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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended September 30, 2002

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the Transition Period from  to

Commission File Number 0-30043

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divine, inc.(Exact name of Registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation or organization)

36-4301991(I.R.S. Employer Identification Number)1301 N. Elston Avenue, Chicago, Illinois(Address of Principal Executive Offices)

60622(Zip Code)


Registrant's telephone number, including area code: (773) 394-6600

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

At
November 11, 2002, the registrant had outstanding an aggregate of 25,751,059 shares of class A common stock.

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divine, inc.        Form 10-Q        INDEX

|                                 |  |                                                                                                                                |  | Page
Number
|-------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | -----------
|Part I.    FINANCIAL INFORMATION |  | 3                                                                                                                             
|Item 1.                          |  | Consolidated Financial Statements                                                                                              |  | 3          
|                                 |  | Consolidated Balance Sheets
September 30, 2002 (unaudited) and December 31, 2001                                               |  | 3          
|                                 |  | Consolidated Statements of Operations (unaudited)
Three months and nine months ended September 30, 2002 and September 30, 2001 |  | 4          
|                                 |  | Consolidated Statement of Stockholders' Equity
Nine months ended September 30, 2002 (unaudited)                                |  | 5          
|                                 |  | Consolidated Statements of Cash Flows (unaudited)
Nine months ended September 30, 2002 and September 30, 2001                  |  | 6          
|                                 |  | Notes to Unaudited Interim Consolidated Financial Statements                                                                   |  | 7          
|Item 2.                          |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                          |  | 15         
|Item 3.                          |  | Quantitative and Qualitative Disclosures about Market Risk                                                                     |  | 30         
|Item 4.                          |  | Controls and Procedures                                                                                                        |  | 31         
|Part II.    OTHER INFORMATION    |  | 32                                                                                                                            
|Item 2.                          |  | Changes in Securities and Use of Proceeds                                                                                      |  | 32         
|Item 4.                          |  | Submission of Matters to a Vote of Security Holders                                                                            |  | 32         
|Item 6.                          |  | Exhibits and Reports on Form 8-K                                                                                               |  | 32         
|SIGNATURE                        |  | 35                                                                                                                            
|CERTIFICATIONS                   |  | 36                                                                                                                            

2

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PART I    FINANCIAL INFORMATION

Item 1.    Financial Statements

divine, inc.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

|                                                                                            |                                                                                                                                                               | September 30,
2002                         |         | December 31,
2001 |        
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------------- | -------
|
|Assets                                                                                      |                                                                                                                                                               |                                            |         |                   |        
|Current assets:                                                                             |                                                                                                                                                               |                                            |         |                   |        
|                                                                                            | Cash and cash equivalents                                                                                                                                     |                                            | $       | 61,188            |        
|                                                                                            | Restricted cash                                                                                                                                               |                                            |         | 31,764            |        
|                                                                                            | Accounts receivable, net of allowance for doubtful accounts of $7,857 and $6,983                                                                              |                                            |         | 141,658           |        
|                                                                                            | Available-for-sale securities                                                                                                                                 |                                            |         | 1,126             |        
|                                                                                            | Notes receivable                                                                                                                                              |                                            |         | 127               |        
|                                                                                            | Prepaid expenses                                                                                                                                              |                                            |         | 17,379            |        
|                                                                                            | Deferred publisher costs                                                                                                                                      |                                            |         | 155,080           |        
|                                                                                            | Other current assets                                                                                                                                          |                                            |         | 14,395            |        
|                                                                                            |                                                                                                                                                               |                                            |         |                   |        
|                                                                                            |                                                                                                                                                               | Total current assets                       |         |                   | 422,717
|Property and equipment, net                                                                 |                                                                                                                                                               |                                            | 53,271  |                   |        
|Goodwill and other intangible assets, net of accumulated amortization of $16,129 and $4,097 |                                                                                                                                                               |                                            | 313,482 |                   |        
|Restricted cash                                                                             |                                                                                                                                                               |                                            |        |                   |        
|Other noncurrent assets                                                                     |                                                                                                                                                               |                                            | 14,602  |                   |        
|                                                                                            |                                                                                                                                                               |                                            |         |                   |        
|                                                                                            |                                                                                                                                                               | Total assets                               |         | $                 | 804,072
|                                                                                            |                                                                                                                                                               |                                            |         |                   |        
|Liabilities and Stockholders' Equity                                                        |                                                                                                                                                               |                                            |         |                   |        
|Current liabilities:                                                                        |                                                                                                                                                               |                                            |         |                   |        
|                                                                                            | Accounts payable                                                                                                                                              |                                            | $       | 20,934            |        
|                                                                                            | Publisher payables                                                                                                                                            |                                            |         | 102,147           |        
|                                                                                            | Accrued payroll expenses                                                                                                                                      |                                            |         | 11,343            |        
|                                                                                            | Accrued professional fees                                                                                                                                     |                                            |         | 3,935             |        
|                                                                                            | Current portion of facilities impairment                                                                                                                      |                                            |         | 13,435            |        
|                                                                                            | Current portion of capital leases                                                                                                                             |                                            |         | 12,714            |        
|                                                                                            | Notes payable and current portion of long-term debt                                                                                                           |                                            |         | 666               |        
|                                                                                            | Deferred revenue                                                                                                                                              |                                            |         | 236,689           |        
|                                                                                            | Other accrued expenses and current liabilities                                                                                                                |                                            |         | 45,954            |        
|                                                                                            |                                                                                                                                                               |                                            |         |                   |        
|                                                                                            |                                                                                                                                                               | Total current liabilities                  |         |                   | 447,817
|Long-term debt                                                                              |                                                                                                                                                               |                                            | 57,649  |                   |        
|Long-term facilities impairment                                                             |                                                                                                                                                               |                                            | 28,662  |                   |        
|Capital leases                                                                              |                                                                                                                                                               |                                            | 8,912   |                   |        
|Other noncurrent liabilities                                                                |                                                                                                                                                               |                                            | 12,326  |                   |        
|Stockholders' Equity:                                                                       |                                                                                                                                                               |                                            |         |                   |        
|                                                                                            | Series B convertible preferred stock, $0.001 par value; 100,000 shares authorized; 22,941 and 0 shares issued and outstanding                                 |                                            |         | 22,941            |        
|                                                                                            | Series B-1 convertible preferred stock, $0.001 par value; 100,000 shares authorized; 38,459 and 0 shares issued and outstanding                               |                                            |         | 38,237            |        
|                                                                                            | Series C preferred stock, $0.001 par value; 1 share authorized; 1 and 0 shares issued and outstanding                                                         |                                            |         |                  |        
|                                                                                            | Class A common stock, $.001 par value; 2,500,000,000 shares authorized; 26,511,947 and 14,856,358 shares issued; 25,706,077 and 14,639,912 shares outstanding |                                            |         | 26                |        
|                                                                                            | Additional paid-in capital                                                                                                                                    |                                            |         | 1,271,160         |        
|                                                                                            | Unearned stock-based compensation                                                                                                                             |                                            |         | (4,657            | )      
|                                                                                            | Accumulated other comprehensive loss                                                                                                                          |                                            |         | (8,855            | )      
|                                                                                            | Treasury stock, at cost; 805,870 and 163,113 shares                                                                                                           |                                            |         | (20,033           | )      
|                                                                                            | Accumulated deficit                                                                                                                                           |                                            |         | (1,050,113        | )      
|                                                                                            |                                                                                                                                                               |                                            |         |                   |        
|                                                                                            |                                                                                                                                                               | Total stockholders' equity                 |         |                   | 248,706
|                                                                                            |                                                                                                                                                               |                                            |         |                   |        
|                                                                                            |                                                                                                                                                               | Total liabilities and stockholders' equity |         | $                 | 804,072
|                                                                                            |                                                                                                                                                               |                                            |         |                   |        

See accompanying notes to unaudited interim consolidated financial statements.

3

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divine, inc.

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)

|                                                                                   |                                                                                                                                                                          | Three Months Ended                                                                           |                                                                                | Nine Months Ended |        
|---------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ----------------- | -------
|
|Revenues:                                                                          |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   | Products                                                                                                                                                                 |                                                                                              | $                                                                              | 40,314            |        
|                                                                                   | Content                                                                                                                                                                  |                                                                                              |                                                                                | 91,192            |        
|                                                                                   | Services                                                                                                                                                                 |                                                                                              |                                                                                | 30,740            |        
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          | Total revenues                                                                               |                                                                                |                   | 162,246
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|Operating expenses:                                                                |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   | Cost of revenues:                                                                                                                                                        |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          | Products (exclusive of $2, $13, $9 and $44 of amortization of stock-based compensation)      |                                                                                |                   | 13,658 
|                                                                                   |                                                                                                                                                                          | Content                                                                                      |                                                                                |                   | 83,758 
|                                                                                   |                                                                                                                                                                          | Services (exclusive of $40, $190, $381 and $497 of amortization of stock-based compensation) |                                                                                |                   | 32,146 
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              | Total cost of revenues                                                         |                   |        
|                                                                                   | Selling, general and administrative (exclusive of $864, $1,841, $3,785 and $6,857 of amortization of stock-based compensation)                                           |                                                                                              |                                                                                | 51,101            |        
|                                                                                   | Research and development (exclusive of $(34), $75, $34 and $274 of amortization (recovery) of stock-based compensation)                                                  |                                                                                              |                                                                                | 24,709            |        
|                                                                                   | Bad debt expense (recovery)                                                                                                                                              |                                                                                              |                                                                                | (741              | )      
|                                                                                   | Amortization of intangible assets                                                                                                                                        |                                                                                              |                                                                                | 4,343             |        
|                                                                                   | Acquired technology: in-process research and development                                                                                                                 |                                                                                              |                                                                                | 594               |        
|                                                                                   | Impairment of prepaid co-location and bandwidth services                                                                                                                 |                                                                                              |                                                                                |                  |        
|                                                                                   | Impairment of intangible and other assets                                                                                                                                |                                                                                              |                                                                                | 6                 |        
|                                                                                   | Amortization of stock-based compensation                                                                                                                                 |                                                                                              |                                                                                | 872               |        
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              | Total operating expenses                                                       |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              | Operating loss                                                                 |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|Other income (expense):                                                            |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   | Interest income                                                                                                                                                          |                                                                                              |                                                                                | 138               |        
|                                                                                   | Interest expense                                                                                                                                                         |                                                                                              |                                                                                | (2,085            | )      
|                                                                                   | Other income (expense), net                                                                                                                                              |                                                                                              |                                                                                | (537              | )      
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          | Total other income (expense)                                                                 |                                                                                |                   | (2,484 
|                                                                                   | Loss before minority interest, equity in losses of associated companies, (impairment) recovery of investment in equity and cost method companies, and extraordinary gain |                                                                                              |                                                                                | (50,684           | )      
|Minority interest                                                                  |                                                                                                                                                                          |                                                                                              |                                                                               |                   |        
|Equity in losses of associated companies                                           |                                                                                                                                                                          |                                                                                              |                                                                               |                   |        
|(Impairment) recovery of investment in equity and cost method associated companies |                                                                                                                                                                          |                                                                                              | 1,078                                                                          |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              | Net loss before extraordinary gain                                             |                   |        
|Extraordinary gain                                                                 |                                                                                                                                                                          |                                                                                              | 11,910                                                                         |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              | Net loss applicable to common stockholders                                     |                   | $      
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              | Basic and diluted net loss per share before extraordinary gain                 |                   | $      
|                                                                                   |                                                                                                                                                                          |                                                                                              | Extraordinary gain                                                             |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              | Basic and diluted net loss per share applicable to common stockholders         |                   | $      
|                                                                                   |                                                                                                                                                                          |                                                                                              |                                                                                |                   |        
|                                                                                   |                                                                                                                                                                          |                                                                                              | Weighted average shares used in computing basic and diluted net loss per share |                   |        

See
accompanying notes to unaudited interim consolidated financial statements.

4

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divine, inc.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands, except share data)

|                                                                                                                 |                           | Common stock                              |   | Preferred stock |    |   |        |   |   |        |   |   |           |   |   |         |  
|---------------------------------------------------------------------------------------------------------------- | ------------------------- | ----------------------------------------- | - | --------------- | -- | - | ------ | - | - | ------ | - | - | --------- | - | - | ------- | -
|
|
|Balance at December 31, 2001                                                                                     |                           | 14,639,912                                |   | $               | 15 |   |       |   |   |       |   | $ | 1,172,204 |   | $ | (16,654 | )
|                                                                                                                 | Comprehensive loss:       |                                           |   |                 |    |   |        |   |   |        |   |   |           |   |   |         |  
|                                                                                                                 |                           | Net loss                                  |   |                |    |   |       |   |  |        |   |  |           |   |  |         |  
|                                                                                                                 | Other comprehensive loss: |                                           |   |                 |    |   |        |   |   |        |   |   |           |   |   |         |  
|                                                                                                                 |                           | Unrealized holding loss during the period |   |                |    |   |       |   |  |        |   |  |           |   |  |         |  
|                                                                                                                 |                           | Foreign currency translation              |   |                |    |   |       |   |  |        |   |  |           |   |  |         |  
|                                                                                                                 |                           |                                           |   |                 |    |   |        |   |   |        |   |   |           |   |   |         |  
|                                                                                                                 | Total comprehensive loss  |                                           |  |                 |    |  |        |  |   |        |  |   |           |  |   |         | 
|                                                                                                                 |                           |                                           |   |                 |    |   |        |   |   |        |   |   |           |   |   |         |  
|Issuance of Series B and B-1 convertible preferred stock                                                         |                           |                                          |   |                 |   |   | 61,600 |   |   | 61,178 |   |   |          |   |   |        |  
|Issuance of Series C preferred stock                                                                             |                           |                                          |   |                 |   |   | 1      |   |   |       |   |   |          |   |   |        |  
|Issuance of Class A common stock                                                                                 |                           | 11,176,212                                |   |                 | 11 |   |       |   |   |       |   |   | 97,775    |   |   |        |  
|Issuance of warrants in conjunction with acquisitions                                                            |                           |                                          |   |                 |   |   |       |   |   |       |   |   | 151       |   |   |        |  
|Issuance of warrants to acquire the Company's common stock                                                       |                           |                                          |   |                 |   |   |       |   |   |       |   |   | 822       |   |   |        |  
|Issuance of stock options in conjunction with acquisitions                                                       |                           |                                          |   |                 |   |   |       |   |   |       |   |   | 7,084     |   |   |        |  
|Issuance of Class A common stock through the Employee Stock Purchase Plans                                       |                           | 182,877                                   |   |                 |   |   |       |   |   |       |   |   | 1,045     |   |   |        |  
|Issuance of Class A common stock through the exercise of stock options                                           |                           | 353,500                                   |   |                 |   |   |       |   |   |       |   |   | 340       |   |   |        |  
|Unearned stock-based compensation                                                                                |                           |                                          |   |                 |   |   |       |   |   |       |   |   |          |   |   | (473    | )
|Stock-based compensation                                                                                         |                           |                                          |   |                 |   |   |       |   |   |       |   |   |          |   |   | 4,209   |  
|Recovery of unearned stock-based compensation                                                                    |                           | (3,667                                    | ) |                 |   |   |       |   |   |       |   |   | (8,261    | ) |   | 8,261   |  
|Purchase of treasury stock, at cost                                                                              |                           | (610,494                                  | ) |                 |   |   |       |   |   |       |   |   |          |   |   |        |  
|Change in indirect ownership of shares of the Company's common stock owned by equity method associated companies |                           | (32,263                                   | ) |                 |   |   |       |   |   |       |   |   |          |   |   |        |  
|                                                                                                                 |                           |                                           |   |                 |    |   |        |   |   |        |   |   |           |   |   |         |  
|Balance at September 30, 2002                                                                                    |                           | 25,706,077                                |   | $               | 26 |   | 61,601 |   | $ | 61,178 |   | $ | 1,271,160 |   | $ | (4,657  | )
|                                                                                                                 |                           |                                           |   |                 |    |   |        |   |   |        |   |   |           |   |   |         |  

See accompanying notes to unaudited interim consolidated financial statements.

5

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divine, inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                 |                                                                                                                               | Nine months
ended
September 30,
2002                                                     |                                                     | Nine months
ended
September 30,
2001 |        
|------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------ | -------
|
|Cash flows from operating activities:            |                                                                                                                               |                                                                                          |                                                     |                                      |        
|                                                 | Net loss                                                                                                                      |                                                                                          | $                                                   | (159,807                             | )      
|                                                 | Adjustments to reconcile net loss to net cash used in operating activities:                                                   |                                                                                          |                                                     |                                      |        
|                                                 |                                                                                                                               | Depreciation and amortization                                                            |                                                     |                                      | 27,602 
|                                                 |                                                                                                                               | Acquired technology: in-process research and development                                 |                                                     |                                      | 611    
|                                                 |                                                                                                                               | Extraordinary gain                                                                       |                                                     |                                      | (14,389
|                                                 |                                                                                                                               | Stock-based compensation                                                                 |                                                     |                                      | 4,209  
|                                                 |                                                                                                                               | Noncash compensation expense                                                             |                                                     |                                      |       
|                                                 |                                                                                                                               | Bad debt expense (recovery)                                                              |                                                     |                                      | (5,241 
|                                                 |                                                                                                                               | Equity in losses of associated companies                                                 |                                                     |                                      |       
|                                                 |                                                                                                                               | Gain on stock transactions of associated companies                                       |                                                     |                                      |       
|                                                 |                                                                                                                               | Impairment charges                                                                       |                                                     |                                      | 2,346  
|                                                 |                                                                                                                               | Minority interest                                                                        |                                                     |                                      |       
|                                                 |                                                                                                                               | Gain on the sale of assets                                                               |                                                     |                                      | (804   
|                                                 |                                                                                                                               | Realized gain on sale of investment                                                      |                                                     |                                      |       
|                                                 |                                                                                                                               | Realized gain on sale of associated company                                              |                                                     |                                      |       
|                                                 |                                                                                                                               | Realized loss on note payable settled in shares of the Company's common stock            |                                                     |                                      | 389    
|                                                 | Changes in assets and liabilities, excluding effects from acquisitions:                                                       |                                                                                          |                                                     |                                      |        
|                                                 |                                                                                                                               | Restricted cash                                                                          |                                                     |                                      | 2,938  
|                                                 |                                                                                                                               | Accounts receivable                                                                      |                                                     |                                      | 70,616 
|                                                 |                                                                                                                               | Prepaid expenses                                                                         |                                                     |                                      | (1,153 
|                                                 |                                                                                                                               | Deferred publisher costs                                                                 |                                                     |                                      | 95,217 
|                                                 |                                                                                                                               | Other assets                                                                             |                                                     |                                      | (14,140
|                                                 |                                                                                                                               | Accounts payable                                                                         |                                                     |                                      | 56     
|                                                 |                                                                                                                               | Publisher payables                                                                       |                                                     |                                      | 10,454 
|                                                 |                                                                                                                               | Accrued expenses and other liabilities                                                   |                                                     |                                      | (24,927
|                                                 |                                                                                                                               | Deferred revenue                                                                         |                                                     |                                      | (86,317
|                                                 |                                                                                                                               |                                                                                          |                                                     |                                      |        
|                                                 |                                                                                                                               |                                                                                          | Net cash used in operating activities               |                                      |        
|                                                 |                                                                                                                               |                                                                                          |                                                     |                                      |        
|Cash flows from investing activities:            |                                                                                                                               |                                                                                          |                                                     |                                      |        
|                                                 | Additions to property and equipment                                                                                           |                                                                                          |                                                     | (3,517                               | )      
|                                                 | Acquisition of companies and sale and deconsolidation of ownership interests in associated companies, including cash acquired |                                                                                          |                                                     | 33,460                               |        
|                                                 | Capitalized acquisition costs                                                                                                 |                                                                                          |                                                     | (5,899                               | )      
|                                                 | Proceeds from the sale of property and equipment                                                                              |                                                                                          |                                                     | 1,648                                |        
|                                                 | Change in notes receivable                                                                                                    |                                                                                          |                                                     | 349                                  |        
|                                                 |                                                                                                                               |                                                                                          |                                                     |                                      |        
|                                                 |                                                                                                                               |                                                                                          | Net cash provided by (used in) investing activities |                                      |        
|                                                 |                                                                                                                               |                                                                                          |                                                     |                                      |        
|Cash flows from financing activities:            |                                                                                                                               |                                                                                          |                                                     |                                      |        
|                                                 | Proceeds from the issuance of preferred stock, net of issuance costs                                                          |                                                                                          |                                                     | 61,178                               |        
|                                                 | Issuance of shares under Employee Stock Purchase Plans                                                                        |                                                                                          |                                                     | 1,045                                |        
|                                                 | Repayments of notes payable                                                                                                   |                                                                                          |                                                     | (32,298                              | )      
|                                                 | Proceeds from the issuance of long-term debt                                                                                  |                                                                                          |                                                     | 34                                   |        
|                                                 | Repayments of long-term debt                                                                                                  |                                                                                          |                                                     | (43                                  | )      
|                                                 | Proceeds from the exercise of stock options                                                                                   |                                                                                          |                                                     | 340                                  |        
|                                                 | Repurchase and cancellation of exercised stock options                                                                        |                                                                                          |                                                     |                                     |        
|                                                 | Purchase of treasury stock                                                                                                    |                                                                                          |                                                     | (5,857                               | )      
|                                                 | Proceeds from repayments of stock subscription receivable                                                                     |                                                                                          |                                                     |                                     |        
|                                                 |                                                                                                                               |                                                                                          |                                                     |                                      |        
|                                                 |                                                                                                                               |                                                                                          | Net cash provided by (used in) financing activities |                                      |        
|                                                 |                                                                                                                               |                                                                                          |                                                     |                                      |        
|Effect of exchange rates on cash                 |                                                                                                                               |                                                                                          | (1,392                                              | )                                    |        
|Net decrease in cash and cash equivalents        |                                                                                                                               |                                                                                          | (43,292                                             | )                                    |        
|Cash and cash equivalents at beginning of period |                                                                                                                               |                                                                                          | 104,480                                             |                                      |        
|                                                 |                                                                                                                               |                                                                                          |                                                     |                                      |        
|Cash and cash equivalents at end of period       |                                                                                                                               | $                                                                                        | 61,188                                              |                                      | $      
|                                                 |                                                                                                                               |                                                                                          |                                                     |                                      |        
|Supplemental disclosures:                        |                                                                                                                               |                                                                                          |                                                     |                                      |        
|                                                 | Interest paid                                                                                                                 |                                                                                          | $                                                   | 4,153                                |        
|                                                 | Noncash financing and investing activities:                                                                                   |                                                                                          |                                                     |                                      |        
|                                                 |                                                                                                                               | Issuance of notes payable, stock, options, and warrants in conjunction with acquisitions |                                                     |                                      | 105,014
|                                                 |                                                                                                                               | Retirement of notes receivable from exercise of stock options                            |                                                     |                                      |       
|                                                 |                                                                                                                               | Issuance of stock to settle notes payable                                                |                                                     |                                      | 5,283  

See accompanying notes to unaudited interim consolidated financial statements.

6

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divine, inc.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(1)  Summary of Significant Accounting Policies



The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring accruals) necessary for a fair presentation have been included. The results of operations for the three and nine months ended September 30, 2002
are not necessarily indicative of results that may be expected for the year ending December 31, 2002 or for any future periods. These unaudited interim consolidated financial statements and
related notes should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2001, which are contained in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on April 1, 2002, as amended on Form 10-K/A on May 9, 2002.



In May 2002, the Company effected a 1 for 25 reverse stock split of its class A common stock. All share and per share data of the Company in the
accompanying unaudited interim consolidated financial statements, and in these notes to the unaudited consolidated financial statements, give effect to the reverse stock split.



Net loss per share is calculated in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." Basic earnings per
share is computed based on the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding for the three and nine months ended
September 30, 2002 includes the effect of 361,397 shares of Delano Technology Corporation outstanding at September 30, 2002, which are each exchangeable for one share of the Company's
class A common stock. These Delano shares were issued in conjunction with the Company's acquisition of Delano in July 2002. The dilutive effect of common stock equivalents and
convertible preferred stock is included in the calculation of diluted earnings per share only when the effect of their inclusion would be dilutive. Because the Company reported a net loss for the
three and nine month periods ended September 30, 2002 and 2001, potentially dilutive securities have not been included in the shares used to compute net loss per share.

Had
the Company reported net income for the three and nine month periods ended September 30, 2002, the weighted average number of shares outstanding for those periods would have
potentially been diluted by 2,783,485 and 3,187,534 common equivalent shares, respectively, assuming the exercise of all outstanding stock options; by 385,151 and 379,749 common equivalent shares,
respectively, assuming the exercise of all outstanding warrants; and by 8,516,863 and 3,303,598 common equivalent shares, assuming the conversion of all outstanding convertible preferred stock.

Had
the Company reported net income for the three and nine month periods ended September 30, 2001, the weighted average number of shares outstanding for those periods would have
potentially been diluted by 1,191,340 and 654,211 common equivalent shares, respectively, assuming the exercise of all

7

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outstanding stock options, and 46,087 and 15,588 common equivalent shares, respectively, assuming the exercise of all outstanding warrants.



Certain reclassifications of prior period amounts have been made to conform to current period presentations.

(2)  Business Combinations



In January 2002, the Company acquired 100% of the stock of Data Return Corporation, a provider of high-availability managed hosting services.
The purchase price, for the purpose of purchase accounting for this transaction, consisted of $8,623,000 of cash payments related to acquisition costs and interim financing, and 2,982,028 shares of
the Company's class A common stock, with a fair value of $34,137,000. In addition, the Company assumed or issued options and warrants to purchase 602,819 shares of the Company's class A
common stock which are included as part of the purchase price paid for Data Return. The Black-Scholes fair value of these options and warrants was $5,948,000.

In
January 2002, through one of its wholly-owned subsidiaries, the Company acquired certain assets of Northern Light Technology LLC, a leading provider of search and content
integration solutions, in exchange for 560,106 shares of the Company's class A common stock and the assumption of certain liabilities of Northern Light. In addition, the Company issued to a
vendor of Northern Light a warrant to purchase up to 4,803 shares of the Company's class A common stock, at an exercise price of $14.50 per share.

In
February 2002, the Company acquired the 66.7% of Perceptual Robotics, Inc. that it did not already own in exchange for 177,108 shares of the Company's class A
common stock and $55,000 in cash.

In
February 2002, the Company acquired the minority interest of Net Unlimited, Inc. in exchange for 14,601 shares of the Company's class A common stock.

In
February 2002, the Company acquired 100% of RWT Corporation (d/b/a RealWorld Technologies, Inc.), a leading provider of production management and tracking software, in
exchange for 30,769 shares of the Company's class A common stock.

In
April 2002, the Company acquired Denalii Inc., a provider of content management solutions for the Asian market, in exchange for 60,190 shares of the Company's
class A common stock. The Company also provided $1,016,000 of interim financing to Denalii. In addition, the Company granted options to purchase a total of 19,600 shares of the Company's
class A common stock to certain continuing employees of Denalii and the Company agreed to issue a maximum of $5,600,000 of the Company's class A common stock if the acquired Denalii
business meets certain revenue thresholds in 2002.

In
July 2002, the Company acquired Delano Technology Corporation, a Toronto-based marketing solutions company offering state-of-the-art
interaction-based e-business and CRM solutions. The purchase price, for the purpose of purchase accounting for this transaction, consisted of $1,750,000 of actual and estimated acquisition
costs and 1,719,482 shares of the Company's class A common stock, with a fair value of $27,391,000. Additionally, certain of Delano's shareholders currently hold an aggregate of 361,397 shares
of Delano that are each exchangeable for one share of the Company's

8

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class A common stock. These shares had a fair value of $5,757,000 for purchase accounting purposes. In addition, the Company issued options to purchase 70,289 shares of the Company's
class A common stock to certain continuing employees of Delano. These options are included as part of the purchase price paid for Delano, and the Black-Scholes fair value of these options was
$1,008,000.

In
September 2002, the Company acquired Viant Corporation, a professional services organization providing digital business solutions and industry insight. The purchase price, for
the purpose of purchase accounting for this transaction, consisted of $1,750,000 of actual and estimated acquisition costs and 3,625,143 shares of the Company's class A common stock, with a
fair value of $8,600,000.

During
the nine months ended September 30, 2002, in conjunction with the Company's transactions related to Northern Light, Perceptual Robotics, Net Unlimited, RWT, and Denalii as
described herein, the purchase price, for the purpose of recording the purchase accounting for these transactions, consisted of $1,517,000 of cash payments (including acquisition costs and interim
financing), 842,774 shares of the Company's class A common stock, with a fair value of $14,673,000, and options to purchase 19,600 shares of the Company's class A common stock, with a
Black-Scholes fair value of $256,000. Additionally, in conjunction with the Northern Light acquisition, the Company has granted a warrant to purchase up to 4,803 shares of the Company's class A
common stock which is included as part of the purchase price paid for the assets of Northern Light. The Black-Scholes fair value of this warrant, assuming it will be exercisable for the maximum number
of shares, was $23,000.

The
value of stock issued as consideration in these acquisitions was determined based on the average closing market price of divine's common shares on the measurement date and the three
trading days before and after the measurement date. The measurement date is generally the date on which the terms of the acquisition are agreed to and announced, unless the number of shares or the
amount of other consideration is subsequently changed as a result of further negotiations or a revised acquisition agreement, or if the number of shares or the amount of other consideration to be
issued could change
pursuant to a formula in the initial acquisition agreement. In these cases, the measurement date is the first date on which the number of acquirer shares and the amount of other consideration become
fixed.

The
following table presents information (in thousands) concerning the purchase price allocations for acquisitions completed during the nine months ended September 30, 2002.

|Company     |  | Purchase
Price |         | Fair Value
of Tangible
Net Assets
Acquired
(Net
Liabilities
Assumed) |   | Developed
Technology |   | Unearned
Stock-Based
Compensation |        | In-Process
Research and
Development |   | Extraordinary
Gain |  | Goodwill
|----------- |  | -------------- | ------- | -------------------------------------------------------------------- | - | -------------------- | - | --------------------------------- | ------ | ----------------------------------- | - | ------------------ |  | --------
|
|Data Return |  | $              | 48,708  |                                                                      | $ | (15,961              | ) | $                                 |       |                                     | $ | 452                |  | $       
|Delano      |  |                | 35,906  |                                                                      |   | (3,981               | ) |                                   | 2,077  |                                     |   | 21                 |  |         
|Viant       |  |                | 10,350  |                                                                      |   | 22,298               |   |                                   |       |                                     |   |                   |  |         
|Others      |  |                | 16,469  |                                                                      |   | 5,011                |   |                                   | 9,711  |                                     |   |                   |  |         
|            |  |                |         |                                                                      |   |                      |   |                                   |        |                                     |   |                    |  |         
|            |  | $              | 111,433 |                                                                      | $ | 7,367                |   | $                                 | 11,788 |                                     | $ | 473                |  | $       
|            |  |                |         |                                                                      |   |                      |   |                                   |        |                                     |   |                    |  |         

The portion of the purchase price allocated to in-process research and development assets was written off at the date of acquisition in accordance
with FASB Interpretation No. 4,Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method. Those
write-offs are included in acquired technology: in-process research and development. Developed technology is amortized over the useful life of the technology, which ranges from two to four years. The
extraordinary gain represents the excess of the fair value of the net current assets acquired over the fair

9

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value of the Company's purchase price related to the Company's acquisitions of Viant and Perceptual Robotics.

The
acquired companies are included in the Company's consolidated financial statements from the dates of acquisition. The following table summarizes the estimated fair value (in
thousands) of the tangible net assets acquired at the date of acquisition for the acquisitions completed during the nine months ended September 30, 2002.

|                         |                                                        | Data Return |        | Viant   |   | Delano |        | Others
|------------------------ | ------------------------------------------------------ | ----------- | ------ | ------- | - | ------ | ------ | ------
|
|Current assets           |                                                        | $           | 9,584  |         | $ | 34,340 |        | $     
|Fixed assets             |                                                        |             | 9,706  |         |   |       |        |       
|Other non-current assets |                                                        |             |       |         |   | 3,238  |        |       
|                         |                                                        |             |        |         |   |        |        |       
|                         | Total tangible assets acquired                         |             |        | 19,290  |   |        | 37,578 |       
|Current liabilities      |                                                        |             | 25,240 |         |   | 9,644  |        |       
|Non-current liabilities  |                                                        |             | 10,011 |         |   | 5,636  |        |       
|                         |                                                        |             |        |         |   |        |        |       
|                         | Total liabilities assumed                              |             |        | 35,251  |   |        | 15,280 |       
|                         |                                                        |             |        |         |   |        |        |       
|                         | Tangible net assets acquired (net liabilities assumed) |             | $      | (15,961 | ) | $      | 22,298 |       
|                         |                                                        |             |        |         |   |        |        |       

As
of January 1, 2002, the Company implemented SFAS No. 142,Goodwill and Other Intangible Assets, which requires that
goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. SFAS No. 142 also requires that intangible assets
with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment. SFAS No. 142 also requires that intangible assets with estimable useful lives
be amortized over their respective estimated useful lives and reviewed for impairment. The Company will perform its impairment analysis on its intangible assets in the fourth quarter of 2002 in
accordance with SFAS No. 142. Based on various factors, including the Company's current market capitalization, the Company expects to record a significant non-cash charge to write down the Company's
intangible assets in the fourth quarter.

For
the three and nine months ended September 30, 2001, the Company recorded amortization expense of $4,760,000 and $12,061,000, respectively, related to goodwill and certain
intangible assets, as well as net excess investment over the equity in net assets of equity-method associated companies, which would not have been amortized if SFAS No. 142 had been adopted as
of January 1, 2001. Had the Company not recorded these amortization expenses, net loss and basic and diluted loss per share for the three and nine months ended September 30, 2001 would
have been $81,047,000 and $12.85; and $177,878,000 and $30.35, respectively. Detail about the Company's intangible assets is as follows:

|                               |                         | As of September 30, 2002 |   | As of December 31, 2001 | 
|------------------------------ | ----------------------- | ------------------------ | - | ----------------------- | 
|
|
|Amortized intangible assets:   |                         |                          |   |                         | 
|                               | Developed technology    |                          | $ | 68,649                  | 
|                               | Other intangible assets |                          |   | 400                     | 
|Unamortized intangible assets: |                         |                          |   |                         | 
|                               | Goodwill                |                          |   | 260,562                 | 

10

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In February 2002, the Company sold 51% of its interest in mindwrap, Inc. to mindwrap LLC for nominal consideration. Additionally, the Company
entered into a General Release and Operating Agreement wherein mindwrap LLC paid the Company $766,000, which constitutes payment in full for all amounts due and owing to the Company from or arising
out of the Company's ownership and control of mindwrap, Inc. prior to the closing date. In exchange, the Company released mindwrap LLC from any current or future liability arising from any
condition existing prior to the closing date. The Company also entered into a Joint Ownership Conveyance Agreement with mindwrap LLC wherein the Company will receive a perpetual,
royalty-free, transferable joint ownership interest in certain mindwrap software and other intellectual property.

In
August 2002, the Company sold back its ownership interest in TV House, Inc., an associated company since March 2000, for $1,000,000. In conjunction with this
transaction, the Company also entered into a consulting service agreement whereby the Company agreed to pay TV House $120,000 over the next year. The Company had written off its investment in TV House
in 2001.



During the year ended December 31, 2001, the Company acquired 100% of eshare communications, Inc., Eprise Corporation, RoweCom Inc., and Open
Market, Inc. ("the pro forma acquisitions"). The following unaudited pro forma financial information for the nine months ended September 30, 2001 presents the consolidated operations of
the Company as if the acquisitions had been made on January 1, 2001, after giving effect to certain adjustments, including amortization of certain intangible assets actually recorded by the
Company as part of the purchase accounting for the pro forma acquisitions as of the respective acquisition dates. Under the provisions of SFAS No. 142, goodwill acquired in transactions
completed after June 30, 2001 is not amortized. As the pro forma acquisitions occurred subsequent to that date, these pro forma results do not reflect any goodwill amortization expense related
to these acquisitions. Other acquisitions made during 2001 and during the nine months ended September 30, 2002 have been excluded from the unaudited pro forma financial information because
their effects would be immaterial. The unaudited pro forma financial information is provided for informational purposes only, should not be construed to be indicative of the Company's consolidated
results of operations had the 2001 acquisitions been consummated on these earlier dates, and do not project the Company's results of operations for any future period:

|                                                                       |  | Nine Months Ended
September 30, 2001 |         
|---------------------------------------------------------------------- |  | ------------------------------------ | --------
|
|Revenues                                                               |  | $                                    | 523,649 
|Net loss applicable to common stockholders                             |  |                                      | (274,195
|Basic and diluted net loss per share applicable to common stockholders |  | $                                    | (21.18  

11

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(3)  Equity Financing

In May 2002, the Company entered into a securities purchase agreement with a group of investors led by Oak Investment Partners, whereby the investors
purchased shares of the Company's Series B and Series B-1 convertible preferred stock. The agreement was amended in July 2002. Pursuant to the original agreement, the
Company received an aggregate of $22,941,000 in May and June 2002 in exchange for 22,941 shares of the Company's Series B convertible preferred stock, each of which is convertible into a
number of shares of the Company's common stock determined by dividing the $1,000 per share purchase price of the Company's Series B convertible preferred stock by the conversion price of $6.00
per share of the Company's common stock. In August 2002, pursuant to the amended agreement, the Company received an additional $38,237,000, net of issuance costs, in the second and final round
of funding in exchange for 38,659 shares of the Company's Series B-1 convertible preferred stock, each of which is convertible into a number of shares of the Company's common stock
determined by dividing the $1,000 per share purchase price of the Company's Series B-1 convertible preferred stock by the conversion price of $3.0441 per share of the Company's
common stock.

(4)  Impairment Charges

For the nine months ended September 30, 2002, the Company recorded impairment charges on intangible and other assets of $1,408,000, resulting mainly from
additional charges related to certain acquired companies that were previously written off. Of this amount, $467,000 represents the fair value of approximately 53,000 shares of divine common stock that
were issued in connection with an earnout agreement related to the Company's 2001 acquisition of SageMaker, Inc. Additionally, for the nine months ended September 30, 2002, the Company
recovered $140,000 of impairment of investment in equity method and cost method associated companies. This recovery results mainly from the $1,000,000 the Company received from the sale of its
interest in TV House, partially offset by $860,000 in charges that represent primarily the fair value of 86,363 shares of the Company's class A common stock that were issued in
February 2002 as partial settlement of an obligation of the Company pursuant to its collar agreement with Launchworks, net of the fair value of the portion of these shares recorded as treasury
stock because the Company maintains an equity ownership in Launchworks. This collar agreement was entered into in conjunction with the Company's investment in Launchworks in August 2000. The
Company had completely written off its investment in Launchworks in 2001.

(5)  Segment and Geographic Information

The Company has two operating segments: the software, services and hosting segment and the divine interVentures segment. The software, services and hosting
segment encompasses the operations surrounding the Company's core strategy of delivering integrated web solutions. The divine interVentures segment encompasses the operations of the Company's
remaining portfolio of associated companies, focusing primarily on e-commerce and vertical markets. The Company evaluates segment performance based on income from operations. The Company
does not allocate total assets to its segments.

Segment
information is presented in accordance with SFAS No. 131,Disclosures about Segments of an Enterprise and Related
Information. This standard is based on a management approach, which requires segmentation based upon the Company's internal organization and disclosure of revenue and

12

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operating loss based upon internal accounting methods. Segment results for the three and nine months ended September 30, 2002 and September 30, 2001 are as follows:

|                                                    |  | Three Months Ended
September 30, 2002 |         | Three Months Ended
September 30, 2001 |  
|--------------------------------------------------- |  | ------------------------------------- | ------- | ------------------------------------- | -
|
|
|External revenue                                    |  | $                                     | 162,246 |                                       | $
|Intersegment revenue                                |  |                                       |        |                                       |  
|                                                    |  |                                       |         |                                       |  
|                                                    |  | $                                     | 162,246 |                                       | $
|Eliminations                                        |  |                                       |         |                                       |  
|                                                    |  |                                       |         |                                       |  
|Total revenues                                      |  |                                       |         |                                       |  
|                                                    |  |                                       |         |                                       |  
|Net income (loss) applicable to common stockholders |  | $                                     | (38,774 | )                                     | $
|                                                    |  |                                       |         |                                       |  

|                                                    |  | Nine Months Ended
September 30, 2002 |          | Nine Months Ended
September 30, 2001 |  
|--------------------------------------------------- |  | ------------------------------------ | -------- | ------------------------------------ | -
|
|
|External revenue                                    |  | $                                    | 472,133  |                                      | $
|Intersegment revenue                                |  |                                      |         |                                      |  
|                                                    |  |                                      |          |                                      |  
|                                                    |  | $                                    | 472,133  |                                      | $
|Eliminations                                        |  |                                      |          |                                      |  
|                                                    |  |                                      |          |                                      |  
|Total revenues                                      |  |                                      |          |                                      |  
|                                                    |  |                                      |          |                                      |  
|Net income (loss) applicable to common stockholders |  | $                                    | (159,947 | )                                    | $
|                                                    |  |                                      |          |                                      |  

The
Company's business is conducted on a global basis, with the principal markets for the Company's products and services located in the United States. For the three and nine months
ended September 30, 2002, the Company recorded revenues of $162,246,000 and $472,133,000, respectively. Of these revenues, $96,047,000 and $301,885,000, respectively, were generated in the
United States, $31,268,000 and $83,108,000, respectively, were generated in France, and $34,931,000 and $87,140,000, respectively, were generated in other foreign countries. Revenues are attributed to
countries based on the location of the sales group, as well as the country of domicile of the sales contract.

(6)  Subsequent Events

In August 2002, the Company issued 1,853,756 shares of its class A common stock to the trustee for the assets of marchFIRST GmbH, in settlement of a
promissory note with a face value of Euro 5,369,000, which was originally delivered to the trustee in conjunction with the Company's acquisition of certain assets of marchFIRST GmbH in
September 2001. In October 2002, the Company entered into an agreement with the trustee concerning his disposition of the shares. Under the agreement, the Company paid the trustee
$1,000,000 in October 2002 and agreed to pay an additional

13

---

$1,000,000 in January 2003. In February 2003, the trustee will return to the Company any unsold shares, and the Company will pay the trustee the difference, if any, between the face
value of the promissory note and the sum of (1) the $2,000,000 paid to the trustee by the Company, and (2) the net proceeds received by the trustee from his sales of the stock.

In
October 2002, the Company sold real property that it owned in Chicago, Illinois for $8,286,000, net of selling costs. This property was acquired by the Company in 2000. The
Company realized a loss of $1,464,000 on the sale of the property.

14

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

General

We provide extended enterprise solutions for our base of over 20,000 customers. We offer Web-based software and technology that allows our clients'
critical business units and functional areas to operate more cohesively when interacting with their customers, partners, and employees. We also offer the services necessary to deploy these software
solutions and to integrate them with existing software and technical systems. Our product and service offerings allow us to provide a comprehensive solution for our clients and we offer our customers
a single point of accountability, as our solutions extend across the enterprise. Our extended enterprise solution is comprised of the following key components:



We
focus on Global 5000 and high-growth middle market firms, government agencies, and educational institutions. We expect that our revenues in future periods will be
generated principally through our extended enterprise solutions.

We
began operations as divine interVentures, inc. on June 30, 1999, engaging in business-to-business e-commerce through a community of
associated companies in which we invested. In 1999 and 2000, we
acquired interests in 40 associated companies, established a total of 13 associated companies, and also further developed our operational procedures and capabilities.

In
February 2001, we announced our strategy to primarily focus on enterprise Web solutions and changed our name to divine, inc. Since that time, we have not reflected
separately our interests in associated companies that provide solutions for the extended enterprise. Instead, the operations of these businesses are considered a part of our core business strategy.
Our remaining associated companies, offering software and services focused on e-commerce and vertical markets, were included in our divine interVentures segment. As of December 31,
2001, we have completely written off our investments in the associated companies in our divine interVentures portfolio, other than amounts included in available-for-sale
securities. We do not expect to invest additional funds into these companies in future periods.

Through
integrating the products and services of acquired companies into our development, marketing, sales, and support channels, we extend a broader array of offerings and deliver
greater value to all our constituencies. By introducing combined product suites and cross-selling into existing accounts, we gain financial and market leverage from incremental revenue and increased
market share, while also gaining the operational efficiencies of integration.

15

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Since
July 1, 2002, we have completed the following acquisitions:



In
addition to these acquisitions, we entered into a securities purchase agreement with a group of investors led by Oak Investment Partners in May 2002, which was amended in
July 2002. Pursuant to this agreement, we received an aggregate of $22,941,000 in May and June 2002 in exchange for 22,941 shares of our Series B convertible preferred stock, and
we received an additional $38,237,000, net of issuance costs, in the second and final round of this financing in August 2002 in exchange for 38,569 shares of our Series B-1
convertible preferred stock.

Effect of Various Accounting Methods on the Consolidated Financial Statements

We have held ownership interests in many associated companies since our inception. Since February 2001, our acquisitions have been almost exclusively
acquisitions of 100% of the stock of certain companies that fit our operating strategy. The following discussion regarding various methods of accounting is meant to explain how we accounted for
investments in associated companies focused on e-business and vertical markets, which accounted for the majority of our consolidated operations for the three and nine months ended
September 30, 2001. These companies were considered part of our divine interVentures portfolio throughout 2001. The significance of the operations of these associated companies on our
consolidated operations decreased throughout 2001, and as of December 31, 2001, we had completely written off our investments in the associated companies in our divine interVentures portfolio,
other than amounts included in available-for-sale securities.



Associated companies in which we own, directly or indirectly, more than 50% of the outstanding voting power are accounted for under the consolidation method of
accounting. Under this method, an associated company's results of operations are reflected within our consolidated statement of operations. Earnings or losses attributable to other stockholders of a
consolidated associated company are identified as "minority interest" in our consolidated statement of operations. Minority interest adjusts our consolidated net results of operations to reflect only
our share of the earnings or losses of a consolidated associated company. As of September 30, 2002 we did not reflect any minority interest liability on our consolidated balance sheet. The
results of operations of our consolidated associated companies are reflected in our consolidated financial statements from the acquisition date of the related company.



Associated companies in which we own 50% or less of the outstanding voting power, but over which we exercise significant influence, are accounted for under the
equity method of accounting. Whether or not we exercise significant influence with respect to an associated company depends on an evaluation of several factors including, among other things,
representation on the associated company's board of directors, ownership percentage, and voting rights associated with our holdings in the associated company. With respect to our current associated
companies, if we own at least 20%, but not more than 50%, of the outstanding voting power of an associated company, we account for our interest under the equity method. Under the equity method of
accounting, our consolidated operating results do not reflect an associated company's results of operations. However, our share of the earnings or

16

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losses of that associated company is identified as "equity in losses of associated companies" in our consolidated statement of operations.

The
net effect of an associated company's results of operations on our results of operations is generally the same under either the consolidation method of accounting or the equity
method of accounting, because, under each of these methods, only our share of the earnings or losses of an associated company is reflected in the net loss in our consolidated statement of operations.
However, the presentation of the consolidation method differs dramatically from the equity method of accounting. The consolidation method presents associated company results in the applicable line
items within our consolidated financial statements. In contrast, the equity method of accounting presents associated company results in a single category, "equity in losses of associated companies",
within our consolidated statement of operations. Because we wrote off our remaining investments in equity-method associated companies in 2001, our consolidated statements of operations for the three
and nine months ended September 30, 2002 do not reflect any "equity in losses of associated companies".



Associated companies not accounted for under either the consolidation or the equity method of accounting are accounted for under the cost method of accounting.
Under this method, our share of the earnings and losses of these companies is not included in our consolidated statements of operations unless earnings or losses are distributed.

We
record our ownership interest in equity securities of our associated companies accounted for under the cost method at the lesser of cost or fair value. Those cost method associated
companies that have readily determinable fair values based on quoted market prices are classified in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities.

Results of Operations



Beginning in the first quarter of 2001, we segregated our operations into two operating segments. Our software, services, and hosting segment encompasses the
operations surrounding our core strategy of delivering integrated web solutions. Our divine interVentures segment encompasses the operations of our remaining portfolio of associated companies,
focusing primarily on e-commerce and vertical markets. Beginning in 2001, we changed our business strategy from being an Internet holding company engaged in
business-to-business e-commerce through our community of associated companies to becoming a leader in Web-based solutions for the extended enterprise.
Our operations for the three months ended September 30, 2002 were considerably different from our operations for the three months ended September 30, 2001. This is because nearly all of
our acquisitions made in conjunction with our new strategy, including our acquisitions of RoweCom Inc., eshare communications, Inc., Open Market, Inc., Eprise Corporation, Data
Return Corporation, and Delano Technology Corporation were made subsequent to September 30, 2001. These acquisitions have provided us with a larger customer base and an increased revenue
stream. Because of our change in strategy and the numerous acquisitions we have completed in the last twelve months, our core business operations have changed substantially enough to make a comparison
of our operations for the three months ended September 30, 2002 to our operations for the three months ended September 30, 2001 almost meaningless.

17

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We generated revenues totaling $162,246,000 for the three months ended September 30, 2002, all of which were generated by our software, services, and
hosting segment. This represents an increase of $114,167,000 over revenues of $48,079,000 for the three months ended September 30, 2001. The total revenues for the three months ended
September 30, 2002 included $91,192,000 from the sale of content and $40,314,000 from the sale of products. Product revenues included $24,159,000 from software sales contracts and $15,155,000
from managed services. Revenue from software sales contracts included $11,237,000 related to our CIM Telephony software, $7,953,000 related to our Enterprise Content Manager software, $2,633,000
related to our Enterprise Content Center software, $583,000 related to our Collaboration software, and $1,752,000 related to our CIM Internet software.

Total
revenues for the three months ended September 30, 2002 also included $30,740,000 from the sale of services, generated exclusively from our Professional Services
Organization. Services revenues included $23,355,000 from consulting services and $6,182,000 from divine Product Solutions Group.

Revenues
for the three months ended September 30, 2001 included $3,787,000 from the sale of products, all of which were generated by our software, services and hosting segment.
Product revenues included $2,639,000 from software sales contracts and $1,148,000 from sales of computer hardware. The
total revenues also included $44,292,000 from the sale of services, generated almost exclusively from the operations of our Professional Services Organization.



For the three months ended September 30, 2002, our cost of revenues totaled $129,562,000, exclusive of $42,000 of amortization of stock-based compensation.
This is an increase of $75,849,000 over the $53,713,000 (exclusive of $203,000 of amortization of stock-based compensation) cost of revenues we incurred for the three months ended September 30,
2001. Cost of revenues for the three months ended September 30, 2002 included $83,758,000 of direct costs of providing content, which consisted almost exclusively of content purchases. Cost of
revenues for the three months ended September 30, 2002 also included $32,146,000 of direct costs of providing services, which consisted principally of $24,148,000 of salaries and benefits,
$3,059,000 of rent and facilities services, $1,442,000 of travel expenses, and $1,079,000 of depreciation expense. Additionally, cost of revenues for that period included $13,658,000 of direct costs
of providing products, which consisted primarily of $5,423,000 of office and computer supplies, $3,004,000 of salaries and related benefits, and $1,985,000 of rent and facilities services.

Costs
of revenues for the three months ended September 30, 2001 included $51,924,000 of direct costs of providing services, which consisted principally of $50,357,000 of salaries
and related benefits, $383,000 of rent and facilities services, and $45,000 of depreciation and amortization. Cost of revenues for the three months ended September 30, 2001 also included
$1,789,000 of direct costs of providing products.



For the three months ended September 30, 2002, we incurred selling, general, and administrative expenses of $51,101,000, exclusive of $864,000 of
amortization of stock-based compensation. This represents an increase of $9,487,000 over the $41,614,000 (exclusive of $1,841,000 of amortization of stock-based compensation) of selling, general, and
administrative expenses for the three months ended September 30, 2001. These expenses for the three months ended September 30, 2002 consisted primarily of $30,141,000 of employee
salaries and related benefits, $4,272,000 of fees for professional services, including legal, consulting, and accounting, $2,712,000 of depreciation, $3,657,000 of travel expenses, $3,256,000 of rent
and facilities services, and $2,692,000 of office and computer supplies.

18

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Selling,
general, and administrative expenses for the three months ended September 30, 2001 consisted primarily of $17,422,000 of salaries and related benefits, $5,499,000 of
facility costs, consisting primarily
of rent expense, $4,916,000 of travel costs, $2,879,000 of depreciation expense, and $1,819,000 of fees for professional services, including legal, consulting, and accounting.



For the three months ended September 30, 2002, we incurred research and development expenses of $24,709,000, exclusive of a $34,000 recovery of stock-based
compensation. This represents an increase of $17,179,000 over the $7,530,000 (exclusive of $75,000 of amortization of stock-based compensation) of research and development expenses for the three
months ended September 30, 2001. Research and development expenses for the three months ended September 30, 2002 consisted primarily of $17,053,000 of employee salaries and related
benefits and $3,320,000 of facility costs, consisting primarily of rent, and $1,245,000 of office and computer supplies. Research and development expenses for the three months ended
September 30, 2001 consisted primarily of $6,023,000 of salaries and related benefits.



For the three months ended September 30, 2002, we recorded a net bad debt recovery of $741,000 as compared to $1,985,000 of bad debt expense recorded for
the three months ended September 30, 2001. The net bad debt recovery for the three months ended September 30, 2002 related primarily to the collection of accounts receivable written off
in the fourth quarter of 2001.



For the three months ended September 30, 2002, we incurred amortization expense of $4,343,000 on our intangible assets. This represents an increase of
$344,000 over the $3,999,000 of amortization expense recorded by us for the three months ended September 30, 2001. The increase is attributable mainly to amortizable intangible assets recorded
in conjunction with acquisitions we made primarily in the fourth quarter of 2001, mostly offset by a reduction in amortization related to the impairment of intangible assets in the fourth quarter of
2001 and our implementation in January 2002 of SFAS No. 142, under which goodwill and various other intangible assets are no longer amortized.



For the three months ended September 30, 2002, we recorded in-process research and development charges of $594,000, which represents a decrease
of $602,000 from the $1,196,000 of similar charges recorded for the three months ended September 30, 2001.



For the three months ended September 30, 2002, we recorded impairment charges of $6,000 related to other assets. For the three months ended
September 30, 2001, we recorded $25,000,000 of impairment charges related to prepaid co-location and bandwidth services from Level 3 Communications.

19

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For the three months ended September 30, 2002, we incurred a non-cash expense of $915,000 related to the issuance, prior to the initial public
offering (IPO) of our class A common stock, of shares of restricted stock and grants of options to employees, directors, and consultants with exercise prices lower than the fair value of our
class A common stock on the dates of grant. Additionally, we incurred a non-cash expense of $225,000 related to the issuance of non-vested stock options in conjunction with our
acquisitions of Eprise, Data Return, and Delano, with exercise prices lower than the fair value of our class A common stock on the dates of the grant. Also for the three months ended
September 30, 2002, we recovered $268,000 of previously recognized compensation expense related to non-vested options of terminated employees.

For
the three months ended September 30, 2001, we incurred a non-cash expense of $2,119,000 related to the issuance, prior to our IPO, of shares of restricted stock
and grants of options to employees, directors, and consultants with exercise prices lower than the fair value of our class A common stock on the dates of grant.



Interest income for the three months ended September 30, 2002 was $138,000 and was earned primarily from the investment of our available cash balances.
This is a decrease of $1,587,000 from the $1,725,000 of interest income earned during the three months ended September 30, 2001, which was also earned from the investment of our available cash
balances. Interest expense for the three months ended September 30, 2002 was $2,085,000 and was incurred primarily from our long-term debt and capital leases. This is an increase of
$1,232,000 from the $853,000 of interest expense incurred during the three months ended September 30, 2001, which was incurred primarily from our long-term debt.



Other expense (net) for the three months ended September 30, 2002 was $537,000. This represents a decrease of $2,910,000 from the $3,447,000 of other
expense (net) incurred during the three months ended September 30, 2001. Other expense (net) for the three months ended September 30, 2001 was primarily attributable to an other than
temporary decline in the value of our available-for-sale investment in 360networks.



We recorded no income tax provision or benefit for the three months ended September 30, 2002 or the three months ended September 30, 2001. Because
we have no history of taxable income through September 30, 2002, the tax benefit associated with our net losses has been fully reserved. As of September 30, 2002, we had total net
operating loss carryforwards of $68,182,000, of which $16,447,000 may be utilized by us to reduce future consolidated taxable income, if any. Of the total net operating loss carryforwards, $125,000
are attributable to majority-owned subsidiaries not includible in our consolidated tax group. Although each majority-owned subsidiary excluded from our consolidated tax group may utilize its net
operating loss carryforwards to reduce separate future income taxes, if any, these carryforwards may not offset our consolidated taxable income, if any. In addition, our utilization of the net
operating loss carryforwards is limited under the change in stock ownership rules imposed by Internal Revenue Code Section 382. The net operating loss carryforwards will expire from 2019
through 2022.

In
assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. Based upon our
historical net operating losses and projections for future tax losses, we believe it is more likely than not that we will not realize

20

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the deferred tax assets. Thus, we have provided a full valuation allowance against the net deferred tax assets as of September 30, 2002.



Minority interest of $0 and $394,000 represents the non-controlling stockholders' share of our consolidated associated companies' net loss for the
three months ended September 30, 2002 and the three months ended September 30, 2001, respectively. In 2001, we wrote off all interests in associated companies of which we owned less then
a 100 percent interest.



Because we wrote off, as of December 31, 2001, all of our investments in associated companies accounted for under the equity method of accounting, we
recorded no equity in losses of associated companies for the three months ended September 30, 2002. We recorded $2,203,000 in net losses from associated companies for the three months ended
September 30, 2001, and amortization of our net excess investment over the equity in the net assets of these associated companies, which totaled $797,000 for the three months ended
September 30, 2001.



For the three months ended September 30, 2002, we recovered $1,078,000 of our impairment of investment in equity and cost method associated companies. This
recovery was primarily attributable to the sale of our ownership in TV House for $1,000,000. We had previously written off our investment in TV House. We recorded impairment charges of $2,763,000
during the three months ended September 30, 2001.



For the three months ended September 30, 2002, we reported an extraordinary gain of $11,910,000 related primarily to our acquisition of Viant. This
extraordinary gain represented the excess of the fair value of the net assets acquired over the fair value of the consideration we paid in conjunction with this acquisition. For the three months ended
September 30, 2001, we reported an extraordinary gain of $11,214,000 related to our acquisition of the 67% of Emicom Group, Inc. that we did not previously own.



Beginning in the first quarter of 2001, we segregated our operations into two operating segments. Our software, services, and hosting segment encompasses the
operations surrounding our core strategy of delivering integrated web solutions. Our divine interVentures segment encompasses the operations of our remaining portfolio of associated companies,
focusing primarily on e-commerce and vertical markets. Beginning in 2001, we changed our business strategy from being an Internet holding company engaged in
business-to-business e-commerce through our community of associated companies to becoming a leader in Web-based solutions for the extended enterprise.
Our operations for the nine months ended September 30, 2002 were considerably different from our operations for the nine months ended September 30, 2001. This is because nearly all of
our acquisitions made in conjunction with our new strategy, including our acquisitions of RoweCom Inc., eshare communications, Inc., Open Market, Inc., Eprise Corporation, Data
Return Corporation, and Delano Technology Corporation were made subsequent to September 30, 2001. These acquisitions have provided us with a larger customer base and an increased revenue
stream. Because of our change in strategy and the numerous acquisitions we have completed in the last twelve months, our core business operations have changed

21

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substantially enough to make a comparison of our operations for the nine months ended September 30, 2002 to our operations for the nine months ended September 30, 2001 almost
meaningless.



We generated revenues totaling $472,133,000 for the nine months ended September 30, 2002, which is an increase of $353,016,000 over revenues of
$119,117,000 for the nine months ended September 30, 2001. The total revenues for the nine months ended September 30, 2002 included $252,067,000 from the sale of content and $115,198,000
from the sale of products. Product revenues included $64,824,000 from software sales contracts and $49,663,000 from managed services. Revenue from software sales contracts included $28,645,000 related
to our CIM Telephony software, $19,219,000 related to our Enterprise Content Management software, $8,267,000 related to our Enterprise Content Center software, $4,441,000 related to our CIM Internet
software, and $4,252,000 related to our Collaboration software.

The
total revenues also included $104,868,000 from the sale of services, generated almost exclusively from our Professional Services Organization. Services revenues included $85,523,000
from consulting services and $14,164,000 from divine Product Solutions Group.

Revenues
for the nine months ended September 30, 2001 included $8,703,000 from the sale of products, all of which was generated by our software, services, and hosting segment.
Product revenues included $6,264,000 from software sales contracts and $2,439,000 from sales of computer hardware. The total revenues also included $110,415,000 from the sale of services, generated
almost exclusively from our Professional Services Organization.



For the nine months ended September 30, 2002, our cost of revenues were $384,382,000, exclusive of $390,000 of amortization of stock-based compensation.
This is an increase of $266,958,000 over the $117,424,000 (exclusive of $541,000 of amortization of stock-based compensation) cost of revenues we incurred for the nine months ended
September 30, 2001. Cost of revenues for the nine months ended September 30, 2002 included $227,582,000 of direct costs of providing content, which consisted almost exclusively of
content purchases. We also incurred $45,544,000 of direct costs of providing products, which consisted primarily of $16,553,000 of rent and facilities services, $11,067,000 of salaries and related
benefits, and $8,800,000 of billable expenses. Cost of revenues for 2002 also included $111,256,000 of direct costs of providing services, which consisted principally of $85,426,000 of salaries and
related benefits, $10,243,000 of rent and facilities services, $4,904,000 of travel expenses, $3,334,000 of depreciation expense, and $2,267,000 of computer and office supplies.

Cost
of revenues for the nine months ended September 30, 2001 included $112,640,000 of direct costs of providing services, which consisted principally of $106,950,000 of salaries
and related benefits, $2,207,000 of rent and facilities services and $681,000 of depreciation and amortization. Cost of revenues for the nine months ended September 30, 2001 also included
$4,784,000 of direct costs of providing products.



For the nine months ended September 30, 2002, we incurred selling, general, and administrative expenses of $164,298,000, exclusive of $3,785,000 of
amortization of stock-based compensation. This represents an increase of $54,496,000 over the $109,802,000 (exclusive of $6,857,000 of amortization of stock-based compensation) of selling, general,
and administrative expenses for the nine months ended September 30, 2001. These expenses for the nine months ended September 30, 2002 consisted primarily of $96,986,000 of employee
salaries and related benefits, $15,360,000 of fees for professional services, including legal, consulting, and accounting, $12,875,000 of travel expenses, $9,790,000 of office and

22

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computer supplies, $7,094,000 of depreciation, $6,420,000 of rent and facilities services, and $5,769,000 of marketing expenses.

Selling,
general, and administrative expenses for the nine months ended September 30, 2001 consisted primarily of $49,665,000 of employee salaries and related benefits,
$13,634,000 of facility costs,
consisting primarily of rent expense, $11,714,000 of travel costs, $7,757,000 of depreciation expense, and $7,240,000 of fees for professional services, including legal, consulting, and accounting.



For the nine months ended September 30, 2002, we incurred research and development expenses of $78,935,000, exclusive of $34,000 of amortization of
stock-based compensation. This represents an increase of $65,415,000 over the $13,520,000 (exclusive of $274,000 of amortization of stock-based compensation) of research and development expenses for
the nine months ended September 30, 2001. Research and development expenses for the nine months ended September 30, 2002 consisted primarily of $54,113,000 of salaries and related
benefits, and $10,282,000 of facility costs, consisting primarily of rent. Research and development expenses for the nine months ended September 30, 2001 consisted primarily of $11,209,000 of
salaries and related benefits.



For the nine months ended September 30, 2002, we recorded a net bad debt recovery of $5,241,000 as compared to $4,580,000 of bad debt expense recorded for
the nine months ended September 30, 2001. The net bad debt recovery for the nine months ended September 30, 2002 related mainly to the collection of accounts receivable written off in
the fourth quarter of 2001.



For the nine months ended September 30, 2002, we incurred amortization expense of $12,441,000 on our intangible assets. This represents a decrease of
$288,000 from the $12,729,000 of amortization expense we recorded for the nine months ended September 30, 2001. The decrease is attributable mainly to a reduction in amortization related to the
impairment of intangible assets in the fourth quarter of 2001 and our implementation in January 2002 of SFAS No. 142, under which goodwill and various other intangible assets are no
longer amortized, offset partially by amortizable intangible assets recorded in conjunction with acquisitions we made primarily in the fourth quarter of 2001.



For the nine months ended September 30, 2002, we recorded in-process research and development charges of $611,000, which represents a decrease
of $585,000 from the $1,196,000 of similar charges recorded for the nine months ended September 30, 2001.



For the nine months ended September 30, 2002, we recorded impairment charges of $1,408,000 relating mainly to additional charges related to acquired
companies that were previously written off. Of this amount, $467,000 represents the fair value of approximately 53,000 shares of divine common stock that were issued in connection with an earnout
agreement related to the Company's 2001 acquisition of SageMaker. For the nine months ended September 30, 2001, we recorded $25,000,000 of impairment charges related to prepaid
co-location and bandwidth services from Level 3 Communications, and we recorded $3,024,000 for other than temporary declines in the carrying values of certain consolidated associated
companies.

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For the nine months ended September 30, 2002, we incurred a non-cash expense of $4,303,000 related to the issuance, prior to our IPO, of shares
of restricted stock and grants of options to employees, directors, and consultants with exercise prices lower than the fair value of the class A common stock on the dates of grant.
Additionally, we incurred a non-cash expense of $449,000 related to the issuance of non-vested stock options, as part of our acquisitions of Eprise, Data Return, and Delano, with exercise
prices lower than the fair value of the class A common stock on the dates of the grant. Also for the nine months ended September 30, 2002, we recovered $543,000 of previously recognized
compensation expense related to non-vested options of terminated employees.

For
the nine months ended September 30, 2001, we incurred a non-cash expense of $8,142,000 related to the issuance, prior to our IPO, of shares of restricted stock and
grants of options to employees, directors, and consultants with exercise prices lower than the fair value of the class A common stock on the dates of grant. Additionally, we incurred a
one-time charge of $132,000 related to the issuance of options to members of our advisory committee. Also for the nine months ended September 30, 2001, we recovered $602,000 of
previously recognized compensation expense related to non-vested options of
terminated employees, and we repurchased a total of 85,851 shares of restricted class A common stock which were previously exercised by terminated employees.



Interest income for the nine months ended September 30, 2002 was $631,000 and was earned primarily from the investment of our available cash balances. This
is a decrease of $7,007,000 from the $7,638,000 of interest income earned during the nine months ended September 30, 2001, which was also earned from the investment of our available cash
balances. Interest expense for the nine months ended September 30, 2002 was $6,018,000 and was incurred primarily from our long-term debt and capital leases. This is an increase of
$3,829,000 from the $2,189,000 of interest expense incurred during the nine months ended September 30, 2001, which was also incurred primarily from our long-term debt.



Other income (expense), net for the nine months ended September 30, 2002 was $(39,000). This represents a decrease of $10,823,000 from the $10,784,000 of
other income (expense), net earned during the nine months ended September 30, 2001. Other income for the nine months ended September 30, 2002 consisted primarily of gains of $804,000 on
disposal of assets, and an investment gain of $215,000 in connection with our investment in i-Fulfillment, Inc., which filed for bankruptcy in 2001. We had previously written off
our entire investment in i-Fulfillment, and in January 2002, we received proceeds from the bankruptcy in the amount of $215,000. Other expenses consisted of $495,000 of realized
foreign currency exchange losses and other expenses, net, of $563,000. Other income for the nine months ended September 30, 2001 was earned primarily from the sale of our investments in Farms
and Sequoia Software Corporation, which resulted in realized gains of approximately $7,225,000 and $6,611,000, respectively. Other expense for this period consisted primarily of an other than
temporary decline of $4,181,000 in our available-for-sale investment in 360networks.

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We recorded no income tax provision or benefit for the nine months ended September 30, 2002 or the nine months ended September 30, 2001. Because we
have no history of taxable income through September 30, 2002, the tax benefit associated with our net losses has been fully reserved. As of September 30, 2002, we had total net operating
loss carryforwards of approximately $68,182,000 of which approximately $16,447,000 may be utilized by us to reduce future consolidated taxable income, if any. Approximately $125,000 of the total net
operating loss carryforwards are attributable to majority-owned subsidiaries not includible in our consolidated tax group. Although each majority-owned subsidiary excluded from our consolidated tax
group may utilize its net operating loss carryforwards to reduce separate future income taxes, if any, these carryforwards may not offset our consolidated taxable income, if any. In addition, our
utilization of the net operating loss carryforwards is limited under the change in stock ownership rules imposed by Internal Revenue Code Section 382. The net operating loss carryforwards will
expire from 2019 through 2022.

In
assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. Based upon our
historical net operating losses and projections for future tax losses, we believe it is more likely than not that we will not realize the deferred tax assets. Thus, we have provided a full valuation
allowance against the net deferred tax assets as of September 30, 2002.



Minority interest of $0 and $4,269,000 represents the non-controlling stockholders' share of our consolidated associated companies' net loss for the
nine months ended September 30, 2002 and the nine months ended September 30, 2001, respectively. In 2001, we wrote off all interests in associated companies of which we owned less then a
100 percent interest.



Because we had written off, as of December 31, 2001, all of our investments in associated companies accounted for under the equity method of accounting, we
recorded no equity in losses of associated companies for the nine months ended September 30, 2002. We recorded $9,955,000 in net losses from associated companies for the nine months ended
September 30, 2001. Equity in losses of associated companies also included amortization of our net excess investment over the equity in the net assets of these associated companies, which
totaled $5,488,000 for the nine months ended September 30, 2001.



For the nine months ended September 30, 2002, we recorded impairment charges of $140,000 for other than temporary declines in the carrying value of certain
equity and cost method associated companies. We recorded impairment charges of $30,382,000 during the nine months ended September 30, 2001.



For the nine months ended September 30, 2002, we reported an extraordinary gain of $14,389,000, which related primarily to our acquisition of Viant and the
outstanding equity of Perceptual Robotics that we did not already own. This extraordinary gain represented the excess of the fair value of the net assets acquired over the fair value of the
consideration we paid in conjunction with these acquisitions. For the nine months ended September 30, 2001, we reported an extraordinary gain of $11,214,000 related to our acquisition of the
67% of Emicom Group, Inc. that we did not already own.

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Summary of Currently Expected Fixed Charges

The following table summarizes the fixed charges as of September 30, 2002 that we currently expect to incur throughout the remainder of 2002 and over the
next three years for amortization of our identifiable intangible assets and unearned stock-based compensation:

|                                     |  | Year
|------------------------------------ |  | ----
|
|
|Identifiable Intangible Assets       |  | $   
|Unearned Stock-Based Compensation(1) |  |     
|                                     |  |     
|Total                                |  | $   
|                                     |  |     

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Liquidity and Capital Resources

As of September 30, 2002, we had cash and cash equivalents, current restricted cash, and available-for-sale securities of
$94,078,000, which represented a decrease of $46,654,000 from $140,732,000 as of December 31, 2001, and an increase of $38,972,000 from $55,106,000 as of June 30, 2002. The net decrease
in cash and cash equivalents for the nine months ended September 30, 2002 was due primarily to net cash used in operating activities of $92,340,000, net cash provided by the issuance of
preferred stock of $61,178,000, net cash provided by the acquisition of companies and the sale and deconsolidation of ownership interests in associated companies of $33,460,000, net cash used to repay
notes payable of $32,298,000, net cash used for capitalized acquisition costs of $5,899,000, net cash used to acquire treasury stock of $5,857,000, and net cash used to acquire property and equipment
of $3,517,000. The net increase in cash and cash equivalents for the three months ended September 30,
2002 was due primarily to net cash used in operating activities of $29,645,000, net cash provided by the issuance of preferred stock of $38,237,000, net cash provided by the acquisition of companies
and the sale of ownership interests in associated companies of $29,927,000, net cash used for capitalized acquisition costs of $2,950,000, and net cash used to pay down notes payable of $6,384,000.

As
of September 30, 2002, we had a $40,000,000 line of credit with LaSalle Bank N.A. This line of credit is cash collateralized and is available for working capital financing and
general corporate purposes other than permanent financing for acquisitions of interests in associated companies. As of September 30, 2002, we had established letters of credit of $9,600,000
against this line of credit. These letters of credit include $5,207,000 for a note payable to marchFIRST GmbH and $4,393,000 as collateral for various real estate and equipment leases. The marchFIRST
GmbH letter of credit expired in October 2002.

As
of September 30, 2002, we had current restricted cash of $31,764,000, which represented a decrease of $802,000 from $32,566,000 as of December 31, 2001 and an increase
of $8,075,000 from $23,689,000 as of June 30, 2002. Current restricted cash as of September 30, 2002 included $10,560,000 that secured the $9,600,000 in letters of credit from LaSalle
Bank N.A. described above, $9,203,000 securing operating obligations related to our international operations, primarily associated with our content business, $8,009,000 that represents prepayments by
certain customers for the purchase of content, and $3,992,000 of other current restricted cash that secures real estate leases we assumed in our various acquisitions.

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In
May and June 2002, we received an aggregate of $22,941,000 for 22,941 shares of our series B convertible preferred stock from a group of investors led by Oak Investment
Partners. In August 2002, we received an additional $38,237,000, net of issuance costs, in exchange for 38,569 shares of our Series B-1 convertible preferred stock.

At
September 30, 2002, we had $1,126,000 in available-for-sale securities. This amount includes shares of Neoforma.com and CMGI.

Under
our revised Alliance Agreement with Microsoft Corporation, entered into in July 2002, we agreed to purchase $7,000,000 of software products and services from Microsoft
during the three-year term of the agreement, and to spend $1,500,000 over three years to promote Microsoft solutions as part of our product and service offerings. As of
September 30, 2002, we have fulfilled approximately $370,000 and $100,000, respectively, of these obligations. Additionally, we agreed to work closely with Microsoft to accomplish certain goals
over the term of the agreement, such as developing Microsoft-related offerings, delivering joint customer wins, creating two "Microsoft Centers of Excellence" within our existing facilities (one of
which already exists), and training or certifying an increasing portion of our technical staff on Microsoft technologies.

In
connection with the acquisition by our subsidiary divine/Whittman-Hart, Inc. of certain assets from marchFIRST, Inc. in April 2001,
divine/Whittman-Hart issued, and has outstanding, a $57,500,000 balloon note, which is due on April 12, 2006, but which is accelerated to the extent of 50% of free cash flow from
divine/Whittman-Hart's operations. This note is secured by the assets of divine/Whittman-Hart. divine/Whittman-Hart has the option to pay the note with cash or by delivering
shares of our class A common stock. This note bears interest at the Wall Street Journal prime rate of interest. marchFIRST also is eligible to receive up to an aggregate of $55,000,000 in bonus
payments, payable to the extent that 50% of free cash flow from divine/Whittman-Hart's operations during the five years ending April 12, 2006 exceeds divine/Whittman-Hart's obligation under the
promissory notes. We have not guaranteed the promissory notes from divine/Whittman-Hart to marchFIRST, but the terms of the promissory notes restrict payments from
divine/Whittman-Hart to us.

In
August 2002, we issued 1,853,756 shares of our class A common stock to the trustee for the assets of marchFIRST GmbH, in settlement of a promissory note with a face
value of Euro 5,369,000, which we originally delivered to the trustee in conjunction with our acquisition of certain assets of marchFIRST GmbH in September 2001. In October 2002,
we entered into an agreement with the trustee concerning his disposition of the shares. Under the agreement, we paid the trustee $1,000,000 in October 2002 and agreed to pay an additional
$1,000,000 in January 2003. In February 2003, the trustee will return to us any unsold shares, and we will pay the trustee the difference, if any, between the face value of the
promissory note and the sum of (1) the $2,000,000 paid to the trustee by us, and (2) the net proceeds received by the trustee from his sales of the stock.

In
connection with our acquisition of Synchrony Communications, Inc. in October 2001, we acquired debt with balances totaling $708,000 as of September 30, 2002,
payable in equal monthly installments through March 2003.

In
conjunction with our acquisition of RoweCom Inc. in November 2001, we acquired current notes payable with balances totaling $15,931,000 as of December 31, 2001,
which were paid in full as of September 30, 2002.

In
conjunction with our acquisition of RoweCom, we assumed a factoring agreement previously in place between RoweCom's French subsidiary (RoweCom France) and a European factoring
company. The arrangement allowed the factoring company to purchase, without recourse, $55,000,000 of the accounts receivable of RoweCom France during the period October 1, 2001 to
September 30, 2002. The factoring arrangement was structured so that we received 90% of the face value of the accounts receivable upon sale to the factoring company, with the remaining 10% due
to us upon the ultimate

27

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collection of the accounts receivable by the factoring company. Our cost for this arrangement was 0.37% of the face value of the sold receivable, which was paid when the accounts receivable were
transferred to the factoring company. This factoring agreement expired in October, 2002. We currently have no factoring arrangement in place for any of our accounts receivable.

During
July, August, and September 2002, we used net cash of $4,118,000, $10,710,000, and $12,504,000, respectively. These amounts are exclusive of an increase of $73,844,000, net
of issuance costs, from our convertible preferred stock financing and cash acquired through acquisitions, as well as a decrease of $7,540,000 principally related to RoweCom debt paydowns. Our working
capital (current assets minus current liabilities), net of deferred publisher costs and deferred revenue, increased from $22,865,000 at June 30, 2002 to $56,509,000 at September 30,
2002. Our cash flows from operating activities can vary significantly from month to month, depending on the timing of operating cash receipts and payments and other working capital changes, especially
accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities.

Our
operating plan depends on us achieving increases in revenue and cash receipts and decreases in expenses. We intend to decrease our operating costs, primarily through workforce and
payroll reductions, as we continue to integrate acquired companies into our operations. Based on our plan forecast, we believe that our existing unrestricted cash and cash equivalents, accounts
receivable, and new cash generated from our customers will be sufficient to fund our operations and capital requirements. There is a substantial risk, however, that our revenue and cash receipts will
not grow at a sufficient rate, and that we will not be able to reduce our expenses to keep them in line with our revenue. If we are unable to meet our revenue and expense management goals, we will
need to significantly reduce our workforce, enter into business combinations, discontinue some or all of our operations, or take other restructuring actions. While we expect that these actions would
result in a reduction of recurring costs, they also may result in a reduction of recurring revenues and cash receipts. It is also likely that we would incur substantial non-recurring costs
to implement one or more of these restructuring actions.

We
are also exploring other alternatives to generate cash, including selling certain assets and obtaining funding through the issuance of new debt, and we may also explore additional
equity financings. We do not currently have in place any agreements to provide us any sources of these funds, and these sources of funds may not be available to us on favorable terms, if they are
available to us at all. In addition, any of these transactions also could result in significant equity dilution to the holders of our common and preferred stock.

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Our
outstanding contractual obligations, leasehold commitments, and outstanding debt balances as of September 30, 2002 are set forth in the following table. These amounts
represent payments due by us for the periods indicated under non-cancelable contracts, leases, and loan arrangements.

|                                                                            |       | Payments Due by Period (in thousands)
|--------------------------------------------------------------------------- | ----- | -------------------------------------
|
|Notes payable                                                               |       | $                                    
|Note payable related to acquisition of marchFIRST GmbH(1)                   |       |                                      
|Long-term debt payable in cash or common stock                              |       |                                      
|Other long-term debt                                                        |       |                                      
|Capital lease obligations                                                   |       |                                      
|Operating leases, net of income from subleases                              |       |                                      
|Obligations under our amended alliance agreement with Microsoft Corporation |       |                                      
|                                                                            |       |                                      
|                                                                            | Total |                                      

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Recent Accounting Pronouncements

In June 2002, the FASB issued Statement No. 146,Accounting for Costs Associated with Exit or Disposal Activitieswhich requires
that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, not on the date the entity commits to an
exit plan. The provisions of that statement are required to be adopted for all exit and disposal activities initiated after December 31, 2002 with early application encouraged. We are currently
analyzing the potential impact of SFAS No. 146 on our results of operations, financial position, and cash flows upon the adoption of this standard.



This report includes forward-looking statements that reflect our current expectations and projections about our future results, performance, prospects, and
opportunities. We have tried to identify these forward-looking statements by using words such as "may," "will," "expect," "anticipate," "believe," "intend," "plan," "estimate," and similar
expressions. These forward-looking statements are based on information currently available to us and are subject to a number of risks, uncertainties, and other factors that could cause our actual
results, performance, prospects, or opportunities to differ

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materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties, and other factors include:



Other
matters, including unanticipated events and conditions, also may cause our actual future results to differ materially from these forward-looking statements. We cannot assure you
that our expectations will prove to be correct. In addition, all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements mentioned above. You should not place undue reliance on these forward-looking statements. All of these forward-looking statements are based on our
expectations as of the date of this report. We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Equity Price RiskAt September 30, 2002, we had $1,126,000 of available-for-sale equity
securities. These securities represent companies in the Internet and high technology sectors, both of which have experienced significant volatility, specifically in the past year. These investments
are at risk in the event of a downturn in the public markets in general or a downturn in their specific sectors. However, these investments accounted for only 0.3% of our current assets at
September 30, 2002.

Interest Rate RiskAt September 30, 2002, we had $92,952,000 in cash and cash equivalents and restricted cash. A
decrease in market rates of interest would have no material effect on the value of

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these assets, as they are short-term financial instruments with a fair value approximating our cost basis. Cash equivalents consist mainly of money market accounts, short-term
treasury bills, and commercial paper. The carrying values of other financial instruments, such as accounts receivable, notes receivable, accounts payable, publisher payables, accrued expenses, and
notes payable approximate fair value as well because of their short-term nature. The carrying value of long-term debt approximates fair value due to the variable rates at which
the underlying notes bear interest.

At
September 30, 2002, we had $57,500,000 of long-term debt carried at variable interest rates. A hypothetical 1% change in market rates of interest would not have a
material effect on our net loss.

Foreign Currency Exchange RiskOur financial market risk includes risks associated with our acquisition of companies with
operations outside the United States. Through September 30, 2002, we have recorded a net foreign currency translation loss of $3,375,000 in other comprehensive income as a result of
fluctuations in foreign currency exchange rates. We do not currently engage in any activities for the purpose of hedging foreign currency risk.

Impairment RiskAt September 30, 2002, we had net goodwill and other intangible assets of $313,482,000 related to our
acquisition of companies in the fourth quarter of 2001 and throughout 2002. We assess the net realizable value of the assets acquired from these companies at least annually to determine if we have
incurred an other than temporary decline in the value of our capital investment. For the nine months ended September 30, 2002, we incurred $1,408,000 of impairment charges related to our
intangible and other assets. At September 30, 2002, we also had $13,435,000 and $28,662,000, respectively, of current and long-term facilities impairment, representing future cash
payments we are obligated to make under operating leases, related mainly to facilities or portions of facilities that we are no longer utilizing. We may incur additional impairment charges in future
periods.

We
will perform our impairment analysis on our intangible assets in the fourth quarter of 2002 in accordance with SFAS No. 142. Based on various factors, including our current market
capitalization, we expect to record a significant non-cash charge to write down our intangible assets in the fourth quarter.

Item 4.    Controls and Procedures

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PART II    OTHER INFORMATION

Item 2.    Changes in Securities and Use of Proceeds

In August 2002, we issued 38,659 shares of our series B-1 convertible preferred stock to a group of seven investors led by Oak
Investment Partners. The aggregate purchase price for those shares was $38,237,000, net of issuance costs. Each of the series B-1 convertible preferred shares is convertible at any
time into a number of shares of our class A common stock determined by dividing the purchase price of the series B-1 convertible preferred share by the conversion price of
$3.0441 per share of our class A common stock. This transaction was exempt from registration pursuant to Section 4(2) and Rule 506 of the Securities Act of 1933, as amended.

In
August 2002, we issued 1,853,756 shares of our class A common stock to the trustee for the assets of marchFIRST GmbH, in settlement of a promissory note with a face
value of Euro 5,369,000, which we originally delivered to the trustee in conjunction with our acquisition of certain assets of marchFIRST GmbH in September 2001. This transaction was
exempt from registration pursuant to Section 4(2) and Rule 506 of the Securities Act of 1933, as amended. The resale of these shares was registered on a Form S-3
(Registration No. 333-98367), which was declared effective August 30, 2002.

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

The following summarizes the votes of divine's Special Meeting of Stockholders held on August 27, 2002:

|Matter                                                                                                                                   |  | For        |  | Against |  | Abstain |  | Non-Vote |  | Shares Voted
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- |  | ------- |  | ------- |  | -------- |  | ------------
|Approval of the potential issuance of shares of class A common stock upon conversion of our Series B and B-1 convertible preferred stock |  | 9,205,835  |  | 275,534 |  | 43,611  |  |         |  | 9,524,980   
|Approval of the Certificate of Amendment to Certificate of Designations, Preferences and Rights of Series B convertible preferred stock  |  | 13,023,591 |  | 274,652 |  | 50,237  |  |         |  | 13,348,480  
|Approval of divine's 2002 Employee Stock Purchase Plan                                                                                   |  | 12,522,966 |  | 673,754 |  | 151,760 |  |         |  | 13,348,480  

Item 6.    Exhibits and Reports on Form 8-K



|Number |  | Description of Exhibit                                                                                                                                                                                                                                                                                       
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1    |  | Amendment to Agreement and Plan of Merger and Reorganization, dated as of July 23, 2002, by and among divine, inc., DVC Acquisition Company, and Viant Corporation (incorporated herein by reference to Exhibit 2.1
of divine's Report on Form 8-K/A filed July 25, 2002).                                   
|2.2    |  | Second Amendment to Agreement and Plan of Merger and Reorganization, dated as of August 2, 2002, among divine, inc., DVC Acquisition Company, and Viant Corporation (incorporated herein by reference to Exhibit 2.3 of Amendment No. 1 to
divine's Registration Statement on Form S-4 (Reg. No. 333-90800)).
|2.3    |  | Combination Agreement, dated March 12, 2002, by and between divine, inc. and Delano Technology Corporation (the "Combination Agreement") (incorporated herein by reference to Exhibit 2.1 of divine's Current Report on Form 8-K, filed on
March 14, 2002).                                                  
|       |  |                                                                                                                                                                                                                                                                                                              

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|2.4  |  | Amendment to the Combination Agreement, dated May 30, 2002 (incorporated herein by reference to divine's Report on Form 8-K filed on May 31, 2002).                                                                                                                                             
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Certificate of Designations, Preferences and Rights of Series B-1 Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1 of divine's Report on Form 8-K filed July 18, 2002).                                                                                             
|3.2  |  | Certificate of Amendment to Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1 of divine's Report on Form 8-K filed August 29,
2002).                                                                 
|3.3  |  | Certificate of Amendment to Certificate of Designations, Preferences and Rights of Series B-1 Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.2 of divine's Report on Form 8-K filed August 29,
2002).                                                               
|3.4  |  | Certificate of Designations, Preferences, and Rights of Series C Preferred Stock.                                                                                                                                                                                                               
|4.3  |  | Amendment No. 4 to Rights Agreement, dated as of July 16, 2002, between divine and Computershare Investor Services, LLC, as Rights Agent (incorporated herein by reference to Exhibit 6 of divine's Form 8-A/A filed on July 31,
2002).                                                         
|4.4  |  | Amendment No. 5 to Rights Agreement, dated as of July 24, 2002, between divine and Computershare Investor Services, LLC, as Rights Agent (incorporated herein by reference to Exhibit 7 of divine's Form 8-A/A filed on July 31,
2002).                                                         
|10.1 |  | Amended and Restated Securities Purchase Agreement, dated as of July 16, 2002, by and among divine, inc. and the investors named therein (incorporated herein by reference to Exhibit 4.1 of divine's Report on Form 8-K filed July 18,
2002).                                                  
|10.2 |  | Second Amended and Restated Securities Purchase Agreement, dated as of July 24, 2002, by and among divine, inc. and the investors named therein (incorporated herein by reference to Exhibit 4.1 of divine's Report on Form 8-K/A filed
July 25, 2002).                                         
|10.3 |  | Form of Amended and Restated Registration Rights Agreement, by and among divine, inc. and the investors named therein (incorporated herein by reference to Exhibit 10.1 of divine's Report on Form 8-K filed July 18, 2002).                                                                    
|10.4 |  | Form of Amended and Restated Registration Rights Agreement, by and among divine, inc. and the investors named therein (incorporated herein by reference to Exhibit 10.1 of divine's Report on Form 8-K/A filed July 25, 2002).                                                                  
|10.5 |  | divine, inc. 2002 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 4.1 of divine's Registration Statement on Form S-8 (Reg. No. 333-90884), filed June 21, 2002).                                                                                                      
|10.6 |  | Office Lease, dated November 17, 1999, by and between 302 Town Centre Limited and Delano Technology Corporation (incorporated herein by reference to Exhibit 10.8 of Delano's Registration Statement on Form F-1 (Reg. No. 333-94505)
).                                                        
|10.7 |  | Lease Amending Agreement, dated February 25, 2000, by and between 302 Town Centre Limited and Delano Technology Corporation (incorporated herein by reference to Exhibit 10.17 of Delano's Annual Report on Form 10-K for the fiscal year ended
March 31, 2000 (Commission File No. 333-94505)).
|10.8 |  | Standard Industrial/Commercial Multi-Tenant LeaseNet, dated July 5, 2000, by and between PAS Trust, as lessor, and Viant Corporation, as lessee, for the premises located at 3562-3582 Eastham Drive, Culver City, California (the "Culver City
Lease").                                       
|     |  |                                                                                                                                                                                                                                                                                                 

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|10.8.1 |  | Addendum No. 1 to Culver City Lease, dated July 5, 2000.                                                                                                                                                                                         
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8.2 |  | Addendum No. 2 to Culver City Lease, dated July 11, 2000.                                                                                                                                                                                        
|10.9   |  | Lease Agreement, dated May 12, 2000, between John Arrillaga Survivor's Trust and Richard T. Peery Separate Property Trust, as landlord, and Viant Corporation, as tenant, for the premises located at 640 Clyde Court, Mountain View,
California.
|99.1   |  | Certification of CEO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                   
|99.2   |  | Certification of CFO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                   



We
filed a report on Form 8-K dated July 16, 2002, announcing that we entered into an Amended and Restated Securities Purchase Agreement, dated July 16,
2002, with a group of investors led by Oak Investment Partners X, Limited Partnership.

We
filed a report on Form 8-K dated July 23, 2002, announcing that we entered into an amendment to the Agreement and Plan of Merger reorganization with Viant
Corporation, dated April 5, 2002.

We
filed a report on Form 8-K/A, dated July 24, 2002, announcing that we entered into a Second Amended and Restated Securities Purchase Agreement, dated
July 24, 2002, with a group of investors led by Oak Investment Partners X, Limited Partnership.

We
filed a report on Form 8-K dated July 31, 2002, announcing that we completed our acquisition of Delano Technology Corporation.

We
filed a report on Form 8-K dated August 28, 2002, announcing that we closed the second round of a private placement with a group of investors led by Oak
Investment Partners X, Limited Partnership.

We
filed a report on Form 8-K, dated September 27, 2002, announcing that we completed our acquisition of Viant Corporation.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on November 14, 2002.

| |  | DIVINE, INC.                                                                                                                                             
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | /s/MICHAEL P. CULLINANEMichael P. Cullinane Executive Vice President,
Chief Financial Officer, and Treasurer
(Principal Financial and Accounting Officer)

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CERTIFICATIONS

I, Andrew J. Filipowski, certify that:





November 14,
2002

/s/ANDREW J. FILIPOWSKI

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Andrew J. Filipowski
Chief Executive Officer

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CERTIFICATIONS

I, Michael P. Cullinane, certify that:





November 14,
2002

/s/MICHAEL P. CULLINANE

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Michael P. Cullinane
Chief Financial Officer

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