Securities Law & Instruments

Headnote

Rule 54-501 - Relief granted from the requirementto reconcile to Canadian GAAP certain financial statements includedin an information circular that were prepared in accordancewith U.S. GAAP

Ontario Rule Cited

Rule 54-501 Prospectus Disclosure in CertainInformation Circulars (2000), 23 OSCB 8519, section 3.1

Rule 41-501 General Prospectus Requirements(2000), 23 OSCB 761, sections 9.1, 9.4; Form 41-501F1 section8.4 and subsection 8.5(2)

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO AND ALBERTA

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
DIVINE, INC.

AND

IN THE MATTER OF
DELANO TECHNOLOGY CORPORATION

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario and Alberta (the "Jurisdictions") has receivedan application from divine, inc. ("divine") and DelanoTechnology Corporation ("Delano" and, together withdivine, the "Applicants") for a decision under thesecurities legislation of the Jurisdictions (the "Legislation")that the Applicants be exempt from the following requirementswith respect to divine in the management information circular(the "Circular") to be sent to the shareholders ofDelano (the "Delano Shareholders") in connection witha proposed transaction pursuant to which divine will acquireDelano (collectively, the "Financial Statement Requirements"):

(a) the requirement that historical and proforma financial statements of divine prepared in accordancewith U.S. generally accepted accounting principles ("U.S.GAAP") be accompanied by notes that explain and quantifythe effect of material differences between Canadian generallyaccepted accounting principles ("Canadian GAAP") andU.S. GAAP that relate to measurements and that provide a reconciliationof such financial statements to Canadian GAAP and provide disclosureconsistent with Canadian GAAP requirements to the extent notalready reflected in the financial statements;

(b) the requirement that the divine auditor'sreport include a statement disclosing any material differencesin the form and content of its auditor's report as comparedto a Canadian auditor's report and confirming that the auditingstandards applied are substantially equivalent to Canadian generallyaccepted auditing standards; and

(c) the requirement that the divine management'sdiscussion and analysis of operating results and financial condition("divine MD&A") provide a restatement of thoseparts of the divine MD&A that would read differently ifthe divine MD&A were based on statements prepared in accordancewith Canadian GAAP and that the divine MD&A provide a cross-referenceto the notes in the financial statements that reconciled thedifferences between U.S. GAAP and Canadian GAAP.

AND WHEREAS, under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission ("OSC") is the principalregulator for this Application;

AND WHEREAS the Applicants have representedto the Decision Makers that:

1. divine is a corporation incorporated underthe laws of the state of Delaware.

2. divine is not, and has no present intentionof becoming, a reporting issuer under the Legislation or underthe securities legislation of any other province or territoryof Canada, but is subject to the reporting requirements of theUnited States Securities Exchange Act of 1934 (the "1934Act").

3. divine's authorized capital consists of 2,500,000,000shares of Class A common stock, par value $0.001 per share,and 100,000,000 shares of Class C common stock, US$0.001 parvalue per share, and 50,000,000 shares of Preferred stock, $0.001par value per share, ("divine Preferred Stock") ofwhich 500,000 shares have been designated Series A Junior ParticipatingPreferred Stock. No shares of Series A Junior ParticipatingPreferred Stock are issued and outstanding on the date hereof.The Class A common stock ("divine Common Shares")are voting shares. As of March 27, 2002, there were 457,145,645shares of Class A common stock outstanding and no shares ofClass C common stock outstanding. As part of the Transaction,divine will issue a special voting share to a trust companywhich will be appointed as trustee under a voting and exchangetrust agreement.

4. divine maintains employee stock option andpurchase plans pursuant to which the divine Board of Directorshas the authority, among other things, to determine the typeof options ("divine Options") and the number of divineCommon Shares which are subject to the divine Options or thenumber of divine Common Shares which may be purchased, as thecase may be. As at April 4, 2002, a total of 119,609 divineOptions were held by persons indicated on divine's records asbeing resident in Canada.

5. As at April 4, 2002, there were 22 registeredholders of divine Common Shares indicated on divine's recordsas being resident in Canada holding, in aggregate, 6,847,789divine Common Shares, representing less than 2% of the totalnumber of issued and outstanding divine Common Shares.

6. The divine Common Shares are quoted on theNasdaq National Market ("NASDAQ") as "DVIN".

7. Delano is a corporation incorporated underthe laws of Ontario.

8. Delano is a reporting issuer in the Jurisdictionsbut is not a reporting issuer or the equivalent under the securitieslegislation of any other province or territory of Canada. Delanois also subject to the reporting requirements of the 1934 Act.

9. The authorized capital of Delano consistsof an unlimited number of common shares (the "Delano CommonShares"), an unlimited number of Class A special shares,an unlimited number of Class B special shares, an unlimitednumber of Class C special shares (collectively, the "SpecialShares") and an unlimited number of preferred shares. Asof March 12, 2002, 43,429,694 Delano Common Shares and no SpecialShares or preferred shares were issued and outstanding.

10. As of April 4, 2002, there were 6,689,399options to acquire Delano Common Shares ("Delano Options")granted pursuant to Delano's employee stock option plans. Additionally,as of April 4, 2002, 36,723 warrants to acquire Delano CommonShares ("Delano Warrants") were outstanding. As atApril 4, 2002, a total of 4,502,830 Delano Options and no DelanoWarrants were held by persons indicated on Delano's recordsas being resident in Canada.

11. As at April 3, 2002, there were 79 registeredholders of Delano Common Shares indicated on Delano's recordsas being resident in Canada holding, in aggregate, 17,053,525Delano Common Shares, representing approximately 39.2% of thetotal number of issued and outstanding Delano Common Shares.

12. The Delano Common Shares are listed fortrading on the Toronto Stock Exchange (the "TSE")under the symbol "DLN" and are quoted on NASDAQ as"DTEC".

13. A special meeting (the "Meeting")of Delano Shareholders will be held on or about May 22, 2002,at which Meeting Delano will seek the requisite shareholderapproval for the Transaction.

14. In connection with the Meeting, Delano willmail, on or about April 26, 2002 to each Delano Shareholder:(i) a notice of the Meeting, (ii) a form of proxy and (iii)the Circular. The Circular will be prepared in accordance withthe Legislation, except with respect to any relief granted therefrom,and will contain disclosure of the Transaction and the businessand affairs of each of divine and Delano.

15. The Circular will contain the followingfinancial statements:

(a) unaudited pro forma consolidated balancesheet of divine as at December 31, 2001 prepared to give effectto the Transaction as if it had occurred on that date and unauditedpro forma consolidated statement of operations of divine forthe 12-month period ended December 31, 2001 and the compilationreports thereon, prepared to give effect to the Transactionas if it had occurred on January 1, 2001, and the compilationreports thereon, all in accordance with U.S. GAAP;

(b) audited annual financial statements of divinefor the fiscal years ended December 31, 2001 and December 31,2000 and for the period from May 7, 1999 (inception) to December31, 1999, including balance sheets as at December 31, 2001 andDecember 31, 2000 and the auditor's reports thereon, all inaccordance with U.S. GAAP;

(c) audited financial statements of Delano forthe fiscal years ended March 31, 2001, March 31, 2000 and theperiod from May 7, 1998 (inception) to March 31, 1999, includingbalance sheets as at March 31, 2001 and March 31, 2000 and theauditor's reports thereon, all in accordance with Canadian GAAPand also in accordance with U.S. GAAP; and

(d) unaudited interim financial statements ofDelano for the three and nine-month periods ended December 31,2001, all in accordance with Canadian GAAP and also in accordancewith U.S. GAAP.

16. divine is eligible to distribute divineCommon Shares in Canada pursuant to a prospectus filed underthe multi-jurisdictional disclosure system prescribed by NationalInstrument 71-101 (the "MJDS Rule"). The Circularwill include the disclosure that would be required in an MJDSprospectus in respect of divine in connection with the significantbusiness acquisition rules of U.S. securities laws.

17. The Circular will disclose that, in connectionwith the Transaction, divine and Delano have applied for butnot yet been granted relief from the registration and prospectusrequirements, the continuous disclosure requirements and insiderreporting requirements and will also disclose the limitationsimposed on any resale of securities acquired pursuant to thedecision requested in an application filed with the Commissionand the securities regulators in all jurisdictions in Canadaon behalf of divine and Delano under National Policy No. 12-201,with Ontario as the principal jurisdiction (the "MRRS Application").The Circular will disclose the disclosure requirements fromwhich Delano has applied to be exempted and identify the disclosurethat will be made in substitution therefor if such exemptionsare granted.

18. Under the terms and conditions of the Transactionand under the terms of the MRRS Application, if granted, thoseDelano shareholders who, after completion of the plan of arrangement,will hold Exchangeable Shares will be provided with the continuousdisclosure and other shareholder materials which are providedto holders of divine Common Shares in the United States.

19. Delano and divine will effect the Transactionby way of a plan of arrangement following approval of the Transactionby the Delano Shareholders and the Ontario Superior Court ofJustice. Pursuant to the Transaction, Delano Shareholders (otherthan divine and its affiliates and those Delano Shareholderswho properly exercise their dissent rights and are paid fairvalue by Delano) will receive for each Delano Common Share held:

(a) 1.187 (the "Exchange Ratio") divineCommon Shares; or

(b) at the option of Delano Shareholders whoare either (i) Canadian residents not exempt from tax underPart I of the Income Tax Act (Canada) holding Delano CommonShares on their own behalf or (ii) persons who hold Delano CommonShares on behalf of one or more Canadian residents not exemptfrom tax under Part I of the Income Tax Act (Canada) and (ineither case) who validly so elect, 1.187 exchangeable non-votingshares issued by Delano (and certain ancillary rights) (the"Exchangeable Shares").

20. The Exchangeable Shares will not be listedor quoted on any exchange.

21. Each Exchangeable Share will be exchangeableat the option of the holder, at any time, for one divine CommonShare and an amount in cash equal to the declared and unpaiddividends on one Exchangeable Share. Holders of the ExchangeableShares will be entitled to dividend and other rights that aresubstantially economically equivalent to those of holders ofdivine Common Shares.

22. Delano Shareholders who are not eligibleto receive Exchangeable Shares or who are so eligible but donot validly elect to receive Exchangeable Shares will receive1.187 divine Common Shares for each Delano Common Share theyown.

23. Each Delano Option that has not been cancelled,terminated or duly exercised prior to the Effective Time willbe exchanged for an option (a "Replacement Option")to purchase the number of divine Common Shares equal to theproduct of the Exchange Ratio multiplied by the number of DelanoCommon Shares subject to such Delano Option. The ReplacementOption will provide for an exercise price per divine CommonShare equal to the exercise price per share of such Delano Optionimmediately prior to the Effective Time divided by the ExchangeRatio.

24. Each Delano Warrant will be amended, inaccordance with its terms, into a warrant to purchase the numberof divine Common Shares equal to the product of the ExchangeRatio multiplied by the number of Delano Common Shares subjectto such Delano Warrants, at an exercise price per divine CommonShare equal to the exercise price per share of such Delano Warrantimmediately prior to the Effective Time divided by the ExchangeRatio.

25. divine is making an application to NASDAQin order that the divine Common Shares issued pursuant to orin connection with the Transaction be listed for trading onNASDAQ.

26. It is expected that, upon completion ofthe Transaction or shortly thereafter, the Delano Common Shareswill be delisted from the TSE and NASDAQ.

27. Upon completion of the Transaction, it isexpected that registered holders of divine Common Shares (includingholders that receive Exchangeable Shares) indicated on divine'srecords as being resident in Canada (calculated based on theestimated number of registered Delano Shareholders and registeredholders of divine Common Shares who are indicated on the recordsof the relevant company as being resident in Canada as at April3, 2002) will hold approximately 5% of the issued and outstandingdivine Common Shares. That percentage would become approximately6% if it is assumed that all of the holders of divine Optionsand Delano Options who are indicated on the records of the relevantcompany as being resident in Canada exercise their options topurchase underlying divine Common Shares. Assuming that allDelano Common Shares are exchanged and no Delano options areexercised, then immediately following completion of the Transaction,existing Delano shareholders would hold approximately 51,551,047divine Common Shares, representing approximately 10% of theoutstanding divine Common Shares.

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that the Financial Statement Requirementsshall not apply in connection with the disclosure pertainingto divine in the Circular.

April 19, 2002.

"John Hughes"