Securities Law & Instruments

Headnote

Mutual Reliance Review Systemfor Exemptive Relief Applications - Relief from registrationand prospectus requirements in connection with a statutory arrangementinvolving an exchangeable share structure where exemptions maynot be available in for technical reasons. Issuer of exchangeableshares exempted from certain continuous disclosure requirementsand its insiders exempted from insider reporting requirementssubject to certain conditions. First trade deemed a distributionunless made in accordance with specified provisions of MultilateralInstrument 45-102: Resale of Securities.

Applicable Ontario StatutoryProvisions

Securities Act, R.S.O. 1990,c. S.5, as am., ss. 25, 53, 74(1), 80(b)(iii) and 121(2)(a)(ii).

Applicable Ontario Rules

Rule 45-501 - Exempt Distributions.

Rule 51-501 - AIF and MD&A.

Applicable National Instruments

Multilateral Instrument 45-102:Resale of Securities.

National Instrument 55-102 Systemfor Electronic Disclosure by Insiders (SEDI).

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ALBERTA, SASKATCHEWAN,

MANITOBA, QUEBEC, ONTARIO,NOVA SCOTIA,

NEW BRUNSWICK, NEWFOUNDLANDAND LABRADOR,

PRINCE EDWARD ISLAND, NORTHWESTTERRITORIES,

NUNAVUT AND YUKON TERRITORY

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

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 securitiesregulatory authority or regulator (the "Decision Maker")in each of Alberta, Saskatchewan, Manitoba, Ontario, Quebec,Nova Scotia, New Brunswick, Newfoundland and Labrador, PrinceEdward Island, the Yukon Territory, the Northwest Territoriesand Nunavut (collectively the "Jurisdictions") hasreceived an application from divine, inc. ("divine")and Delano Technology Corporation ("Delano" and, togetherwith divine, the "Applicants") for a decision underthe securities legislation of the Jurisdictions (the "Legislation")that:

(a) certain trades in securitiesmade in connection with or resulting from the proposed acquisitionof Delano by divine (the "Transaction") to beeffected by way of a plan of arrangement (the "Arrangement")under section 182 of the Business Corporations Act(Ontario) (the "OBCA") shall be exempt from therequirements contained in the Legislation to be registeredto trade in a security (the "Registration Requirements")and to file a preliminary prospectus and a prospectus andreceive receipts therefor (the "Prospectus Requirements");

(b) Delano be exempt fromany requirements of the Legislation, where applicable,

(i) to issue press releasesand file reports regarding material changes ("MaterialChange Reporting Requirements");

(ii) to prepare, fileand deliver annual reports, audited comparative annualfinancial statements, unaudited, comparative, interimfinancial statements and information circulars or annualreports in lieu thereof;

(collectively, the "ContinuousDisclosure Requirements") and

(iii) to prepare and filean annual information form ("AIF"), includingmanagement's discussion and analysis ("MD&A"),to prepare and file interim MD&A, and to send suchannual and interim MD&A to security holders of Delano(collectively, the "AIF and MD&A Requirements");

(c) that insiders of Delanobe exempt from the requirement (the "Insider ReportingRequirement") contained in the Legislation, where applicable,to file reports disclosing the insider's direct or indirectbeneficial ownership of, or control or direction over, securitiesof Delano; and

(d) that Delano be exemptfrom the requirement to contained in section 2.2(2) of OSCRule 52-501 Financial Statements to prepare and filea comparative income statement and cash flow statement (collectivelythe "52-501 Filing Requirement").

AND WHEREAS, under theMutual Reliance Review System for Exemptive Relief Applications(the "System"), the Ontario Securities Commission("OSC") is the principal regulator for this Application;

AND WHEREAS the Applicantshave represented to the Decision Makers that:

1. divine was incorporatedin 1999 as a Delaware corporation. divine's business includesproviding expertise in collaboration, interaction and knowledgesolutions that extend enterprise solutions. divine's principalcorporate offices are located in Chicago, Illinois.

2. divine is currently subjectto the informational requirements of the United States SecuritiesExchange Act of 1934, as amended (the "1934 Act"),is not a "reporting issuer" or its equivalent inany of the Jurisdictions and does not intend to become a reportingissuer or its equivalent in any of the Jurisdictions aftercompletion of the Transaction.

3. divine's authorized capitalconsists of 2,500,000,000 shares of Class A common stock ("divineCommon Shares"), par value U.S.$0.001 per share, 100,000,000shares of Class C common stock, U.S.$0.001 par value per share,and 50,000,000 shares of preferred stock, U.S.$0.001 par valueper share ("divine Preferred Stock") of which 500,000shares have been designated Series A Junior ParticipatingPreferred Stock. As at March 27, 2002, no shares of divinePreferred Stock and no shares of Class C common stock wereissued and outstanding, and 457,145,645 divine Common Shareswere issued and outstanding. As part of the Transaction, divinewill issue one share of special voting stock (the "SpecialVoting Share") to a trustee (the "Trustee")in accordance with the Voting and Exchange Trust Agreement(defined below).

4. divine maintains stockoption and purchase plans pursuant to which the divine Boardof Directors has the authority, among other things, to determinethe type of options ("divine Options") and the numberof divine Common Shares which are subject to the divine Optionsor the number of divine Common Shares which may be purchased,as the case may be.

5. The divine Common Sharesare quoted on the NASDAQ National Market ("NASDAQ").

6. As at April 4, 2002, therewere approximately 22 registered holders of divine CommonShares indicated on divine's records as being resident inCanada holding, in aggregate, 6,847,789 divine Common Shares,representing less than 2% of the total number of issued andoutstanding divine Common Shares. Following the completionof the Transaction and certain other transactions (to be completedbefore or shortly after the Transaction) by divine that aredisclosed in the Circular (defined below), and assuming thatExchangeable Shares are considered to be divine Common Shares,it is expected that the beneficial holders of divine CommonShares resident in Canada will hold less than 10% of the issuedand outstanding divine Common Shares and represent less than10% of the number of holders of divine Common Shares. Thiscalculation is based upon the number of beneficial and registeredDelano Shareholders (as defined below) and registered holdersof divine Common Shares who are residents of Canada and onthe assumption that the consideration to be paid by divineto Delano Shareholders pursuant to the Arrangement will consistentirely of Exchangeable Shares.

7. Delano was incorporatedunder the OBCA in 1998. Delano develops and markets customerrelations management software. Delano's head office is locatedin Markham, Ontario.

8. Delano is a reporting issuerin the provinces of Ontario and Alberta (the "ReportingJurisdictions"), but is not a reporting issuer or itsequivalent under the Legislation of any other Jurisdiction.Delano is also subject to the reporting requirements of the1934 Act.

9. The authorized capitalof Delano consists of an unlimited number of common shares("Delano Common Shares"), an unlimited number ofClass "A" special shares, an unlimited number ofClass "B" special shares, an unlimited number ofClass "C" special shares and an unlimited numberof preference shares. As of March 12, 2002, 43,429,694 DelanoCommon Shares were issued and outstanding and no Class "A",Class "B" or Class "C" or preferred shareswere issued and outstanding. As part of the Transaction, Delanowill create and issue non-voting exchangeable shares ("ExchangeableShares"), which will be exchangeable for an equal numberof divine Common Shares. As of May 31, 2002, no publicly tradeddebt securities of Delano were outstanding.

10. The Delano Common Sharesare currently listed for trading on The Toronto Stock Exchange(the "TSX") and are quoted on NASDAQ.

11. Delano maintains employeestock option plans pursuant to which it has granted optionsto acquire Delano Common Shares ("Delano Options").As of April 4, 2002, there were Delano Options outstandingwhich, when vested, would be exercisable to purchase a totalof 6,689,602 Delano Common Shares.

12. As of April 4, 2002, therewere warrants ("Delano Warrants") to acquire 36,723Delano Common Shares issued and outstanding.

13. To the knowledge of Delano,Delano is not in default of any requirements of the Legislation.

14. On March 12, 2002, divineand Delano entered into a business combination agreement (the"Combination Agreement") setting forth the termsof the Transaction. On completion of the Transaction, to beeffected by way of the Arrangement, divine will own all ofthe outstanding Delano Common Shares. The Arrangement willrequire: (i) the approval of holders of the Delano CommonShares (the "Delano Shareholders") holding not lessthan 66 and 2/3% of the votes cast at the special meetingof such Delano Shareholders (the "Delano Meeting")by Delano Shareholders present in person or represented byproxy; and (ii) the final approval of the Court (as definedbelow).

15. In connection with theArrangement, Delano mailed to the Delano Shareholders a managementinformation circular (the "Circular"). The Circularcontains, among other things, prospectus-level disclosureof the business and affairs of each of Delano and divine andthe particulars of the Arrangement, the Exchangeable Sharesand the divine Common Shares. The Circular also disclosesthat divine and Delano have applied for exemptive relief fromProspectus Requirements for certain trades to be made in connectionwith Transaction, and for relief that exempts Delano fromcertain Continuous Disclosure Requirements and that exemptsinsiders of Delano from certain Insider Reporting Requirements.

16. On April 22, 2002 theSuperior Court of Justice (Ontario) (the "Court")granted an interim order in respect of the Arrangement providingfor the calling and holding of the Delano Meeting and certainother procedural matters including providing for approvalof the Arrangement to be made by the affirmative vote of notless than 66 and 2/3% of the votes cast at the Delano Meetingby Delano Shareholders present in person or represented byproxy.

17. It is expected that, shortlyafter consummation of the Transaction, the Delano Common Shareswill be delisted from the TSX and NASDAQ.

18. Pursuant to the Transaction,vesting terms of all out-of-the money Delano Options ("Out-of-the-MoneyOptions") will be accelerated such that all such Out-of-the-MoneyOptions are exercisable and may be conditionally exercisedprior to the effective time of the Arrangement (the "EffectiveTime"), and, to the extent such Out-of-the-Money Optionsare not exercised prior to the Effective Time, such Out-of-the-MoneyOptions shall terminate and expire immediately prior to theEffective Time.

19. At the Effective Time,the steps described below will occur:

(a) the outstanding DelanoCommon Shares held by each Delano Shareholder, other than:

(i) Delano Common Sharesheld by divine or any affiliate thereof;

(ii) Delano Common Sharesthat an eligible holder has validly elected to exchangefor Exchangeable Shares;

(iii) Delano Common Sharesheld by shareholders exercising their dissent rights whoare ultimately entitled to be paid the fair value of theirDelano Common Shares;

will be transferred by theholder thereof to divine in exchange for that number ofdivine Common Shares equal to the product of the total numberof Delano Common Shares held by such shareholder multipliedby 1.187 (the "Exchange Ratio").

(b) Delano's capital willbe reorganized to create the Exchangeable Shares and toeliminate all other classes of shares of Delano other thanthe Delano Common Shares.

(c) the outstanding DelanoCommon Shares that a holder has validly elected to exchangefor Exchangeable Shares shall be transferred by the holderthereof to Delano in exchange for a number of ExchangeableShares equal to the product of the Exchange Ratio and thenumber of Delano Common Shares in respect of which suchelection is validly made, provided that notwithstandingthe foregoing, only Delano Shareholders who are either,(1) Canadian residents for purposes of the Income TaxAct (Canada) (the "ITA") not exempt from taxunder Part I of the ITA holding Delano Common Shares ontheir own behalf or (2) persons who hold Delano Common Shareson behalf of one or more Canadian residents for purposesof the ITA not exempt from tax under Part I of the ITA,shall be entitled to elect to receive Exchangeable Sharesin respect of any such Delano Common Shares.

(d) divine and Delano shallexecute a support agreement (the "Exchangeable ShareSupport Agreement") and divine, Delano and the Trusteewill enter into a voting and exchange trust agreement (the"Voting and Exchange Trust Agreement") and allrights of holders of Exchangeable Shares under the Votingand Exchange Trust Agreement shall be received by them aspart of the property receivable by them in exchange forthe Delano Common Shares so transferred to Delano.

(e) each Delano Option thathas not been cancelled, terminated or duly exercised priorto the Effective Time will be exchanged for a replacementoption ("Replacement Option"). Each ReplacementOption will constitute an option to purchase a number ofdivine Common Shares equal to the product of the ExchangeRatio and the number of Delano Common Shares subject tothat Delano Option, at an exercise price per divine CommonShare equal to the exercise price per Delano Common Shareof the Delano Option immediately prior to the EffectiveTime divided by the Exchange Ratio.

(f) each Delano Warrantwill be amended to provide for the purchase of the numberof divine Common Shares equal to the product of the ExchangeRatio multiplied by the number of Delano Common Shares subjectto such Delano Warrant, at an exercise price per divineCommon Share equal to the exercise price per Delano CommonShare of the Delano Warrant immediately prior to the EffectiveTime divided by the Exchange Ratio.

20. No fractional ExchangeableShares or fractional divine Common Shares will be deliveredin exchange for Delano Common Shares pursuant to the Arrangement.In lieu of any such fractional securities, each person otherwiseentitled to a fractional interest in an Exchangeable Shareor a divine Common Share will be entitled to receive a cashpayment equal to such person's pro rata portion of the netproceeds after expenses received upon the sale of whole sharesrepresenting an accumulation of all fractional interests indivine Common Shares to which all such persons would otherwisebe entitled (either directly or through rights appertainingto such fractional Exchangeable Shares).

21. The Exchangeable Shareswill not be listed or quoted on any exchange.

22. divine has applied toNASDAQ to quote the divine Common Shares issued pursuant tothe Arrangement or issuable from time to time in exchangefor Exchangeable Shares, or upon the exercise of the ReplacementOptions or the Delano Warrants, effective on completion ofthe Transaction.

23. Each Exchangeable Sharewill be exchangeable at the option of the holder, at any time,for one divine Common Share and an amount in cash equal tothe declared and unpaid dividends on one Exchangeable Share.

24. The Exchangeable Shares,together with the Voting and Exchange Trust Agreement andSupport Agreement described below, will provide holders thereofwith a security of a Canadian issuer having economic and votingrights which are substantially economically equivalent tothose of divine Common Shares. Exchangeable Shares will generallybe received by Canadian-resident holders of Delano CommonShares, on a tax-deferred rollover basis for purposes of theITA.

25. The Exchangeable Sharesare subject to adjustment or modification in the event ofa stock split or other change to the capital structure ofdivine so as to maintain at all times the initial one-to-onerelationship between the Exchangeable Shares and the divineCommon Shares.

26. The rights, privileges,restrictions and conditions attaching to the ExchangeableShares (the "Exchangeable Share Provisions") willprovide that each Exchangeable Share will entitle the holderto dividends payable at the same time as, and equivalent to,each dividend paid by divine on a divine Common Share.

27. The Exchangeable Shareswill be non-voting (except as required by the ExchangeableShare Provisions or by applicable law) and will be retractableat the option of the holder at any time. Subject to the overridingRetraction Call Right of divine referred to below in thisparagraph, upon retraction the holder will be entitled toreceive for each Exchangeable Share retracted an amount equalto the current market price of a divine Common Share, to besatisfied by the delivery of one divine Common Share, togetherwith an amount equivalent to the amount of all declared andunpaid dividends on each such Exchangeable Share (such aggregateamount, the "Retraction Price"). Upon being notifiedby Delano of a proposed retraction of Exchangeable Shares,divine will have an overriding retraction call right (the"Retraction Call Right") to purchase from the holderall of the Exchangeable Shares that are the subject of theretraction notice for a price per share equal to the RetractionPrice.

28. Subject to the applicablelaw and the overriding Redemption Call Right of divine referredto below in this paragraph, Delano may redeem all but notless than all of the then outstanding Exchangeable Shares(other than Exchangeable Shares held by divine and its affiliates)on, or any time after, the third anniversary of the effectivedate of the Transaction (the "Redemption Date").As set out in the Exchangeable Share Provisions, in certaincircumstances the Board of Directors of Delano may acceleratethe Redemption Date. Upon such redemption, a holder will beentitled to receive from Delano for each Exchangeable Shareredeemed an amount equal to the current market price of adivine Common Share, to be satisfied by the delivery of onedivine Common Share, together with an amount equivalent tothe amount of all declared and unpaid dividends on each suchExchangeable Share (such aggregate amount, the "RedemptionPrice"). Upon being notified by Delano of a proposedredemption of Exchangeable Shares, divine will have an overridingredemption call right (the "Redemption Call Right")to purchase on the Redemption Date all but not less than allof the then outstanding Exchangeable Shares (other than ExchangeableShares held by divine and its affiliates) for a price pershare equal to the Redemption Price.

29. Subject to the overridingLiquidation Call Right of divine referred to below in thisparagraph, in the event of the liquidation, dissolution orwinding-up of Delano or any other distribution of assets ofDelano for the purpose of winding up its affairs, a holderof an Exchangeable Share will be entitled to receive fromDelano for each such Exchangeable Share, subject to applicablelaw, in preference to Delano Common Shares, an amount equalto the current market price of one divine Common Share, tobe satisfied by the delivery of one divine Common Share, togetherwith an amount equivalent to the amount of all declared andunpaid dividends on each such Exchangeable Share (the "LiquidationAmount"). Upon a proposed liquidation, dissolution orwinding-up of Delano or other distribution of the assets ofDelano for the purpose of winding up its affairs, divine willhave an overriding liquidation call right (the "LiquidationCall Right") to purchase all but not less than all ofthe Exchangeable Shares (other than Exchangeable Shares heldby divine and its affiliates) on the effective date of suchliquidation, dissolution or winding-up for an amount per shareequal to the Liquidation Amount.

30. In the event of certainchanges in Canadian federal and Ontario tax law, (such thata beneficial owner of Exchangeable Shares who is a Canadianresident and holds their Exchangeable Shares as capital propertymay exchange their Exchangeable Shares with divine for divineCommon Shares on a tax deferred basis) divine will have theright to purchase all of the Exchangeable Shares then outstanding(other than Exchangeable Shares held by divine and its affiliates)prior to the third anniversary of the Effective Date (the"divine Call Right") for an amount per share equalto the current market price of a divine Common Share, to besatisfied by the delivery of one divine Common Share, togetherwith an amount equivalent to the amount of all declared andunpaid dividends on each such Exchangeable Share.

31. Upon the exchange of anExchangeable Share for a divine Common Share, the holder ofthe Exchangeable Share will cease to have voting rights inrespect of divine Common Shares provided under the Votingand Exchange Trust Agreement, as described below.

32. divine shall have theright to cause an affiliate of divine to exercise the LiquidationCall Right, Redemption Call Right, divine Call Right or RetractionCall Right in any circumstance in which divine is entitledto exercise such rights.

33. The Special Voting Shareentitles the holder of record of such share to a number ofvotes at meetings of holders of divine Common Shares equalto the aggregate number of votes that the holders of ExchangeableShares outstanding from time to time (excluding by agreementExchangeable Shares held by divine and its affiliates) wouldbe entitled to if such Exchangeable Shares were exchangedby the holders thereof for divine Common Shares, and whichSpecial Voting Share is to be issued, deposited with and votedby the Trustee as described in the Voting and Exchange TrustAgreement.

34. Each holder of an ExchangeableShare (other than divine and its affiliates) on the recorddate for any meeting at which holders of divine Common Sharesare entitled to vote will be entitled to instruct the Trusteeto exercise that number of the votes attached to the SpecialVoting Share represented by the Exchangeable Shares held bysuch holder.

35. Under the Voting and ExchangeTrust Agreement, divine will grant to the Trustee for thebenefit of the holders of the Exchangeable Shares a right(the "Exchange Right") exercisable upon certaininsolvency events in respect of Delano, to require divineto purchase from a holder of Exchangeable Shares (other thandivine or its affiliates) all or any part of the ExchangeableShares held by that holder. The purchase price for each ExchangeableShare purchased by divine under the Exchange Right will bean amount equal to the current market price of a divine CommonShare to be satisfied by the delivery to the Trustee, on behalfof the holder, of one divine Common Share, together with anamount equivalent to the amount of all declared and unpaiddividends on such Exchangeable Share.

36. Shortly prior to the liquidation,dissolution or winding-up of divine or other distributionof divine's assets for the purpose of winding up of its affairs,the Exchangeable Shares (other than those held by divine andits affiliates) will be automatically exchanged for divineCommon Shares pursuant to the Voting and Exchange Trust Agreementin order that holders of Exchangeable Shares may participatein such event on the same basis as holders of divine CommonShares.

37. The Support Agreementwill provide that: (a) divine will not declare or pay anydividends on the divine Common Shares unless Delano is ableto declare and pay, and simultaneously declares and pays anequivalent dividend on the Exchangeable Shares; (b) divinewill honour the redemption and retraction rights and dissolutionentitlements that are attributes of the Exchangeable Sharesunder the Exchangeable Share Provisions and the related LiquidationCall Right, Redemption Call Right, divine Call Right and RetractionCall Right; and (c) divine will not exercise its vote as ashareholder to initiate the voluntary liquidation, dissolutionor winding-up of Delano nor take any action or omit to takeany action that is designed to result in the liquidation,dissolution or winding up of Delano.

38. The Support Agreementwill also provide that, without the prior approval of holdersof the Exchangeable Shares, actions such as distributionsof stock dividends, options, rights and warrants for the purchaseof securities or other assets, subdivisions, reclassifications,reorganizations and other changes cannot be taken in respectof the divine Common Shares without the same or an economicallyequivalent action being taken in respect of the ExchangeableShares.

39. The steps under the Transactionand the attributes of the Exchangeable Shares contained inthe Exchangeable Share Provisions, the Arrangement, the Votingand Exchange Trust Agreement and the Exchangeable Share SupportAgreement involve or may involve a number of trades of securities(collectively, the "Trades").

40. The fundamental investmentdecision to be made by holders of Delano Common Shares ismade at the time of the Arrangement, when such holders votein respect of the Arrangement. As a result of this decision,a holder (other than a dissenting holder) will receive ExchangeableShares or divine Common Shares in exchange for the DelanoCommon Shares held by such holder. The Exchangeable Shares(together with ancillary rights) will provide certain Canadiantax benefits to certain Canadian holders but will otherwisebe substantially the economic and voting equivalent of thedivine Common Shares, and as such all subsequent exchangesof Exchangeable Shares are in furtherance of the holder'sinitial investment decision. As mentioned above, that investmentdecision will be made on the basis of the Delano Circular,which contains prospectus-level disclosure of the businessand affairs of each of divine and Delano and of the particularsof the Transaction and the Arrangement.

41. Following completion ofthe Arrangement, divine will concurrently send to holdersof Exchangeable Shares and divine Common Shares resident inJurisdictions all disclosure material it sends to holdersof divine Common Shares resident in the United States pursuantto the 1934 Act.

AND WHEREAS under theSystem, this MRRS Decision Document evidences the decision ofeach Decision Maker (collectively, the "Decision");

AND WHEREAS each of theDecision Makers is satisfied that the test contained in theLegislation that provides the Decision Maker with the jurisdictionto make the Decision has been met;

THE DECISION of the DecisionMakers under the Legislation is that:

1. The Trades are not subjectto the Registration Requirements and the Prospectus Requirements,provided that:

(a) except in Quebec, thefirst trade in a Jurisdiction of Exchangeable Shares acquiredunder a Trade will be a distribution or primary distributionto the public unless the conditions in subsections (3) or(4) of section 2.6 of Multilateral Instrument 45-102 - Resaleof Securities ("MI 45-102") are satisfied;

(b) except in Quebec, thefirst trade in a Jurisdiction of divine Common Shares acquiredunder a Trade will be a distribution or primary distributionto the public under the Legislation of such Jurisdiction(the "Applicable Legislation") (other than firsttrades which are Trades or which are otherwise exemptedfrom the Registration Requirements and the Prospectus Requirementsunder the Applicable Legislation) unless, at the time ofthe first trade:

(i) if divine is a reportingissuer or its equivalent in any Jurisdiction listed inAppendix B to MI 45-102 other than Quebec, the conditionsin subsections (3) or (4) of section 2.6 of MI 45-102are satisfied; or

(ii) if divine is nota reporting issuer or its equivalent in any Jurisdictionother than Quebec, such first trade is made through anexchange, or a market, outside of Canada; and

(c) In Quebec,

to the extent that thereis no exemption available from the Registration Requirementsand the Prospectus Requirements in respect of a first tradeof Exchangeable Shares acquired under a Trade, the firsttrade in Quebec of Exchangeable Shares will be a distributionunless either

(i) the following conditionsare met :

A. one of the partiesto the Arrangement is and has been a reporting issuerin Quebec and has complied with the applicable requirementsfor the twelve months immediately preceding such firsttrade;

B. no unusual effortis made to prepare the market or to create demand forthe Exchangeable Shares;

C. no extraordinarycommission is paid to a person or company in respectof the trade; and

D. if the seller ofthe Exchangeable Shares is an insider or officer ofDelano, the seller has no reason to believe that Delanois in default of the Legislation, or

(ii) Delano is not a reportingissuer in Quebec and such first trade is made throughan exchange, or a market, outside of Canada;

(d) In Quebec,

to the extent that thereis no exemption available from the Registration Requirementsand the Prospectus Requirements in respect of a first tradeof divine Common Shares acquired under a Trade, the firsttrade in Quebec of divine Common Shares will be a distributionunless either

(i) the following conditionsare met :

A. divine is and hasbeen a reporting issuer in Quebec and has complied withthe applicable requirements for the twelve months immediatelypreceding such first trade;

B. no unusual effortis made to prepare the market or to create demand forthe divine Common Shares;

C. no extraordinarycommission is paid to a person or company in respectof the trade; and

D. if the seller ofthe divine Common Shares is an insider or officer ofdivine, the seller has no reason to believe that divineis in default of the Legislation, or

(ii) divine is not a reportingissuer in Quebec and such first trade is made throughan exchange, or a market, outside of Canada;

2. the Continuous DisclosureRequirements of Jurisdictions in which Delano is a reportingissuer or its equivalent shall not apply to Delano duringsuch time as Delano is a reporting issuer or its equivalentin any of such Jurisdictions or thereafter, so long as:

(a) divine sends to allholders of Exchangeable Shares resident in the Jurisdictionsall disclosure material furnished to holders of divine CommonShares resident in the United States, including, withoutlimitation, copies of its annual financial statements andall proxy solicitation materials;

(b) divine files with theDecision Maker in the Jurisdictions in which Delano is areporting issuer or its equivalent copies of all documentsrequired to be filed pursuant to the 1934 Act, as amended,including, without limitation, copies of any Form 10-K,Form l0-Q, Form 8-K and proxy statements prepared in connectionwith divine's stockholders' meetings;

(c) divine complies withthe requirements of NASDAQ in respect of making public disclosureof material information on a timely basis and forthwithissues in the Jurisdictions in which Delano is a reportingissuer or its equivalent and files with the Decision Makerin such Jurisdictions any press release that discloses amaterial change in divine's affairs;

(d) Delano complies withthe Material Change Reporting Requirements in respect ofmaterial changes in the affairs of Delano that would bematerial to holders of Exchangeable Shares, but not to holdersof divine Common Shares;

(e) prior to or coincidentwith the distribution of the Exchangeable Shares, divineshall cause Delano to provide to each recipient or proposedrecipient of Exchangeable Shares resident in the Jurisdictionsa statement that Delano is exempted from certain disclosurerequirements applicable to reporting issuers in the Jurisdictions,and specifying those requirements Delano has been exemptedfrom and identifying the disclosure that will be made insubstitution therefor (which statement may be satisfiedby the inclusion of such a statement in the Delano Circular);

(f) divine includes in allfuture mailings of proxy solicitation materials to holdersof Exchangeable Shares a clear and concise statement explainingthe reason for the mailed material being solely in relationto divine and not in relation to Delano, such statementto include a reference to the substantial economic equivalencybetween the Exchangeable Shares (and the right to directvoting at divine's stockholders' meetings pursuant to theVoting and Exchange Trust Agreement) and the divine CommonShares;

(g) divine remains the director indirect beneficial owner of all the issued and outstandingvoting securities of Delano;

(h) Delano has not madea public offering of securities other than the ExchangeableShares in the Jurisdictions; and

(i) divine files with eachDecision Maker copies of all documents required to be filedby it with the SEC under the 1934 Act, and such filingsare made under Delano's SEDAR profile and the filing feeswhich would otherwise be payable by Delano in connectionwith such filings are paid

3. the Insider Reporting Requirementsof Jurisdictions in which Delano is a reporting issuer orits equivalent shall not apply to any insider of Delano duringsuch time as Delano is a reporting issuer or its equivalentin any of such Jurisdictions or thereafter, so long as suchinsider:

(a) does not receive orhave access to, in the ordinary course, information as tomaterial facts or material changes concerning divine beforethe material facts or material changes are generally disclosed;

(b) is not a director orsenior officer of a significant subsidiary of divine asdefined in National Instrument 55-101 Exemption FromCertain Insider Reporting Requirements (a "SignificantSubsidiary"); and

(c) is not an insider ofdivine in a capacity other than as a director or seniorofficer of a subsidiary of divine that is not a major subsidiaryof divine, as if divine were a reporting issuer.

July 26, 2002.

"Paul M. Moore"                    "HaroldP. Hands"

AND THE FURTHER DECISIONof the Decision Maker in Ontario is that the AIF and MD&ARequirements and the 52-501 Filing Requirement shall not applyto Delano provided that the conditions set out in paragraph2 of the operative portion of the Decision are satisfied.

July 26, 2002.

"Margo Paul"