Dissident Clarus Slate Declares Victory

By Tom Johnson

NEW YORK (Reuters) - Software company Clarus Corp. (NasdaqNM:CLRS - News) said on Wednesday a dissident group of shareholders frustrated by its recent financial and stock woes has gained near control of its board.

The three-member slate led by stockholder Warren Kanders won three of the seven seats on the board, having garnered the support of about 57 percent of Clarus shares voted at the annual meeting on May 21, the company said. Just after the meeting, the Kanders camp hinted its group had won, but Clarus called the election "too close to call."

The victory leaves Clarus' restructuring plans and merger talks in a state of flux. However, officials at the Atlanta company, which develops software that helps companies save money on purchasing supplies, said the two sides have already held constructive discussions about ways to enhance shareholder value.

"We've been encouraged by what we've seen," said Clarus spokesman Kevin Acocella. "We plan to continue our exploration of strategic alternatives, but now we will do it with the benefit of additional insight."

Kanders is best known for his 1996 acquisition of security product provider Armor Holdings Inc. (NYSE:AH - News). With the support of Ehrlich and Sokolow, he helped engineer a financial turnaround by expanding the company into security services through a series of acquisitions.

At Clarus, the dissident group launched its board challenge last month after publicly criticizing the company's "dismal" financial and stock performance and management's failure to develop and implement "a clear strategy to enhance shareholder value."

Specifically, the group cited a freefall in the company's stock price from a high of $136 in early 2000 to just above $4 in April amid a deep industry slump. It also said Clarus posted revenue declines in each of the last three years.

WEIGHING OPTIONS

Clarus said last month that it hired U.S. Bancorp Piper Jaffray as its financial advisor and opened preliminary talks with an unnamed party on a "value-enhancing strategic transaction" as part of an overall effort to review its alternatives.

Acocella said he could not comment on how the board election might affect those talks.

Kanders, who will join the board along with fellow shareholders Burtt Ehrlich and Nicholas Sokolow, had initially asked Clarus executives to suspend any merger talks until the board vote was decided.

At the time, Kanders said his board slate had "vastly superior" experience than the company's current management in completing strategic acquisitions. All three are still on Armor's board.

The group has offered few specifics about its strategy for Clarus but has said its first priority will be to find ways to help the company slow its cash burn.

"While proxy contests can be divisive, we accept the trust which stockholders have placed in us and shall use our skill and experience to work collaboratively with the other board members to honor our commitment to enhance the value of Clarus and return that value to stockholders in this challenging environment," Kanders said in a statement on Wednesday.

The Kanders-led group's victory comes even though Institutional Shareholders Services, an influential independent shareholder advisory firm, advised its clients to back the company's slate.

While lauding the dissident group's stated objective of exploring Clarus' strategic alternatives, including selling the company, ISS said they ultimately were not specific enough about their plans to warrant three board seats.

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