to be affected in the form of a stock
dividend. All share and per share data in the accompanying consolidated
financial statements have been adjusted to reflect the split.

Acquisition of Elekom Corporation

On November 6, 1998, the Company completed its acquisition of ELEKOM
Corporation ("ELEKOM") for approximately $15.7 million, consisting of $8.0
million in cash and approximately 1.4 million shares, valued at $5.52 per
share, of the Company's common stock. ELEKOM was merged with and into Clarus
CSA, Inc., a wholly owned subsidiary of the Company, and the separate existence
of ELEKOM ceased. The Company, as additional purchase price, recorded (i)
payments of $500,000 made to fund the operations of ELEKOM from October 1,
1998, through the closing date and (ii) expenses of approximately $1.0 million
to complete the merger. The Company allocated $10.5 million of the purchase
price to purchased in-process research and development. The remainder of the
excess of the purchase price over the tangible assets acquired of approximately
$6.9 million was assigned to trade names, workforce, and goodwill and is being
amortized over a period ranging from three months to ten years.

Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries. All intercompany transactions and balances
have been eliminated.

F-6
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Minority Interest

Minority interest represented the 20% ownership interest in the Company's
majority-owned subsidiary Clarus Professional Services, L.L.C. (the "Services
Subsidiary") (Note 3).

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Reclassification

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

Fair Value of Financial Instruments

The book values of cash and cash equivalents, trade accounts receivable, trade
accounts payable, and other financial instruments approximate their fair values
principally because of the short-term maturities of these instruments. The fair
value of the Company's long-term debt is estimated based on current rates
offered to the Company for debt with similar terms and maturities. Under this
method, the Company's fair value of financial instruments was not materially
different from the stated value at December 31, 1997 and 1998.

Credit and Concentrations of Product Risk

The Company's accounts receivable potentially subject the Company to credit
risk, as collateral is generally not required. The credit risk is mitigated by
the large number of customers comprising the customer base.

Substantially all of the Company's product revenues are derived from sales of
its financial and human resources applications. Increased market acceptance of
the Company's product family is critical to the Company's ability to increase
sales and thereby sustain profitability. Any factor adversely affecting sales
or pricing levels of these applications will have a material adverse effect on
the Company's business, results of operations, and financial condition.

F-7
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenue Recognition

The Company's revenue consists of revenues from the licensing of software and
fees from consulting, implementation, training, and maintenance services. For
the years ended December 31, 1996 and 1997, the Company recognized software
license revenue in accordance with the provisions of American Institute of
Certified Public Accountants Statement of Position ("SOP") No. 91-1, "Software
Revenue Recognition." Accordingly, software license revenue was recognized upon
shipment of the software following execution of a contract, provided that no
significant vendor obligations remain outstanding, amounts are due within one
year, and collection is considered probable by management. If significant post-
delivery obligations exist, the revenue from the sale of the software license,
as well as other components of the contract, was recognized using percentage of
completion accounting.

Effective January 1, 1998, the Company adopted SOP No. 97-2, "Software Revenue
Recognition," that supersedes SOP No. 91-1, "Software Revenue Recognition."
Under SOP No. 97-2, the Company recognizes software license revenue when the
following criteria are met: (i) a signed and executed contract is obtained,
(ii) shipment of the product has occurred, (iii) the license fee is fixed and
determinable, (iv) collectibility is probable, and (v) remaining obligations
under the license agreement are insignificant.

Revenues from services fees are recognized as the services are performed.
Maintenance fees relate to customer maintenance and support and are recognized
rateably over the term of the software support services agreement, which is
typically 12 months.

Revenues that have been prepaid or invoiced but that do not yet qualify for
recognition under the Company's policies are reflected as deferred revenues.

Deferred Revenues

Deferred revenues at December 31, 1997 and 1998, were as follows (in
thousands):

<TABLE>
<CAPTION>
1997 1998
------- ------
<S> <C> <C>
Deferred revenues:
Deferred license fees...................................... $ 1,027 $ 809
Deferred services and training fees........................ 127 353
Deferred maintenance fees.................................. 9,043 8,537
------- ------
Total deferred revenues.................................. 10,197 9,699
Less current portion....................................... 5,717 7,397
------- ------
Non-current deferred revenues.............................. $ 4,480 $2,302
======= ======
</TABLE>

The Company has introduced in the past, and is expected to introduce in the
future, additional modules and product enhancements. As a result, deferred
revenues resulting from contracts executed in a prior period are recognized in
the quarter in which delivery of the new product occurs. This practice has and
will in the future continue to cause fluctuations in revenues and operating
results from period to period.

F-8
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Property and Equipment

Property and equipment consist of furniture, computers, other office equipment,
purchased software, and leasehold improvements. These assets are depreciated on
a straight-line basis over a two-, five-, or seven-year life. Improvements are
amortized over the term of the lease.

Product Returns and Warranties

The Company provides warranties for its products after the software is
purchased for the period in which the customer maintains the Company's support
of the product. The Company generally supports only current releases and the
immediately prior releases of its products. The Company's license agreements
generally do not permit product returns by its customers. The Company has not
experienced significant warranty claims to date. Accordingly, the Company has
not provided a reserve for warranty costs at December 31, 1997 and 1998.

Intangible Assets

Intangible assets include goodwill, workforce, trade names, and purchased
software licensing rights and are being amortized on a straight-line basis over
periods ranging from two to 15 years.

In 1996, the Company entered into a license and private label agreement to
purchase a non-exclusive and perpetual license for human resources, payroll,
and benefits software. The agreement allows the Company to modify and enhance
the software and to license these software products to its customers. The
purchase price of $2.0 million is included in intangible assets and is being
amortized on a straight-line basis over the estimated useful life of 48 months.
Amortization expense related to the agreement for the years ended December 31,
1996, 1997, and 1998, was approximately $417,000, $500,000, and $500,000,
respectively. The amortization expense related to the agreement is included in
research and development expense in the accompanying consolidated statements of
operations.

The Company has entered into other license agreements which are being amortized
over the terms of the agreements.

Capitalized Software Development Costs

Internal research and development expenses are charged to expense as incurred.
Computer software development costs are charged to research and development
expense until technological feasibility is established, after which remaining
software production costs are capitalized in accordance with SFAS No. 86,
"Accounting for Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed." The Company has defined technological feasibility as the point in
time at which the Company has a working model of the related product.
Historically, the internal development 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.
Therefore, the Company has charged all internal software development costs to
expense as incurred for the three years ended December 31, 1998.

The Company has in the past and may in the future purchase or license software
that may be modified and integrated with its products. If at the time of
purchase or license, technological

F-9
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

feasibility is met, the cost of the software is capitalized and amortized over
a period not to exceed its useful life.

Impairment of Long-lived and Intangible Assets

The Company periodically reviews the values assigned to long-lived assets,
including property and other assets, to determine whether any impairments are
other than temporary. Management believes that the long-lived assets in the
accompanying balance sheets are appropriately valued.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities include the following as of December
31, 1997 and 1998 (in thousands):

<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Accounts payable.............................................. $ 973 $2,105
Accrued compensation, benefits, and commissions............... 1,636 2,569
Accrued other................................................. 1,989 2,743
------ ------
$4,598 $7,417
====== ======
</TABLE>

Net Loss Per Share

Net loss per share was computed in accordance with SFAS No. 128, "Earnings Per
Share," using the weighted average number of common shares outstanding. Net
loss per share does not include the impact of stock options, warrants, or
convertible preferred stock as their impact would be antidilutive. Diluted
earnings per share is not presented, as the effects of these common stock
equivalents were antidilutive.

Stock-Based Compensation Plan

The Company accounts for its stock-based compensation plan under Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Effective in fiscal year 1996, the Company adopted the disclosure
option of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123
requires that companies which do not choose to account for stock-based
compensation as prescribed by the statement shall disclose the pro forma
effects on earnings and earnings per share as if SFAS No. 123 had been adopted.

New Accounting Pronouncement

In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is
effective for the Company's fiscal year ending December 31, 2000. Management
does not expect SFAS No. 133 to have a significant impact on the Company's
consolidated financial statements.

F-10
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Comprehensive Loss

Comprehensive loss for the years ended December 31, 1996, 1997, and 1998, is
the same as net loss presented in the accompanying consolidated statements of
operations.

2. RELATED-PARTY TRANSACTIONS

During the three years ended December 31, 1998, the Company engaged in a number
of transactions with McCall Consulting Group, Inc. ("McCall Consulting Group")
and Technology Ventures, L.L.C. ("Technology Ventures"), entities controlled by
Joseph S. McCall, a former director of the Company. In the opinion of
management, the rates, terms, and considerations of the transactions with
related parties approximate those with non-related entities.

Expenses relating to services provided by McCall Consulting Group were as
follows for the three years ended December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ----
<S> <C> <C> <C>
Contract labor expense:
Research and development................................ $1,250 $1,450 $186
Administrative services................................... 22 38 4
Office rental expense..................................... 96 71 0
Training.................................................. 37 19 8
Software and equipment purchases and rental expense....... 24 33 22
------ ------ ----
Total................................................. $1,429 $1,611 $220
====== ====== ====
</TABLE>

Amounts owed related to services provided by McCall Consulting Group were as
follows as of December 31, 1997 and 1998 (in thousands):

<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Accounts payable and accrued liabilities........................... $52 $ 9
=== ===
</TABLE>

Expenses relating to services provided by Technology Ventures were as follows
for the three years ended December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Recruiting services........................................... $339 $ 0 $ 0
Administrative services....................................... 23 23 2
---- --- ---
Total....................................................... $362 $23 $ 2
==== === ===
</TABLE>

In February 1998, the Company entered into an agreement with Mr. McCall whereby
he resigned as the Company's chief executive officer and as chairman, chief
executive officer, and manager of the Services Subsidiary. Mr. McCall remained
an employee of the Company until the completion of the Offering, at which time
he became a consultant to the Company for a period of one year pursuant to the
terms of an independent contractor agreement. In recognition of past services
to the Company,

F-11
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the termination of the voting trust discussed in Note 10, and resignations of
certain positions noted above, the Company paid to Mr. McCall a lump sum of
$225,000 on June 30, 1998, and also agreed to pay Mr. McCall severance of
$75,000 payable over a one-year period. For his consulting services, the
Company is paying Mr. McCall the sum of $125,000 over the one-year period from
the date of the Offering, with the ability to earn an additional $100,000 in
incentive compensation if certain revenue targets are met by the Company. The
Company paid $107,000 to Mr. McCall under this consulting agreement during the
year ended December 31, 1998.

3. SERVICES SUBSIDIARY

On March 9, 1995, the Company issued 450,000 shares of common stock to acquire
certain intellectual property rights and tangible assets valued at $300,000
from Technology Ventures, a related party controlled by Mr. McCall. Subsequent
to the acquisition, the Company and Technology Ventures formed a subsidiary,
the Services Subsidiary, which was 80%-owned by the Company. The Company
contributed the acquired intellectual property rights and tangible assets to
the Services Subsidiary. Technology Ventures acquired the remaining 20%
interest in the Services Subsidiary in exchange for a $75,000 note bearing
interest at 7.74%, payable annually, with the principal due in a lump-sum
payment in March 2000. As of December 31, 1997, the note was reflected as a
reduction of minority interest in consolidated subsidiary. The Services
Subsidiary provided implementation services for the Company's software
applications.

On February 5, 1998, the Company purchased Technology Ventures' 20% ownership
in the Services Subsidiary for a purchase price of approximately $4.5 million.
In exchange for the 20% interest in the Services Subsidiary, the Company (i)
issued 225,000 shares of common stock to Technology Ventures, (ii) granted
Technology Ventures a warrant to purchase an additional 300,000 shares of
common stock at a purchase price of $3.67 per share, and (iii) agreed to pay
Technology Ventures a monthly sum equal to 20% of the net profits of the
Services Subsidiary until the earlier of the completion of the Offering or a
sale of the Company. In addition, the Company agreed to pay Technology Ventures
the sum of $1.1 million upon exercise of the warrant, but not later than
February 5, 2000, pursuant to a non-negotiable, non-interest-bearing
subordinated promissory note. The Company imputed interest on the note payable
based on its original terms and recognized interest during the period the note
was outstanding. In November 1998, the warrant was exercised and the note
payable was surrendered as payment for the warrant exercise price. The
remaining unamortized discount of $89,000 on the note payable was reclassified
to additional paid in capital.

All of the material terms of the purchase and sale were agreed to by Technology
Ventures and the Company in January 1998. The purchase and sale were accounted
for in the first quarter of 1998 based on the value of the common stock issued
in such transaction at $8 per share. In February 1998, the Services Subsidiary
also paid to Technology Ventures approximately $33,000 as consideration for the
termination of a management services agreement, entered into between the
parties in March 1995, and Technology Ventures paid in full, to the Services
Subsidiary, the remaining principal balance and all accrued interest due under
its $75,000 promissory note.

F-12
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The purchase price was determined by including the following: (i) 225,000
shares of common stock at $8 per share, or $1.8 million, (ii) a note payable of
$1.1 million discounted for interest at 9% for two years, resulting in a net
note payable of $934,000, (ii) cash paid of $62,000, (iv) 20% of net profits,
totaling $330,000, for the period February 5, 1998, through the Offering, and
(v) a warrant valued at $1.4 million determined using the Black-Scholes model
and using expected volatility of 65%, an expected term of two years, and a
risk-free rate of 5.5% to determine a value per share of $4.67, or a total
value of $1.4 million. The Company has accounted for the transaction using the
purchase method of accounting. The purchase price has been allocated to assets
acquired and liabilities assumed based on the fair market value at the date of
acquisition. Goodwill resulting from the transaction is being amortized over 15
years.

The Services Subsidiary had income of approximately $1.1 million, $2.4 million,
and $179,000 for the years ended December 31, 1996 and 1997, and for the period
from January 1, 1998, to February 5, 1998, respectively. The Services
Subsidiary distributed dividends of approximately $1.2 million, $1.4 million,
and $486,000 during the years ended December 31, 1996 and 1997, and during the
period from January 1, 1998, to February 5, 1998, respectively, to the Company
and the related-party minority interest holder.

4. PRO FORMA EFFECTS OF THE ELEKOM ACQUISITION

Unaudited pro forma operating results for the years ended December 31, 1997 and
1998, assuming that the acquisition of ELEKOM had occurred at the beginning of
each year, are as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Revenues................................................. $ 26,005 $ 42,079
Pro forma net loss....................................... (21,258) (15,032)
Pro forma net loss per share............................. (7.66) (2.01)
</TABLE>

5. INCOME TAXES

The Company files a consolidated tax return with its majority-owned
subsidiaries. The components of the income tax provision (benefit) for the
three years ended December 31, 1998, are as follows (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -----
<S> <C> <C> <C>
Current:
Federal........................................... $ 0 $ 0 $ 98
State............................................. 0 0 12
------- ------- -----
0 0 110
------- ------- -----
Deferred:
Federal........................................... (2,494) (1,287) (98)
State............................................. (468) (241) (12)
------- ------- -----
(2,962) (1,528) (110)
Change in valuation allowance....................... 2,962 1,528 110
------- ------- -----
Total........................................... $ 0 $ 0 $ 0
======= ======= =====
</TABLE>

F-13
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following is a summary of the items which caused recorded income taxes to
differ from taxes computed using the statutory federal income tax rate for the
three years ended December 31, 1998:

<TABLE>
<CAPTION>
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Tax benefit at statutory
rate..................... (34.0)% (34.0)% (34.0)%
Effect of:
State income tax, net... (4.0) (4.0) (4.0)
Other................... 0.4 1.1 1.7
Non-deductible acquired
research and develop-
ment................... 0.0 0.0 37.3
Change in valuation al-
lowance................ 37.6 36.9 (1.0)
----- ----- -----
Provision (benefit) for
income taxes............. 0.0% 0.0% 0.0%
===== ===== =====
</TABLE>

Deferred tax assets and liabilities are determined based on the difference
between the financial accounting and tax bases of assets and liabilities.
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1997 and 1998, are as follows (in thousands):

<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................... $ 10,047 $ 10,000
Allowance for doubtful accounts........................ 128 153
Depreciation and amortization.......................... 326 211
Accrued liabilities.................................... 110 141
Other.................................................. 3 0
-------- --------
10,614 10,505
-------- --------
Deferred tax liabilities:
Services Subsidiary.................................... (181) (182)
Amortization of purchased software..................... (5) (5)
-------- --------
(186) (187)
-------- --------
Net deferred tax assets before valuation allowance....... 10,428 10,318
Valuation allowance...................................... (10,428) (10,318)
-------- --------
Net deferred tax assets.................................. $ 0 $ 0
======== ========
</TABLE>

During 1998, the Company used $110,000 of the net operating loss carryforwards
to cover current income taxes payable. The Company reversed the valuation
allowance on the net operating loss carryforwards that were used and set up a
valuation allowance for the deferred tax assets created during the current
year. A valuation allowance is provided when it is determined that some portion
or all of the deferred tax assets may not be realized. Accordingly, since it
currently is more likely than not that the net deferred tax assets resulting
from the remaining net operating loss carryforwards ("NOL's") and other
deferred tax items will not be realized, a valuation allowance has been
provided in the accompanying consolidated financial statements as of December
31, 1997 and 1998. The Company established the valuation allowance for the
entire amount of the deferred tax assets attributable to the NOL carryforwards
as well as for the net deferred tax assets created as a result of temporary
differences between book and tax. The Company will recognize such income tax
benefits when realized. The NOL's at December 31, 1998, were approximately
$26.3 million and will expire at various dates through 2012.

F-14
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company's ability to benefit from certain NOL carryforwards is limited
under Section 382 of the Internal Revenue Code, as the Company is deemed to
have had an ownership change of more than 50%, as defined. Accordingly, certain
NOL's may not be realizable in future years due to the limitation.

6. DEBT

The Company's short- and long-term debt consists of the following as of
December 31, 1997 and 1998 (in thousands):

<TABLE>
<CAPTION>
1997 1998
------ ----
<S> <C> <C>
Equipment notes payable to a leasing company, payable in monthly
installments of $27, with principal installments of $169 due
March 2000 and August 2000, secured by certain company assets,
bearing interest at a weighted average rate of 22.1%............ $ 655 $465
Line-of-credit agreement with a bank, payable on September 30,
1999, bearing interest at prime plus 0.5%, secured by the assets
of Clarus CSA, Inc.............................................. 0 150
Note payable to a financing company, payable in monthly install-
ments of approximately $2 through November 2000, secured by cer-
tain company assets, bearing interest at 8%..................... 51 33
Capital lease obligations........................................ 0 123
Note payable for purchased software licensing rights, payable in
installments over a two-year period through March 1998 at the
rate at which the Company licenses human resources, payroll, and
benefits software to its customers.............................. 1,632 0
------ ----
2,338 771
Less current portion of long-term debt........................... 1,841 526
------ ----
$ 497 $245
====== ====
</TABLE>

The Company has a line-of-credit agreement with a bank bearing interest at
prime. The line-of-credit agreement provides for maximum borrowings not to
exceed the lesser of $3.0 million, or 80% of eligible accounts receivable.
Additionally, the Company has an equipment line agreement with a bank bearing
interest at prime plus 0.5%. The equipment line agreement provides for
borrowings not to exceed $1.0 million. Borrowings under these agreements are
collateralized by substantially all the Company's assets. The Company had no
amounts outstanding under the line of credit or equipment line at December 31,
1998. These lines of credit expire on April 29, 1999.

Under the provisions of the line-of-credit and the equipment line agreements,
the Company must comply with certain restrictive covenants. These covenants,
among other things, require the Company to maintain specified levels of
profitability each quarter.

During 1997, the Company entered into debt and lease agreements with a leasing
company. The debt and lease agreements provide total borrowing capability of up
to $1.0 million for equipment purchases. As of December 31, 1998, the Company
had approximately $463,000 outstanding under these agreements.

F-15
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The aggregate maturities of long-term debt at December 31, 1998, are as follows
(in thousands):

<TABLE>
<S> <C>
December 31:
1999.................................................................. $526
2000.................................................................. 245
----
$771
====
</TABLE>

7. ROYALTY AGREEMENTS

The Company is a party to royalty and other equipment manufacturer agreements
for certain of its applications. The Company incurred a total of approximately
$355,000, $1.1 million, and $1.8 million in royalty fees for the years ended
December 31, 1996, 1997, and 1998, respectively, pursuant to these agreements.
The royalties fees paid are included in cost of revenues-license fees in the
accompanying consolidated statements of operations.

During 1992, the Company entered into a royalty agreement with a former
stockholder. This agreement grants a 3.75% royalty on certain revenues of the
Company, less certain discounts or commissions, collected from any transfer,
sale, or licensing of specific modules of the software. The Company incurred
royalties of $177,000, $295,000, and $91,000 for the years ended December 31,
1996, 1997, and 1998, respectively, pursuant to this royalty agreement. The
royalties fees paid are included in cost of revenues-license fees in the
accompanying consolidated statements of operations.

8. EMPLOYEE BENEFIT PLANS

The Company sponsors the SQL Financials International, Inc., 401(k) Plan (the
"Plan"), a defined contribution plan covering substantially all employees of
the Company. Under the Plan's deferred compensation arrangement, eligible
employees who elect to participate in the Plan may contribute between 2% and
20% of eligible compensation, as defined, to the Plan. The Company, at its
discretion, may elect to provide for either a matching contribution or
discretionary profit-sharing contribution or both. The Company did not make
matching or discretionary profit-sharing contributions to the Plan during the
three years ended December 31, 1998.

9. STOCK OPTION PLAN

The Company has a stock option plan for employees, consultants, and other
individual contributors to the Company which enables the Company to grant up to
approximately 1.6 million qualified and non-qualified incentive stock options
(the "1992 Plan"). The qualified options are to be granted at an exercise price
not less than the fair market value at the date of grant. The non-qualified
options are to be granted at an exercise price of not less than 85% of the fair
market value at the date of grant. The stock option committee determines the
period within which options may be exercised, but no option may be exercised
more than ten years from the date of grant. The stock option committee also
determines the period over which the options vest. Options are generally
exercisable for seven years from the grant date and generally vest over a
period of four years at a rate of 20% for years one and two and 30% for years
three and four.

F-16
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The stock option plan also provides for stock purchase authorizations and stock
bonus awards. As of December 31, 1998, no such awards have been granted under
the plan.

The Company adopted the 1998 Stock Incentive Plan (the "1998 Plan") in the
first quarter of 1998. Under the 1998 Plan, the Board of Directors has the
flexibility to determine the type and amount of awards to be granted to
eligible participants, who must be employees of the Company or its
subsidiaries. The 1998 Plan provides for grants of incentive stock options,
non-qualified stock options, restricted stock awards, stock appreciation
rights, and restricted units. The Company has authorized and reserved for
issuance an aggregate of 1.0 million shares of common stock for issuance under
the 1998 Plan. The aggregate number of shares of common stock that may be
granted through awards under the 1998 Plan to any employee in any calendar year
may not exceed 200,000 shares. The 1998 Plan will continue in effect until
February 2008 unless sooner terminated.

Total options available for grant under the 1992 Plan and the 1998 Plan as of
December 31, 1998 were 310,125.

The Company applies the principles of APB Opinion No. 25, "Accounting for Stock
Issued to Employees," in accounting for its Plan. Accordingly, the Company
recognizes deferred compensation when the exercise price of the options granted
is less than the fair market value of the stock at the date of grant, as
determined by the Board of Directors. The deferred compensation is presented as
a component of equity in the accompanying consolidated balance sheets and is
amortized over the periods expected to be benefited, generally the vesting
period of the options.

During 1996, 1997, and 1998, the Company granted options with exercise prices
below the fair market value at the date of grant. Accordingly, the Company
recorded deferred compensation of approximately $148,000, $328,000, and $1.1
million for options granted during the years ended December 31, 1996, 1997, and
1998, respectively. The Company amortizes deferred compensation over four
years, the vesting period of the options. The Company recognized no
compensation expense for the year ended December 31, 1996, and recognized
$58,000 and $880,000 of non-cash compensation expense related to option grants
for the years ended December 31, 1997 and 1998, respectively. The compensation
expense for 1998 includes the effect of the Company's acceleration of vesting
on certain options that were issued in the first quarter of 1998. The Company
accelerated vesting on options to purchase 283,597 shares of common stock at an
exercise price ranging from $3.67 to $8 per share. As a result of the
acceleration of vesting, the Company recorded a non-cash, non-recurring charge
of approximately $705,000 representing the unamortized deferred compensation
previously recorded.

F-17
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

A summary of changes in outstanding options during the three years ended
December 31, 1998, is as follows:

<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price Price
--------- ------------ --------
<S> <C> <C> <C>
December 31, 1995.......................... 294,540 $ 0.67 $0.67
Granted.................................... 559,830 $0.67-$ 1.00 0.87
Canceled................................... (63,579) $ 0.67 0.67
Exercised.................................. (4,350) $ 0.67 0.67
---------
December 31, 1996.......................... 786,441 $0.67-$ 1.00 0.81
Granted.................................... 802,845 $1.00-$ 3.67 2.96
Canceled................................... (203,730) $0.67-$ 3.67 0.95
Exercised.................................. (16,814) $0.67-$ 1.00 0.68
---------
December 31, 1997.......................... 1,368,742 $0.67-$ 3.67 2.05
Granted.................................... 1,071,322 $3.67-$10.00 7.29
Canceled................................... (143,413) $0.67-$10.00 3.12
Exercised.................................. (199,546) $0.67-$ 3.67 0.90
---------
December 31, 1998.......................... 2,097,105
---------
Vested and exercisable at December 31,
1998...................................... 564,790
=========
</TABLE>

Statement of Financial Accounting Standards No. 123

For SFAS No. 123 purposes, the fair value of each option grant has been
estimated as of the date of grant using the Black-Scholes option pricing model
with the following assumptions:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Dividend yield.......................... 0% 0% 0%
Expected volatility..................... 70 65 65
Risk-free interest rate at the date of
grant.................................. 5.27%-6.69% 5.78%-6.82% 4.10%-5.68%
Expected life........................... Five years Four years Four Years
</TABLE>

Using these assumptions, the fair values of the stock options granted during
the years ended December 31, 1996, 1997, and 1998, are approximately $355,000,
$699,000, and $2.2 million, respectively, which would be amortized over the
vesting period of the options. Had compensation cost been determined consistent
with the provisions of SFAS No. 123, the Company's pro forma net loss and net
loss per share in accordance with SFAS No. 123 for the three years ended
December 31, 1998, would have been as follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- --------
<S> <C> <C> <C> <C>
Net loss:
As reported............. $(7,879) $(4,110) $(10,702)
Pro forma in accordance
with SFAS No. 123...... (7,911) (4,269) (11,009)
Basic and diluted net loss
per share:
As reported............. $ (5.74) $ (2.97) $ (1.70)
Pro forma in accordance
with SFAS No. 123...... (5.76) (3.08) (1.74)
</TABLE>

F-18
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Because SFAS No. 123 has not been applied to options granted prior to January
1, 1995, the resulting pro forma compensation cost may not be representative of
that expected in future years.

The following table summarizes the exercise price range, weighted average
exercise price, and remaining contractual lives by year of grant for the number
of options outstanding as of December 31, 1998:

<TABLE>
<CAPTION>
Weighted
Average
Weighted Remaining
Number of Exercise Average Contractual
Year of Grant Shares Price Range Price Life (Years)
------------- --------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Prior to 1997................. 416,824 $0.67-$ 1.00 $0.89 6.52
1997.......................... 633,945 $1.00-$ 3.67 3.15 6.75
1998.......................... 1,046,336 $3.67-$10.00 7.32 6.44
---------
Total....................... 2,097,105
=========
</TABLE>

The weighted average grant date fair value of options granted during the years
ended December 31, 1997 and 1998, was $3.04 and $7.33, respectively.

10. STOCKHOLDERS' EQUITY

Stockholders' Agreement

All owners prior to the initial public offering of the Company's common stock
were parties to the Company's stockholders' agreement. The stockholders'
agreement terminated upon the Offering, with the exception of the registration
rights of the shares covered by the agreement.

All the holders of common stock were party to a stockholders' voting agreement
dated September 1, 1995, whereby Mr. McCall was named voting trustee and voted
all common shares. As of December 31, 1997, Mr. McCall controlled the right to
vote 22.6% of the Company's outstanding voting stock, after dilution from the
preferred stockholders. Upon the resignation of Mr. McCall in February 1998,
this voting trust expired.

Preferred Stock

The Company is authorized to issue 5.0 million shares of preferred stock. In
connection with the Offering, the preferred stock outstanding on the date of
the Offering was converted to approximately 4.8 million shares of common stock.

Prior to the Offering, preferred stockholders were entitled to participate in
any dividends paid to common stockholders and had the voting rights and powers
of the common stockholders, as defined. Preferred stockholders received
preferential distributions in the event of liquidation of the Company for $4
per share of Series A, $6.65 per share of Series B, $7 per share of Series C,
$8.55 per share of Series D, $8.60 per share of Series E, and $9.60 per share
of Series F, plus any unpaid declared dividends.

F-19
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Each share of preferred stock was convertible at the option of the holder at
any time into the number of common shares which resulted from the effective
conversion rate, as defined. Prior to the Offering, the Company's certificate
of incorporation provided that the preferred stock would automatically convert
at defined conversion rates if the Company consummated an initial public
offering with a price per share and gross proceeds in excess of defined
thresholds. In 1998, the Company obtained waivers from the preferred
stockholders eliminating the requirement that the initial public offering price
and the gross proceeds from an initial public offering be at a defined
threshold in order for the conversion of the preferred stock to be effected
immediately upon an initial public offering.

Series A

On November 24, 1992, pursuant to a stock purchase agreement, the Company sold
250,000 shares of Series A to Greylock Limited Partnership ("Greylock") for an
aggregate sum of $1.0 million. Stock issuance costs of $62,000 were incurred in
connection with the sale of the preferred shares. Additionally, on June 30,
1993, pursuant to a stock purchase agreement, the Company sold 12,500 shares of
Series A for an aggregate sum of $50,000.

Series B

On September 21, 1993, pursuant to a stock purchase agreement, the Company sold
a total of 454,888 shares of Series B at a price of $6.65 per share to Greylock
and additional third-party investors. The aggregate proceeds from the sale of
this stock totaled approximately $3.0 million. Stock issuance costs of $30,000
were incurred in connection with the sale of the preferred shares.

Series C

On April 1, 1994, pursuant to a stock purchase agreement, the Company sold a
total of 428,572 shares of Series C at a price of $7 per share to certain
existing stockholders and additional third-party investors, resulting in
aggregate proceeds of $3.0 million. Stock issuance costs of $16,000 were
incurred.

On August 1, 1994, the Company sold 87,500 shares of Series C preferred stock
to Technology Ventures for a purchase price of $7 per share, the same price per
share as sold to the Series C investors in April 1994. Technology Ventures paid
the purchase price through the delivery of a secured promissory note. The note
was guaranteed by Mr. McCall and was secured by the assets of an entity
controlled by Mr. McCall. As of December 31, 1997, the note was reflected as a
reduction of stockholders' equity in the accompanying consolidated balance
sheets. The Company was almost entirely dependent at the time on the
implementation services of McCall Consulting Group, a wholly owned subsidiary
of Technology Ventures, which was performing substantially all of the
implementation services for the Company's software. In July 1995, at the
request of and as a financial accommodation to Technology Ventures, the Company
converted the 87,500 shares of Series C preferred stock into a warrant to
purchase such shares on the same terms and conditions as set forth in the
promissory note. Based on its dependency on McCall Consulting Group, the

F-20
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Company believed it was in its best interest to maintain Technology Ventures'
long-term interest in the success of the Company through a continuing equity
interest. The note was amended effective July 31, 1995, so that the principal
amount is due and payable only upon the exercise of the warrant. The warrant
was reflected in the statement of stockholders' deficit, with the corresponding
note as a reduction of stockholders' deficit in 1997. The warrant was exercised
in 1998, and the related note receivable was eliminated as the payment of the
exercise price.

Series D

On January 24, 1995, the Company received an advance on a pending equity
financing arrangement. The Company issued promissory notes to certain existing
preferred stockholders totaling $750,000 at an interest rate of 6%. In
addition, the Company issued warrants to the above parties to purchase 17,544
shares of Series D at a price of $8.55 per share. These warrants were exercised
in February 1998.

On February 21, 1995, the Company issued 701,755 shares of Series D for $8.55
per share to certain existing preferred stockholders and additional third-party
investors. Of the proceeds, $750,000 was used to repay the advance on the
financing discussed above. Gross proceeds before stock issuance costs were $6.0
million. Stock issuance costs of $73,000 were incurred.

On January 5, 1996, the Company entered into an agreement with its bank to
extend its old working capital line of credit. As part of the agreement, the
Company granted the bank a warrant to purchase 8,201 shares of Series D
convertible preferred stock at $8.55 per share. The warrant expired on January
4, 1999.

Series E

On February 15, 1996, the Company issued 697,675 shares of Series E for $8.60
per share to certain existing preferred stockholders and additional third-party
investors. Of the proceeds, $2.0 million was used to repay an advance on the
financing received in 1995. Proceeds from the sale of this stock, before stock
issuance costs, were $6.0 million. Stock issuance costs of $34,000 were
incurred.

On March 28, 1997, the Company entered into an agreement with its bank to amend
its working capital line of credit. As part of the agreement, the Company
granted the bank a warrant to purchase 8,721 shares of Series E convertible
preferred stock at $8.60 per share. The warrant expires on March 28, 2000.

Series F

On June 5, 1997, and August 5, 1997, the Company received advances on a pending
equity financing arrangement. The Company issued convertible promissory notes
to certain existing preferred stockholders totaling approximately $2.0 million
and bearing interest at a rate of 8.5%. The notes

F-21
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

were convertible upon the consummation of a private equity offering providing
gross proceeds in excess of defined thresholds. In connection with the issuance
of the notes, the Company issued warrants to the above parties to purchase
46,821 shares of Series F at a price of $9.60 per share. The value of the
warrants of $40,000 was recorded as a debt discount and to be amortized over
the period in which the convertible notes were outstanding. For the year ended
December 31, 1997, the Company amortized $18,000 of the discount to interest
expense. The debt was converted to preferred stock in 1997, and the remaining
unamortized debt discount was reclassified to additional paid-in capital.

On September 27, 1997, the Company issued 416,668 shares of Series F to third-
party investors for $9.60 per share. Upon issuance of Series F to the third-
party investors, the aforementioned convertible notes and accrued interest were
converted to 212,141 shares of Series F at $9.60 per share. Gross proceeds
before stock issuance costs were approximately $6.0 million. Stock issuance
costs of $50,000 were incurred.

11. COMMITMENTS AND CONTINGENCIES

Leases

The Company rents certain office space, telephone, and computer equipment under
non-cancelable operating leases. Rents charged to expense were approximately
$749,000, $772,000, and $918,000 for the years ended December 31, 1996, 1997,
and 1998, respectively. Aggregate future minimum lease payments under non-
cancelable operating leases as of December 31, 1998, are as follows (in
thousands):

<TABLE>
<S> <C>
December 31:
1999................................................................ $1,401
2000................................................................ 1,241
2001................................................................ 1,016
2002................................................................ 965
Thereafter............................................................ 2,968
------
$7,591
======
</TABLE>

In addition, the Company rents certain equipment under agreements treated for
financial reporting purposes as capital leases. The Company's property under
capital leases, which is included in property and equipment on the consolidated
balance sheets at December 31, 1998, was $121,000, which is net of accumulated
depreciation of $11,000.

F-22
<PAGE>

CLARUS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Future minimum lease payments under capital leases are as follows (in
thousands):

<TABLE>
<S> <C>
December 31:
1999................................................................. $119
2000................................................................. 8
----
Total minimum lease payments....................................... 127
Less amount representing interest..................................... (4)
----
Present value of minimum lease payments............................... 123
Current portion...................................................... 119
----
$ 4
====
</TABLE>

Letters of Credit

At December 31, 1997, standby letters of credit of approximately $290,000 and
$210,000 had been issued in accordance with provisions under certain of the
Company's lease and financing agreements. The letters of credit of $290,000 and
$210,000 expire in July 1999 and August 1999, respectively. The requirement for
the letter of credit of $290,000 was terminated in January 1999.

Product Liability

As a result of their complexity, software products may contain undetected
errors or failures when first introduced or as new versions are released. There
can be no assurance that, despite testing by the Company and testing and use by
current and potential customers, errors will not be found in new financial
applications after commencement of commercial shipments or, if discovered, that
the Company will be able to successfully correct such errors in a timely manner
or at all. The occurrence of errors and failures in the Company's products
could result in loss of or delay in the market acceptance of the Company's
financial applications, and alleviating such errors and failures could require
significant expenditure of capital and other resources by the Company. The
consequences of such errors and failures could have a material adverse effect
on the Company's business, results of operations, and financial condition.

Litigation

The Company is subject to claims and litigation related to matters arising in
the normal course of business, including but not limited to, a lawsuit recently
filed against us alleging patent infringement. Based on a current assessment of
such claims and litigation, management believes that as of December 31, 1998,
there are no unasserted, asserted, or pending material litigation or claims
against the Company.

F-23
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson, or other person has been authorized to give any
information or to make any representations not contained in this prospectus. If
any such information is given or any such representations are made, they must
not be relied upon as having been authorized by Clarus or the selling
shareholders. This prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy any of the shares of Clarus Common Stock
offered hereby, to any person in any jurisdiction in which such offer or
solicitation is unlawful. Neither the delivery of this prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of Clarus since such date.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary................................................................... 1
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 18
Selling Stockholders...................................................... 18
Market Prices............................................................. 21
Dividend Policy........................................................... 21
Dilution.................................................................. 21
Selected Historical Financial Data........................................ 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 37
Management................................................................ 50
Principal Stockholders.................................................... 60
Certain Transactions...................................................... 63
Capital Stock............................................................. 64
Shares Eligible for Future Sale........................................... 67
Plan of Distribution...................................................... 69
Legal Matters............................................................. 70
Experts................................................................... 70
Where You Can Find More Information....................................... 70
Index to Financial Statements............................................. 72
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

521,915 Shares of Common Stock

LOGO CLARUS CORPORATION APPEARS HERE

---------------

PROSPECTUS

---------------

April , 1999

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

Item 13. Other Expenses of Issuance and Distribution

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 13,440
National Association of Securities Dealers, Inc. fee............. 5,275
Nasdaq National Market listing fee............................... 75,625
Accountants' fees and expenses................................... 410,000
Underwriting Fees and Commissions................................ 1,750,000
Legal fees and expenses.......................................... 430,000
Blue Sky fees and expenses....................................... 10,000
Transfer Agent's fees and expenses............................... 20,000
Printing and engraving expenses.................................. 300,000
Miscellaneous.................................................... 135,660
----------
Total Expenses................................................. $3,050,000
==========
</TABLE>
- --------
* All fees other than the SEC registration fee, the NASD fee and the Nasdaq
listing fee are estimated.

None of the expenses of issuance and distribution will be borne by the
selling stockholders.

Item 14. Indemnification of Directors and Officers

Our Restated By-Laws (the "Restated By-Laws") and our Restated Certificate
of Incorporation (the "Restated Certificate") provide that we shall indemnify
the directors and officers to the fullest extent authorized by Delaware law,
as it now exists or may in the future be amended, against all expenses and
liabilities reasonably incurred in connection with service for or on behalf of
us. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Company pursuant to the Restated B-
Laws, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. We intend to obtain insurance which insures
our directors and officers against certain losses and which insures us against
certain of our obligations to indemnify such directors and officers. In
addition, our Restated Certificate provides that our directors will not be
personally liable for monetary damages to us for breaches of their fiduciary
duty as directors, unless they violated their duty of loyalty to us or our
stockholders, acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors. Such limitations of personal liability
under the Delaware Business Corporation Law do not apply to liabilities
arising out of certain violations of the federal securities laws. While non-
monetary relief such as injunctive relief, specific performance and other
equitable remedies may be available to us, such relief may be difficult to
obtain or, if obtained, may not adequately compensate us for our damages.

There is no pending litigation or proceeding involving any of our directors,
officers, employees or agents where indemnification by us will be required or
permitted. We are not aware of any threatened litigation or proceeding that
might result in a claim for such indemnification.

Item 15. Recent Sales of Unregistered Securities

During the past three years, we have issued the securities set forth which
were not registered under the Securities Act:

(i) On February 15, 1996, we issued 697,675 shares of our Series E
Preferred Stock for $8.60 per share. In addition, we issued warrants to our
lender to purchase 8,721 shares of its Series E Preferred Stock at an
exercise price of $8.60 per share.

II-1
<PAGE>

(ii) On September 26, 1997, we issued 628,809 shares of Series F
Preferred Stock for $9.60 per share. Of the 628,809 shares of Series F
Preferred Stock, Spitfire Capital Partners, L.P., an affiliate of
NationsBanc Montgomery Securities LLC, acquired 208,334 shares of Series F
Preferred Stock for $9.60 per share.

(iii) On September 26, 1997, we issued warrants to purchase 46,821 shares
of Series F Preferred Stock for $9.60 per share to certain stockholders in
connection with loans made to us.

(iv) On February 5, 1998, we issued 225,000 shares of Common Stock and a
warrant to purchase 300,000 shares of Common Stock at an exercise price of
$3.69 per share, to Technology Ventures LLC in exchange for its 20%
interest in SQL Financials Services, LLC.

(v) On February 9, 15, 17, 18 and 19, 1998, we issued 17,544 shares of
Series D Preferred Stock to certain existing stockholders upon the exercise
of existing warrants, at a price of $8.55 per share.

(vi) Since November 30, 1995, we have issued stock options to purchase an
aggregate of 1,090,631 shares of our Common Stock under the 1992 Stock
Option Plan at prices ranging from 1.00 to 15.00 per share.

Except as described above, no underwriters were engaged in connection with
any of the foregoing issuances of securities. The sale and issuance of shares
listed above were exempt from registration under the Securities Act by virtue
of Sections 3(a), 3(b) and 4(a) of the Securities Act and in reliance on Rule
701 and Regulation D promulgated thereunder.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits. The following is a list of exhibits filed as part of the
Registration Statement.

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
2.1* Acquisition Agreement between the Registrant and Technology Ventures,
LLC dated February 5, 1998.
2.2* Non-Negotiable Subordinated Promissory Note to Technology Ventures,
LLC dated February 5, 1998.
2.3* Warrant for purchase of 200,000 shares issued to Technology Ventures,
LLC dated February 5, 1998.
3.1* Amended and Restated Certificate of Incorporation of the Registrant.
3.2* Amended and Restated Bylaws of the Registrant.
4.1* See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws of the
Registrant defining rights of the holders of Common Stock of the
Registrant.
4.2 Specimen Stock Certificate. (Incorporated by Reference from Exhibit
9.1 to Registrant's Registration Statement on Form S-4 (File No. 333-
63535)).
5.1* Opinion of Womble Carlyle Sandridge & Rice, PLLC, as to the legality
of the shares being registered.
10.1* Stock Purchase Agreement dated September 26, 1997 (Series F).
10.2* SQL 1992 Stock Option Plan, effective November 22, 1992.
10.3* 1998 Stock Incentive Plan, effective February 5, 1998 (with form
option agreement).
10.4* Lease Agreement between Registrant and Technology Park/Atlanta, Inc.
dated March 20, 1997.
10.5* License and Private Label Agreement between Registrant and Personnel
Data Systems, Inc. dated March 1, 1996 (with addendum).
10.6* Loan and Security Agreement with Silicon Valley Bank dated March 28,
1997.
10.7* Leasing Technologies International, Inc. Master Lease Agreement dated
March 13, 1997.
10.8* Leasing Technologies International, Inc. Master Note and Security
Agreement dated March 20, 1997.
10.9* Software License and Support Agreement between the Registrant and
McCall Consulting Group dated February 5, 1998.
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <S>
10.10* Agreement between the Registrant and Joseph S. McCall dated February 5,
1998.
10.11* Independent Contractor Agreement between Registrant and McCall
Consulting Group, Inc. dated February 5, 1998.
10.12* Independent Contractor Agreement between Registrant and Joseph S.
McCall dated February 5, 1998.
10.13* Letter Agreement regarding Joseph McCall 1998 Compensation Plan dated
February 5, 1998.
10.14* Loan and Security Agreement between the Company, SQL Financial
Services, L.L.C. and Silicon Valley Bank.
10.15 Lease Agreement between the Registrant and Technology Park/Atlanta,
Inc. dated July 24, 1998 (Incorporated by reference from Exhibit 10.18
of the Registrant's Form S-4 Registration Statement (File no. 333-
63535)).
10.16 Assignment and Assumption of Leases between Technology Park/Atlanta,
Inc. and Metropolitan Life Insurance Company dated July 24, 1998
(Incorporated by reference from Exhibit 10.18 of the Registrant's Form
S-4 Registration Statement (File no. 333-63535)).
10.17* Acquisition Agreement between the Registrant and Technology Ventures,
LLC dated February 5, 1998.
10.18 Agreement and Plan of Reorganization dated August 31, 1998, by and
among Clarus Corporation, Clarus CSA, Inc. and Elekom Corporation
(Incorporated by reference from Exhibit 2.1 and Appendix A of the
Company's Registration Statement on Form S-4 (Registration No. 333-
63535)).
10.19 Escrow and Minority Investment Agreement by and between the Registrant
and Elekom Corporation and US Bank Trust National Association
(Incorporated by reference from Exhibit 2.2 to the Company's
Registration Statement on Form S-4 (Registration No. 333-63535)).
10.20 Voting Agreement by and among the Registrant and certain shareholders
of Elekom Corporation (Incorporated by reference from exhibit 4.3 to
the Company's Registration Statement on Form S-4 (Registration No.
333-63535)).
10.21 Registration Rights Agreement by and between the Registrant and certain
shareholders of Elekom Corporation (Incorporated by reference from
Exhibit 4.3 to the Company's Form 10-Q for the quarter ended September
30, 1998).
10.22 Escrow and Indemnity Agreement by and among the Registrant, Elekom
Corporation and certain Shareholders of Elekom Corporation
(Incorporated by reference from Exhibit 4.3 to the Company's Form 10-Q
for the quarter ended September 30, 1998).
10.18* Non-Negotiable Subordinated Promissory Note to Technology Ventures, LLC
dated February 5, 1998.
10.19* Warrant for purchase of 200,000 shares issued to Technology Ventures,
LLC dated February 5, 1998.
10.20 OEM Software License Agreement by and between the Registrant and ELEKOM
Corporation (Incorporated by reference from Exhibit 10.23 of the
Registrant's Form S-4 Registration Statement (File No. 333-63535)).
10.21 Amendment OEM Software License Agreement by and between the Registrant
and ELEKOM Corporation (Incorporated by reference from Exhibit 10.24
of the Registrant's Form S-4 Registration Statement (File No. 333-
63535).
10.22 Form of Market Standby and Affiliate Agreement (Incorporated by
Reference from Exhibit 4.6 of the Registrant's Form S-4 Registration
Statement (File No. 333-63535)).
10.23 Declaration of Amendment to 1998 Stock Incentive Plan (Incorporated by
Reference from Exhibit 10.23 of the Form 10-K for the fiscal year
ended December 31, 1998).

21.1 List of Subsidiaries (Incorporated by reference from Exhibit 21.1 of
the Form 10-K for the fiscal year ended December 31, 1998).
</TABLE>

II-3
<PAGE>

<TABLE>
<C> <S>
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Womble Carlyle Sandridge & Rice, PLLC (included in Exhibit
5.1).
24.1 Powers of Attorney (included on signature page).
99.1 Report of Independent Public Accountants on Financial Statement
Schedule.
</TABLE>

(b) Financial Statement Schedule

(i) Schedule II-Valuation and Qualifying Accounts
- --------
* Previously filed in connection with this Registration Statement.

Item 17. Undertakings

(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions or otherwise, we have been advised that,
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of us in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

(b) We hereby undertake that:

(i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.

(ii) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(i) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(1) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(2) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.

(ii) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Post-Effective Amendment No. 2 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Suwanee, State of Georgia on the th day of April, 1999.

CLARUS CORPORATION

/s/ Stephen P. Jeffery
By: _________________________________
Stephen P. Jeffery,
Chairman, Chief Executive Officer
and President

Pursuant to the requirements of the Securities, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Stephen P. Jeffery Chairman, Chief Executive April 16, 1999
____________________________________ Officer (Principal
Stephen P. Jeffery Executive Officer);
President and Director

/s/ William A. Fielder, III Chief Financial Officer April 16, 1999
____________________________________ (Principal Financial and
William A. Fielder, III Accounting Officer)

* Director April 16, 1999
____________________________________
William S. Kaiser

* Director April 16, 1999
____________________________________
Donald L. House

* Director April 16, 1999
____________________________________
Tench Coxe

* Director April 16, 1999
____________________________________
Said Mohammadioun

* Director April 16, 1999
____________________________________
Mark A. Johnson

</TABLE>

*By: __________________________
Stephen P. Jeffery
Attorney-in-Fact

II-5
<PAGE>

Schedule II

Valuation and Qualifying Accounts
Clarus Corporation and Subsidiaries
For the years ended December 31, 1996, 1997 and 1998
Allowance for Doubtful Accounts and Returns

<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Period Expenses Accounts Deductions Period
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts
1996.................. $ -- $387,000 $ -- $ 99,000 $288,000
1997.................. 288,000 125,000 -- 129,000 284,000
1998.................. 284,000 739,000 54,000 (b) 676,000 401,000
Allowance for Returns
1996.................. $476,000 $ -- $376,000 (a) $506,000 $346,000
1997.................. 346,000 166,000 83,000 (a) 541,000 54,000
1998.................. 54,000 -- (54,000)(b) -- --
Total
1996.................. $476,000 $387,000 $376,000 (a) $605,000 $634,000
1997.................. 634,000 291,000 83,000 670,000 338,000
1998.................. 38,000 739,000 -- 676,000 401,000
</TABLE>
- --------
(a) Amounts were reclassified from deferred revenue
(b) Amounts were reclassified from the returns reserve to the bad debt reserve

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made part of this
Registration Statement.

Arthur Andersen LLP

Atlanta, Georgia

April , 1999

<PAGE>

Exhibit 99.1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the board of directors of Clarus Corporation and Subsidiaries

We have audited in accordance with generally accepted auditing standards, the
financial statements of Clarus Corporation and subsidiaries included in this
registration statement and have issued our report thereon dated January 29,
1999. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule in item 16(b) is the responsibility
of the company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
January 29, 1999