Document:

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                                                                   EXHIBIT 10.19
                                           *** TEXT OMITTED AND FILED SEPARATELY
                                                CONFIDENTIAL TREATMENT REQUESTED
                                             UNDER 17 C.F.R.SS.SS.200.80(B) (4),
                                                            200.83 AND 240.24B-2

                      VALUE ADDED RESELLER (VAR) AGREEMENT

     This Agreement is made as of the first (1st) day of October, 2001 (the
"EFFECTIVE DATE"), by ImageWare Systems, Inc., a corporation organized under the
laws of California, with offices at 10883 Thornmint Road, San Diego, CA 92127
("VAR") and Visionics Corporation, with offices at 1 Exchange Place, Jersey
City, NJ 07302 USA ("LICENSOR").

                                    RECITALS

     WHEREAS, Licensor owns or controls the rights in and to the Licensed
Technology (as defined below);

     WHEREAS, the FaceIt Application provides face detection and recognition
functionality to various types of products and services for face finding,
template creation and identification;

     WHEREAS, VAR desires to obtain from Licensor, and Licensor desires to grant
to VAR, a license (as set forth in Section 2.1, the "LICENSE") to use the
Licensed Technology for the purpose of developing, selling, and distributing to
third parties in accordance with and subject to all of the provisions of this
Agreement products and/or services into which the functionality of the FaceIt
Application has been embedded (defined below as "VAR DEVELOPED PRODUCTS" or
"VDPS");

     NOW, THEREFORE, for the consideration stated in this Agreement, the parties
hereby agree as follows:

                                    SECTION 1.
                                   DEFINITIONS

     The following words shall have the following meanings:

     1.1   "CONSOLIDATED CURRENT LIABILITIES" means, at any time, the current
liabilities of VAR and its subsidiaries determined, on a consolidated basis, in
accordance with GAAP.

     1.2   "DOCUMENTATION" shall mean the information developed by Licensor in
printed or computer file format relating to the Licensed Technology, its
installation and use, which information is specified on Schedule 1.2 attached to
and made a part of this Agreement.

     1.3   "END-USER" shall mean any third party which acquires a VDP for its
own internal use and not for further distribution or resale.

     1.4   "FACEIT APPLICATION" shall mean that certain library of algorithms,
database structures, data and related items of software that provides face
detection, faceprint creation and face recognition functionality in the products
and services into which such library is embedded

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through the use of the SDK and any Updates or Upgrades provided by Licensor and
not otherwise separately priced or marketed by Licensor.

     1.5   "FIELD OF USE" shall mean distribution and sublicensing of the VDPs
for static one-to-many image identification systems including: (1) image
identification and mugshot systems by law enforcement and public safety
agencies, (2) drivers license image systems (exclusive of North America, without
prior written consent of Licensor), (3) national passport systems, (4) airport
image and ID systems, (5) ID card systems, (6) national identification systems,
and (7) such other fields as may be reasonably agreed to in writing by the
parties.

     1.6   "INTELLECTUAL PROPERTY RIGHTS" with respect to any item of
intellectual property shall mean all intellectual and similar property rights
including patents, patent applications, inventions, discoveries, copyrights,
licenses, trademarks, trademark applications, trade secrets, service mark, trade
dress, mask work, confidential or proprietary technical and business
information, know-how or other data or information, software and databases and
all embodiments or fixations thereof and related documentation, registrations
and franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the foregoing and other
like rights in such item.

     1.7   "LICENSED TECHNOLOGY" shall mean the FaceIt Application, SDK, and any
Updates or Upgrades provided by Licensor and not otherwise separately priced or
marketed by Licensor.

     1.8   "LICENSOR LOGOS" shall mean the FaceIt logo(s) and/or expression
"with FaceIt(R) Technology" or "with Visionics' FaceIt(R) technology" or "with
FaceIt(R) Face Recognition Technology" and equivalent expressions of the
foregoing that acknowledge that the face detection and recognition technology to
which such expressions relate is the FaceIt Application from Licensor.

     1.9   "SDK" shall mean the FaceIt Identification Developer Kit (SDK)
Version 3.0.

     1.10  "TEMPLATE" shall mean both the vector template and the full template
generated by the Licensed Technology and containing representations subject
faces.

     1.11  "TERRITORY" shall be worldwide.

     1.12  "UPDATE" shall have the meaning set forth in Section 3.2.1.

     1.13  "UPGRADE" shall have the meaning set forth in Section 3.2.1.

     1.14  "VAR DEVELOPED PRODUCTS" or "VDPS" shall mean the products and
services into which VAR embeds the FaceIt Application, subject to and in
accordance with the terms and conditions of this Agreement.

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                                   SECTION 2.
                                GRANT OF LICENSE

     2.1   Subject to the terms and conditions set forth herein, for the Term of
this Agreement, Licensor hereby grants to VAR and VAR hereby accepts a
revocable, non-transferable, limited, non-exclusive license (the "LICENSE")
throughout the Territory to (i) use the Licensed Technology (ii) embed the
FaceIt Application in VDPs and (iii) use and distribute the Documentation,
solely: (a) for the purpose of distributing, licensing, and/or marketing the
VDPs, including through third party distributors, with the FaceIt Application so
embedded therein and sublicensed pursuant to the terms hereof, (b) in strict
accordance with the terms of this Agreement, and (c) within the Field of Use;
PROVIDED, HOWEVER, that VAR shall not have the right to sublicense the Licensed
Technology, by any means, except as incorporated in the VDPs as set forth above.

     2.2   VAR shall not reverse engineer, reverse assemble, disassemble or
decompile the Licensed Technology, or otherwise attempt to discover any source
code, algorithms, trade secrets or other proprietary rights embedded in or
relating to the Licensed Technology by any means whatsoever (except and solely
to the extent that applicable law prohibits reverse engineering restrictions),
nor shall it permit any other person to do so. Except as expressly permitted
hereunder, the Licensed Technology may not be leased, assigned, sublicensed or
otherwise encumbered in whole or in part.

     2.3   As a condition to the exercise of the license granted in Section 2.1
above, VAR shall place one or more Licensor Logos, copies of which shall be
supplied by Licensor upon execution of this Agreement, in a visible and
appropriate location on the VDPs packaging, advertising, scripts, session
screens (including prominently on the search or "About" screen), forms and the
like comprising the VDPs, with all such use to inure to the benefit of Licensor.
All such use of the Licensor Logos shall be subject to Licensor's then-current
trademark use policies and procedures. Within a reasonable period of time prior
to the first publication of the Licensor Logos on any such packaging,
advertisements, scripts, session screens, forms and the like during the term of
this Agreement, VAR will provide Licensor with copies or samples of such
materials for the purpose of allowing Licensor to approve the format and
appearance of the Licensor Logos on such materials, and VAR shall incorporate
Licensor's comments and revisions in such materials prior to the publication
thereof. All use of the Licensor Logos shall be in connection with goods and/or
services of a consistently high standard of quality, commensurate with the
current standards and reputation for quality and reliability associated with the
Licensor's goods and services, and the provision of the goods and/or services
associated with the Licensor Logos shall not reflect adversely upon Licensor or
the Licensor Logos. Licensor shall have the right, not to be unreasonably
exercised, to test, monitor and/or review, as appropriate, all goods and/or
services associated with the Licensor Logos.

     2.4   VAR shall have the right to use Licensor Logos solely for the
purposes and in the context of identifying the origin of Licensed Technology.
VAR shall not market the VDP in any

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way that implies that the Licensed Technology is the proprietary product of VAR
or of any party other than Licensor.

     2.5   Notwithstanding any other provisions contained in this Agreement,
Licensor reserves and VAR hereby acknowledges the reservation by Licensor of all
right, title and interest in and to the Licensed Technology, the Documentation,
the Licensor Logos, and the Intellectual Property Rights in and to the Licensed
Technology, the Documentation and the Licensor Logos. This Agreement and the
license granted herein are not a sale of a copy of the Licensed Technology and
do not render VAR the owner of a copy of the Licensed Technology. Ownership of
the Licensed Technology and all components and copies thereof shall at all times
remain with Licensor, regardless of who may be deemed the owner of the tangible
media in or on which the Licensed Technology may be copied, encoded or otherwise
fixed.

     2.6   VAR agrees to include an appropriate End-User license in or with its
VDP that is as protective of Licensor's rights as: (i) the terms and conditions
VAR uses for its own software products; (ii) substantially the minimum terms and
conditions set forth in Schedule 2.6 attached hereto or such other terms as may
be agreed to in writing by Licensor, as well as such additional and
non-contradictory terms as VAR desires; and (iii) the terms and conditions
governing this Agreement. VAR agrees to enforce the terms and conditions
applicable to the Licensed Technology contained in such license. Licensor may,
from time to time, in its reasonable discretion, request that VAR provide to
Licensor copies of its form, then-currently-negotiated and executed End-User
licenses for VDPs that include Licensed Technology to ensure compliance with
this Section 2.6.

                                   SECTION 3.
                             LICENSOR'S OBLIGATIONS

     3.1   Unless the VAR has already received the SDK, Licensor shall deliver
to VAR a copy of the SDK within ten (10) business days following the Effective
Date. Licensor will invoice VAR for the SDK in the amount of US$10,000. VAR
shall pay all amounts due upon receipt of such invoice.

     3.2   In consideration of and subject to the actual payment of the License
Fees paid or to be paid by VAR in accordance with the terms of Section 7, during
the Term of this Agreement, Licensor shall supply VAR with the following
services (hereinafter collectively referred to as "SUPPORT SERVICES"):

           3.2.1 BASIC SUPPORT: At no charge, (i) Licensor shall supply VAR with
all upgrades, patches and similar devices or methods related to or directed at
bugs in the Licensed Technology ("UPDATES"), (ii) all upgrades, improvements or
modifications to the Licensed

Technology that Licensor generally provides to its licensees who have paid the
Annual License and Maintenance Fees ("UPGRADES"), and (iii) for up to twenty
(20) hours in each year of the Term, during Licensor's regular business hours,
Licensor will provide verbal and written

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communications detailing operational instructions, problem reporting and
technical advice, and access to at least one knowledgeable Licensor technical
person. VAR acknowledges that during the Term of this Agreement, in addition to
delivering to VAR the Updates or Upgrades referred to above, Licensor may
release separate software modules and components for which Licensor may elect to
require that VAR pay separate consideration and enter into separate agreements
or amendments in order to have any rights to such modules or components.

           3.2.2 ERROR CORRECTION SERVICES: Error Correction shall consist
solely of the correction of Errors (as defined below) and the incorporation of
such corrections into releases of the Licensed Technology. An "Error" shall mean
a reproducible failure of the Licensed Technology to substantially conform to
the then-current functional specifications of the Licensed Technology for the
applicable platform. When requesting correction of Errors, VAR shall stipulate
in writing the severity level it has associated with the Error using the
following severity level guidelines:

     SEVERITY LEVEL 1 -  EMERGENCY. The Licensed Technology cannot be used by an
                         End-User to perform any useful work for which the VDP
                         was intended.

     SEVERITY LEVEL 2 -  SEVERELY IMPACTED. The Licensed Technology cannot be
                         used by an End-User to perform all functions, but some
                         useful work can be performed.

     SEVERITY LEVEL 3 -  LIMITED FUNCTION. The Error is not critical, but is an
                         annoying defect that can circumvented or avoided on a
                         temporary basis.

     SEVERITY LEVEL 4 -  CIRCUMVENTED PROBLEM. The Error is a minor problem and
                         can be easily circumvented by the End-User.

     Licensor shall commence commercially reasonable efforts to correct such
     Errors within the time periods set forth below:

     Severity Level 1 -  Next business day.

     Severity Level 2 -  Within three (3) business days.

     Severity Level 3 -  Within fifteen (15) business days.

     Severity Level 4 -  Corrections shall be included at no charge in the next
                         release of the Licensed Technology or as soon
                         thereafter as reasonable.

           3.2.3 PRODUCT IMPLEMENTATION SERVICES: Any Support Services that are
not Basic Support or Error Correction shall be deemed "PRODUCT IMPLEMENTATION
SERVICES," and shall be provided to VAR at Licensor's sole discretion and
subject to the terms of Section 3.2.5. Product Implementation Services shall
include any Support Services provided by Licensor

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subject to Section 3.2.2 where the alleged Error, or to the extent that such
alleged Error, is reasonably determined by Licensor to not be an Error.

           3.2.4 VAR will be responsible for reasonable travel and living
expenses related to such Support Services.

           3.2.5 For all Support Services provided either (i) for Basic Support
in excess of the hours set forth in Section 3.2.1 or (ii) for Product
Implementation Services, VAR shall be invoiced at Licensor's then-current rates
or such other rates as may be agreed to by the parties in writing prior to the
performance of such services; provided, however, that for any Product
Implementation Services provided pursuant to a Severity Level 1 notification,
VAR shall be invoiced at Licensor's then-current rates plus fifty percent (50%)
of such rate. Payment of all such invoices shall be subject to the payment terms
set forth in Section 7.2.

     3.3   From time to time during the Term, Licensor, in its sole and absolute
discretion, may modify the Licensed Technology in response to a written request
by VAR. In consideration thereof, VAR shall pay to Licensor the invoiced charges
for such modification, in accordance with the terms agreed upon for such
modifications. All such modifications shall remain the exclusive property of
Licensor and such modifications will be deemed additional Licensed Technology
for the purposes of this Agreement. Upon delivery to VAR, the License granted to
VAR pursuant to Section 2 above shall be deemed to include such modifications.

     3.4   Licensor agrees that during the term of this Agreement, Licensor will
not directly or indirectly, either for itself or any other person or entity,
solicit any individual who is engaged as an employee, agent or independent
contractor by VAR to terminate his or her employment with VAR and/or to become
an employee, agent or independent contractor of Licensor or such other person or
entity.

     3.5   Licensor shall not directly target any End-Users of the VDPs to sell
products or services that have substantially similar functionality, features and
purposes to those of the VDPs created pursuant to this Agreement.

                                   SECTION 4.
                                VAR'S OBLIGATIONS

     4.1   VAR shall use commercially reasonable efforts to develop, market and
license the VDPs throughout the Territory.

     4.2   VAR shall cause copyright, patent and trademark notices conforming to
Licensor's then-current policies and standards to appear on or within the VDPs
and all instructions, packaging, promotional material or user manuals provided
with each unit of the VDPs. This Section 4.2 shall be applicable only when a VDP
includes Licensed Technology.

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     4.3   VAR shall cooperate with Licensor in protecting the Licensed
Technology, at Licensor's expense, and in connection therewith shall promptly
supply Licensor with any information or materials reasonably requested by
Licensor. If VAR is notified in writing or becomes aware of any unauthorized use
of the Licensed Technology in the Territory, VAR shall so advise Licensor.
Licensor may, in its discretion, take, or elect not to take, such action as it
deems advisable against any infringing party. If Licensor fails, or elects not
to take action against an infringing party within ninety (90) days after receipt
by Licensor of VAR's notice to Licensor of such unauthorized use, VAR shall have
the right, at VAR's expense, to commence an action against the infringer in
VAR's name and in Licensor's name and Licensor shall cooperate with VAR, at
VAR's expense, in connection therewith. VAR shall not enter into any settlements
of any such actions commenced by VAR with respect to the Licensed Technology
without Licensor's prior written consent, which consent shall not be
unreasonably withheld.

     4.4   If VAR develops and markets the VDPs in accordance with the terms of
this Agreement, VAR, biannually not less than thirty (30) days prior to (i) the
beginning of each fiscal year and (ii) six months thereafter, shall prepare a
good-faith reasonable projection of the number of VDPs VAR expects to license
for the following twelve (12) month period (the "PROJECTION") and VAR shall
deliver a copy of the Projection to Licensor. The parties agree and acknowledge
that the Projection will only be an estimate of the number of VDPs which may be
licensed and that VAR's inability to meet or exceed the number of VDPs set forth
in the Projection shall not constitute a breach of any of VAR's obligations
under this Agreement. The Projection will constitute confidential, proprietary
information of VAR and shall be subject to the terms set forth in Section 5.3 of
this Agreement.

     4.5   VAR agrees that during the term of this Agreement, VAR will not
directly or indirectly, either for itself or any other person or entity, solicit
any individual who is engaged as an employee, agent or independent contractor by
Licensor to terminate his or her employment with Licensor and/or to become an
employee, agent or independent contractor of VAR or such other person or entity.

     4.6   VAR shall use and permit the VDP and Licensed Technology to be used
only in accordance with applicable law and industry standards for ethical use of
biometric technology.

     4.7   VAR shall use commercially reasonable efforts to promptly upgrade,
replace or supplement, as appropriate, any Licensed Technology for which
Licensor has provided an Update.

     4.8   VAR shall inform Licensor of the date of initial shipment of VDPs in
each Field of Use in the Territory.

     4.9   VAR shall not transfer any Templates to any third parties, and shall
maintain such Templates in accordance with the confidentiality provisions of
Section 5.3.

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     4.10  VAR shall not supply or provide any Upgrades to an End-User until the
applicable License Fees for that End-User have been paid to Licensor.

                                   SECTION 5.
                               PROPRIETARY RIGHTS

     5.1   Licensor shall own all of the Intellectual Property Rights and all
other right, title and interest in and to the Licensed Technology.

     5.2   VAR shall own all of the Intellectual Property Rights and other
rights to any packaging, advertising and promotional material produced by VAR
for the VDPs only to the extent that they are not derivative works (as such term
is defined in the copyright laws of the United States) of the Licensed
Technology or Documentation. VAR acknowledges that it is not, by virtue of this
Agreement, acquiring from Licensor the right to create or utilize derivative
works of the Licensed Technology or Documentation except as provided in Section
2.1 of this Agreement.

     5.3   VAR and Licensor shall protect and maintain the confidentiality of
all Confidential Information (as defined below) received from the other party
(the "RECIPIENT"). The Recipient shall take all necessary and proper actions to
preserve the secrecy and prevent disclosure of such Confidential Information to
persons other than its employees, subcontractors, agents or advisors who need to
know the Confidential Information and are under obligations of confidentiality.
VAR and Licensor shall establish reasonable security procedures to prevent
unauthorized access to the Confidential Information. Confidential Information
does not include information that (a) is already known to the Recipient without
restriction on use or disclosure by the Recipient; (b) is or becomes publicly
known through no wrongful act or inaction of the Recipient; (c) has been
rightfully received by the Recipient from a third party authorized to make such
communication, without restriction on use or disclosure; (d) has been
independently developed by the Recipient without use of the Confidential
Information; or (e) is required to be disclosed by the Recipient pursuant to
applicable laws, regulations or court order. The Recipient shall have the burden
of proving the existence of the foregoing exceptions. Except as expressly
authorized in writing by Licensor or VAR, as the case may be, the Recipient
shall not disclose to any person or entity or use any Confidential Information
of Licensor or VAR, as the case may be, except as reasonably necessary to
perform and exercise its rights and obligations under this Agreement. Without
limiting the foregoing, the Recipient shall not disclose any Confidential
Information of Licensor or VAR, as the case may be, to any person or entity that
has not agreed in writing to keep such information confidential. For the
purposes of this Agreement, "CONFIDENTIAL INFORMATION" means all information
relating Licensor's or VAR's, as the case may be, Intellectual Property Rights,
business or operations disclosed or made available to the Recipient, its
employees or its representatives by Licensor or VAR, as the case may be, whether
oral or in writing, and whether or not marked as "Confidential."

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                                   SECTION 6.
                                TERM OF AGREEMENT

     6.1   The Term of this Agreement shall commence upon the Effective Date and
shall expire in two (2) years thereafter. Thereafter, this Agreement may be
renewed for successive one (1) year periods upon the mutual written consent of
the parties no later than ninety (90) days before the expiration of the
then-current Term.

                                   SECTION 7.
                             PAYMENT OF LICENSE FEES

     7.1   In consideration for the grant of the License, VAR shall pay to
Licensor the license fees (the "SOFTWARE LICENSE FEES") and the annual
maintenance fees (the "ANNUAL MAINTENANCE FEES") in the amounts and at the rates
set forth on Schedule 7.1 annexed hereto which is incorporated and made a part
hereof (collectively, the "LICENSE FEES").

     7.2   In consideration for a [...***...] discount from the License Fees,
VAR agrees to a minimum Software License Fee payment in the amount of
[...***...] per year. The minimum Software License Fee payment shall be
pro-rated to a quarterly payment of [...***...] and is due 30 days after the
close of each fiscal quarter, to be pro-rated in the first and last fiscal
quarters of the Term, if applicable. If actual Software License Fees in any
given year of the Term reach or exceed [...***...], Licensor shall offer a
[...***...] credit on Software License Fees payable to Licensor in the
immediately-following year, such that in such following year, the discount shall
be [...***...].

     7.3   VAR shall pay the License Fees by check or wire transfer in U.S.
Dollars, according to written instructions given to VAR by Licensor. VAR will
bear all related bank charges. Payment of License Fees shall be due fifteen (15)
days after receipt by VAR of an invoice from Licensor for such License Fees. Any
late payment will accrue interest at the lesser of a rate of 1.5% per month or
the highest rate allowed by law. VAR will pay any late payment charge upon
remitting the principal amount to Licensor. License Fees shall be due and
payable to Licensor regardless of whether VAR collects payments for the VDPs
from VAR's customers or End-Users.

     7.4   Statements which set forth the amount of License Fees due shall be
sent by VAR to Licensor via email and facsimile within fifteen (15) days
following the end of each monthly calendar period for such monthly period.

     7.5   All statements of License Fees and all other accountings rendered by
VAR hereunder shall be subject to objection, stating the basis thereof, by
Licensor until two (2) years after the termination or expiration of this
Agreement.

                                             ***Confidential Treatment Requested

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     7.6   Licensor may change the License Fees, in whole or in part, at any
time after the initial Term of this Agreement upon not less than ninety (90)
days prior written notice to VAR, but only if Licensor generally applies such
changes to its other VARs, subject to any binding commitment that Licensor has
made to VAR and any outstanding binding written quotations to potential
End-Users, copies of which have been provided to Licensor, reasonably made by
VAR in reasonable reliance upon the License Fees then in effect and which
quotations terminate within one (1) month of the effective date of such change
in License Fees unless definitive documents have been signed between VAR and the
End-User, or such potential End-User has made a binding written commitment;
provided, however, that with respect to any quotations approved in writing by
Licensor, such change in the License Fees shall not be applicable.

     7.7   VAR shall maintain, at its executive offices (wherever located) for
the duration of this Agreement and for two (2) years thereafter, books of
account concerning sales of the VDPs and the Licensed Technology and such other
records as may be made by VAR with respect to the use and implementation of the
VDPs and Licensed Technology. Licensor or its agent may, at Licensor's sole
expense, examine (i) said books and records for the purpose of verifying the
accuracy thereof and (ii) VAR's use and implementation of the Licensed
Technology, during VAR's normal business hours and upon reasonable written
notice, but no more than twice annually; PROVIDED, HOWEVER, that if such audit
reveals any underpayment of greater than five percent (5%) or any use of the
Licensed Technology in violation of this Agreement, in addition to any other
remedies that may be available to Licensor, VAR shall pay to Licensor (i) all
such amounts plus all interest in such amounts pursuant to Section 7.2 and (ii)
all costs of such audit. Such books relating to any particular statement of
License Fees may be examined as aforesaid only within two years after the date
rendered. Licensor shall notify VAR in writing within 90 days after such
examination if Licensor believes that VAR's books are not accurate. Licensor and
its agents shall keep all information obtained in such examination confidential
and use such information solely for the purpose of this Section.

     7.8   All amounts payable by VAR under this Agreement are exclusive of any
tax, levy or similar governmental charge that may be assessed by any
jurisdiction, whether based on gross revenue, the delivery, possession or use of
VAR's products, the execution or performance of this Agreement or otherwise,
except for net income, net worth or franchise taxes assessed on VAR outside of
the Territory. If, under the laws of the Territory, VAR is required to withhold
any taxes on such payments, then the amount of the payment will be automatically
increased to totally offset such tax, so that the amount actually remitted to
Licensor, net of all taxes, equals the amount invoiced or otherwise due. VAR
will promptly furnish Licensor with the official receipt of payment of these
taxes to the appropriate taxing authority. VAR will pay all other taxes, levies
or similar governmental charges or provide Licensor with a certificate of
exemption acceptable to the taxing authority.

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                                   SECTION 8.
                 REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION

     8.1   Each party represents and warrants to the other that this Agreement
has been duly authorized, executed and delivered by it; it has the full power
and authority and is free to enter into this Agreement and to perform its
obligations hereunder; this Agreement constitutes its valid and binding
obligation, enforceable in accordance with its terms; and the making of this
Agreement does not violate any agreement, right or obligation existing between
it and any other person, firm or corporation, on the other hand.

     8.2   VAR represents, warrants and covenants to Licensor that the VDPs do
not and will not infringe the Intellectual Property Rights and other proprietary
rights of any third party. VAR further represents, warrants and covenants to
Licensor that the VDPs and the Licensed Technology will be manufactured in
accordance with industry standards for similar products, and, to the best of its
knowledge, will (i) be free of material defects and (ii) not be harmful to the
property or person of third parties. VAR will handle in a professional manner
any End-User or distributor inquiries or complaints regarding the Licensed
Technology.

     8.3   Licensor represents and warrants that Licensor has the right and
authority to license the Licensed Technology as contemplated herein.

     8.4   Until the date ninety (90) days from the Effective Date (the
"WARRANTY PERIOD") Licensor warrants: (1) that the media on which Licensor
delivers the Licensed Technology will remain free from defects in materials and
workmanship; and (2) that the Licensed Technology when delivered will
substantially conform to, and substantially perform in accordance with, the
then-current published functional specification of the Licensed Technology for
the applicable platform. In the event that the Licensed Technology fails to
substantially conform to the then-current published functional specifications of
the Licensed Technology for the applicable platform during the Warranty Period,
VAR's sole recourse shall be to either (i) terminate this Agreement and obtain a
full refund of the License Fees actually paid or (ii) follow the procedures set
forth in Section 3.2.

     8.5   Each party shall indemnify, defend and hold harmless the other (and
the other's officers, directors, and affiliated companies) from and against all
liabilities, damages, costs or expenses (including reasonable attorney's fees)
payable or paid by the indemnified party to a third party as a result of a
breach or alleged breach by the indemnifying party of its representation and
warranty contained in Section 8.2 or Section 8.3, as the case may be, of this
Agreement. The party asserting any claim to indemnification under this
Section  8.5  shall  promptly  notify  the  other  party  of any  such  claim or
proceeding  and  shall not  settle  any such  claim or  proceeding  without  the
indemnifying  party's  prior  written  consent  which shall not be  unreasonably
withheld.  The  indemnified  party  shall  have  the  right  at its  expense  to
participate in the defense thereof with counsel of its choice, provided that the
indemnifying party shall have the right at all times to retain or resume control
of the conduct of such defense.

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     8.6   Licensor shall indemnify, defend and hold harmless VAR (and VAR's
officers, directors, and affiliated companies, but not End-Users) from and
against all liabilities, damages, costs or expenses (including reasonable
attorney's fees) payable or paid by VAR to third parties resulting from any
final judicial decision without opportunity for appeal arising from claims by
such third parties that any use of the Licensed Technology or Documentation by
VAR in accordance with the provisions of this Agreement infringes any United
States copyright, trademark, or trade secret of such third parties. VAR shall
promptly notify Licensor of any such claim or proceeding and shall not settle
any such claim or proceeding without the Licensor's prior written consent. VAR
shall have the right at its expense to participate in the defense thereof with
counsel of its choice, provided that Licensor shall have the right at all times
to retain or resume control of the conduct of such defense. If an injunction is
obtained against the use by VAR or its End-Users of any Licensed Technology or
Documentation, Licensor will, at its option and expense, either (i) procure for
VAR and its End-Users the right under such copyright or trademark to license or
use as appropriate, the Licensed Technology or Documentation; (ii) replace the
Licensed Technology or Documentation with other suitable, functionally-
equivalent and non-infringing products; (iii) modify the Licensed Technology or
Documentation so as to make it non-infringing without substantially reducing its
utility; provided, however, that if Licensor deems the foregoing remedies not
commercially reasonable, Licensor will refund a pro-rated portion (based on a 12
month period from the Effective Date) of the License Fees paid by VAR for the
allegedly infringing materials. In any event, the foregoing obligation of
Licensor does not apply with respect to Licensed Technology or Documentation (i)
made in whole or in part in accordance to VAR's or such End-User's
specifications, (ii) modified after shipment by Licensor, if the alleged
infringement relates to such modification, (iii) which are combined with other
products, processes or materials where the alleged infringement relates to such
combination, (iv) to the extent that VAR or such End-User continues allegedly
infringing activity after being notified thereof or after being informed of
modifications that would have avoided the alleged infringement, or (v) where
VAR's or such End-User's use of the Licensed Technology or Documentation is
incident to an infringement not resulting primarily from the Licensed Technology
or Documentation is not strictly in accordance with the License granted herein.

     8.7   VAR shall indemnify, defend and hold harmless the Licensor (and
Licensor's officers, directors, and affiliated companies) from and against all
liabilities, damages, costs or expenses (including reasonable attorney's fees)
payable or paid by the Licensor to a third party (i) as a result of any claim
that the VDP and/or related materials infringe on, resulted or may result in any
deprivation or violation of, the Intellectual Property Rights, constitutional,
statutory, contractual, common law or other rights of any person, (ii) as a
result of any breach of applicable law by VAR or any End-User or (iii) as result
of any claim based on one or more of the occurrences excluded from Licensor's
indemnification obligations as set forth in the last sentence of Section 8.6.
The Licensor shall promptly notify VAR of any such claim or proceeding and shall
not settle any such claim or proceeding without VAR's prior written consent. The
Licensor shall have the right at its expense to participate in the defense
thereof with counsel of its choice, provided that VAR shall have the right at
all times to retain or resume control of the conduct of

                                      -12-
<Page>

such defense. This indemnification obligation shall survive termination or
expiration of this Agreement.

                                   SECTION 9.
                                   TERMINATION

     9.1   Upon termination or expiration of the Term of this Agreement, all
rights granted to VAR hereunder shall immediately and without further action by
Licensor revert to Licensor and VAR (1) shall not thereafter use, embed,
reproduce, distribute or sell Licensed Technology or Documentation, (2) will
forthwith return to Licensor the Licensed Technology, including any
Documentation, electronic media, instructions and all related materials
furnished to VAR hereunder and shall not retain any copies for its use or for
any purpose and (3) destroy all Templates, each unless and solely to the extent
that VAR is using such Licensed Technology for its own internal use and not for
further distribution or resale and continues to pay Licensor all applicable
License Fees; PROVIDED, HOWEVER, that such termination or expiration shall not
effect the validity of the End-User licenses, which shall remain in effect
subject to their terms, provided that such terms fully comply with Section 2.6.

     9.2   Either party may terminate this Agreement in the event that (1) the
other party materially breaches its obligations hereunder, which breach remains
uncured following 30 days written notice from the nonbreaching party, or (2)
bankruptcy, insolvency or reorganization proceedings, or other proceedings
analogous in nature or effect, are instituted against the other party or by the
other party with respect to itself. For purposes of this Agreement, the failure
of VAR to render statements and payment of License Fees in accordance with the
terms of this Agreement shall be deemed to be a material breach of VAR's
obligations hereunder. Licensor may terminate this Agreement at any time upon
thirty (30) days notice if VAR shall challenge, or influences any third party to
challenge, the Intellectual Property Rights or other rights of Licensor or its
suppliers to the Licensed Technology anywhere in the world.

     9.3   Licensor's obligations and VAR's rights under this Agreement shall
terminate if there is a change in ownership or control of VAR such that one or
more entities that compete with Licensor in the field of the Licensed Technology
comes to own and/or control (directly or indirectly) thirty-three percent (33%)
or more of the voting or equity stock of VAR.

     9.4   Upon expiration or termination of this Agreement, VAR will cease all
display, advertising and use of all Licensor Logos and will not thereafter use,
advertise or display any name, mark or logo which is, or any part of which is,
similar to or confusing with any such designation associated with Licensed
Technology.

     9.5   The following sections shall survive any termination or expiration of
this Agreement: Sections 1, 2.2, 5, 7, 8.5, 8.7, 9.1, 9.5, 9.6, 10 and 11 of
this Agreement.

                                      -13-
<Page>

                                   SECTION 10.
                     LIMITATION OF LIABILITY AND DISCLAIMER

     10.1  UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR INCIDENTAL DAMAGES OR LOST
PROFITS, WHETHER FORESEEABLE OR UNFORESEEABLE, EVEN IF ANY REPRESENTATIVE OF A
PARTY HERETO HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES (INCLUDING, BUT
NOT LIMITED TO, CLAIMS FOR LOSS OR DATA, GOODWILL, USE OF MONEY OR USE OF THE
LICENSED TECHNOLOGY, INTERRUPTION IN USE OR AVAILABILITY OF DATA, STOPPAGE OF
OTHER WORK OR IMPAIRMENT OR OTHER ASSETS), ARISING OUT OF BREACH OR FAILURE OF
EXPRESS OR IMPLIED WARRANTY OR CONDITION, BREACH OF CONTRACT, MISREPRESENTATION,
NEGLIGENCE, STRICT LIABILITY IN TORT, OR OTHERWISE. IN NO EVENT WILL THE
AGGREGATE LIABILITY WHICH EITHER PARTY MAY EXCEPT FOR A BREACH OF SECTION 5.3 OF
THIS AGREEMENT, INCUR IN ANY ACTIONS OR PROCEEDINGS EXCEED THE TOTAL AMOUNT
ACTUALLY PAID TO LICENSOR BY VAR HEREUNDER. UNDER NO CIRCUMSTANCE SHALL LICENSOR
BE LIABLE FOR ANY ACTIONS, CLAIMS OR THE LIKE BY VAR OR ANY THIRD PARTY THAT THE
USE OF THE LICENSED TECHNOLOGY HAS RESULTED, RESULTS OR MAY RESULT IN ANY
INFRINGEMENT, DEPRIVATION OR VIOLATION OF THE INTELLECTUAL PROPERTY,
CONSTITUTIONAL, STATUTORY, CONTRACTUAL, COMMON LAW OR OTHER RIGHTS OF ANY
PERSON. EXCEPT FOR ACTIONS RELATING TO BREACH OF SECTION 5.3, NO ACTION,
REGARDLESS OF FORM, ARISING OUT OF THE TRANSACTIONS UNDER THIS AGREEMENT MAY BE
BROUGHT BY VAR OR LICENSOR MORE THAN TWO (2) YEARS AFTER THE EVENT WHICH GAVE
RISE TO THE CAUSE OF ACTION OCCURRED. THIS SECTION WILL NOT APPLY IN THE EVENT
AND TO THE EXTENT THAT APPLICABLE LAW SPECIFICALLY PROHIBITS THE LIMITATION OF
LIABILITY SET FORTH IN THIS SECTION 10.

     10.2  EXCEPT FOR THE LIMITED WARRANTY SET FORTH IN SECTION 8.4, THE
LICENSED TECHNOLOGY AND DOCUMENTATION ARE PROVIDED "AS-IS" AND "AS-AVAILABLE."
EXCEPT AS SPECIFICALLY PROVIDED HEREIN, LICENSOR MAKES NO, AND HEREBY
SPECIFICALLY DISCLAIMS ANY WARRANTY TO VAR OR ANY OTHER PERSON OR ENTITY
CONCERNING THE LICENSED TECHNOLOGY OR DOCUMENTATION, WHETHER EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, COMPLETENESS, USE, ACCURACY, TITLE OR
NONINFRINGEMENT. IN ADDITION, EXCEPT AS SPECIFICALLY PROVIDED HEREIN, LICENSOR
MAKES NO, AND HEREBY SPECIFICALLY DISCLAIMS ANY WARRANTY THAT THE LICENSED
TECHNOLOGY OR DOCUMENTATION WILL MEET VAR'S REQUIREMENTS, OR THAT VAR'S USE OF
THE LICENSED TECHNOLOGY OR DOCUMENTATION WILL BE UNINTERRUPTED, TIMELY, SECURE
OR ERROR FREE;

                                      -14-
<Page>

NOR, EXCEPT AS SPECIFICALLY PROVIDED HEREIN, DOES LICENSOR MAKE ANY WARRANTY,
AND LICENSOR SPECIFICALLY DISCLAIMS ALL WARRANTY, AS TO THE RESULTS THAT MAY BE
OBTAINED FROM THE USE OF THE LICENSED TECHNOLOGY OR DOCUMENTATION OR THAT
DEFECTS OR ERRORS IN THE LICENSED TECHNOLOGY OR DOCUMENTATION WILL BE CORRECTED.

     10.3  The provisions of this Section 10 allocate the risks under this
Agreement between Licensor and VAR and the parties have relied upon the
limitations set forth herein in determining whether to enter into this
Agreement.

                                   SECTION 11.
                            MISCELLANEOUS PROVISIONS

     11.1  All notices, statements and payments to be sent to the parties
hereunder shall be addressed to the parties at the addresses set forth on the
first page hereof or at such other address as the parties shall designate in
writing from time to time. All notices shall be in writing and shall either be
served by personal delivery (to an officer of each company), mail, or facsimile
(if confirmed by mail or personal delivery of the hard copy), all charges
prepaid. Except as otherwise provided herein, such notices shall be deemed given
when received. Copies of all notices to Licensor should be sent to Licensor at
its address set forth above, attention: Legal Department, with a copy to Douglas
A. Cifu at Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York NY 10019. Copies of all notices sent to VAR should be sent to
VAR at its address set forth above, attention: Jim Miller.

     11.2  VAR shall not have the right to assign any of its rights or
obligations hereunder without the prior written consent of Licensor, except to
assign this Agreement in connection with a merger, a sale of all or
substantially all of its assets, or other corporate reorganization; provided,
that prior written consent for the assignment or transfer of this Agreement or
any rights or obligations hereunder shall be required prior to such merger with
or sale by VAR to an entity that competes with Licensor in the field of the
Licensed Technology.

     11.3  The entire understandings between the parties hereto relating to the
subject matter hereof are contained herein, and this Agreement supersedes all
prior and contemporaneous communicates and agreements with respect to such
subject matter. There are no representations, warranties, terms, conditions,
undertakings or collateral agreements, express, implied or statutory, between
the parties other than as expressly set forth in this Agreement. This Agreement
cannot be changed, modified, amended or terminated except by an instrument in
writing executed by both VAR and Licensor. All Schedules, which may be attached
hereto, constitute a part of this Agreement and are incorporated herein by this
reference.

     11.4  No waiver, modification or cancellation of any term or condition of
this Agreement shall be effective unless executed in writing by the party
charged therewith. No written waiver shall excuse the performance of any act
other than those specifically referred to

                                      -15-
<Page>

therein and shall not be deemed or construed to be a waiver of such terms or
conditions for the future or any subsequent breach thereof.

     11.5  There is no relationship of agency, partnership, joint venture,
employment, or franchise between the parties. Neither VAR nor Licensor shall
have any right, power or authority to obligate or bind the other in any manner
whatsoever, except as provided for in this Agreement, and nothing herein
contained shall give or is intended to give any rights of any kind to any third
persons.

     11.6  This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without reference to the conflict of law
principles thereof.

     11.7  Any judicial proceeding brought with respect to this Agreement must
be brought in a court of competent jurisdiction in the State of New York and, by
execution and delivery of this Agreement, each party (i) accepts, generally and
unconditionally, the exclusive jurisdiction of such courts and any related
appellate court, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement, (ii) irrevocably waives any objection
it may now or hereafter have as to the venue of any such suit, action or
proceeding brought in such a court or that such court is an inconvenient forum
and (iii) agrees that service of process in any such action or proceeding may be
effected (A) by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to its address set forth
above or (B) in any other manner permitted by law.

     11.8  EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT.

     11.9  If any provision of this Agreement or any part, portion or the scope
of any such provision is or becomes or is deemed invalid, illegal or
unenforceable under the applicable laws or regulations of any jurisdiction, then
either such provision or part, portion or scope will be deemed amended to
conform to such laws or regulations without materially altering the intention of
the parties or it shall be stricken and the remainder of this Agreement shall
remain in full force and effect.

     11.10 Except for the obligations to make payments hereunder, each party
shall be relieved of the obligations hereunder to the extent that performance is
delayed or prevented by any cause beyond its reasonable control, including
without limitation, acts of God, public enemies, war, civil disorder, fire,
flood, explosion, labor disputes or strikes or any acts or orders of any
governmental authority.

     11.11 VAR acknowledges that it is not entering into this Agreement on the
basis of any representations not expressly contained herein. No employee, agent
or other representative has

                                      -16-
<Page>

any authority to bind Licensor with regard to any statement, representation or
warranty unless the same is specifically set forth or incorporated by reference
herein.

     11.12 The parties hereto are sophisticated and have had the opportunity to
be represented by lawyers throughout the negotiation of this Agreement. As a
consequence, the parties do not believe that the presumptions of any laws or
rules relating to the interpretation of contracts against the drafter of any
particular clause should be applied in this case and therefore waive their
effects.

     11.13 VAR acknowledges that the copying, disclosure, or use of any or any
portion of Licensor's confidential information or the Licensed Technology, in a
manner inconsistent with any provision of this Agreement may cause irreparable
injury for which there may be no adequate remedy at law. Licensor shall be
entitled to equitable relief in court, including but not limited to temporary
restraining orders, preliminary injunctions and permanent injunctions without
any requirements to post bond as a condition of such relief.

     11.14 In any action to enforce this Agreement, the prevailing party shall
be awarded all court costs and reasonable attorneys' fees incurred, including
such costs and attorneys' fees incurred in enforcing and collecting any
judgment.

     11.15 The parties expressly agree and acknowledge that to the fullest
extent permitted by law, the provisions of the Uniform Computer Information
Transactions Act (UCITA), or any similar legislation as may be enacted in the
future, shall not apply to this Agreement.

     11.16 The parties agree that they shall comply with all applicable laws and
regulations of governmental bodies or agencies in their performance under this
Agreement. VAR shall not export, directly or indirectly, any technical data or
software acquired under this Agreement or the direct product of any such
technical data or software to any country for which the United States Government
or any agency thereof, at the time of export, requires an export license or
other government approval, without first obtaining such license or approval.
With respect to any export transactions under this Agreement, both parties will
cooperate in any reasonable manner to effect compliance with all applicable
export regulations. If Licensor becomes aware of any applicable laws or
regulations restricting or requiring licenses to export the Licensed Technology,
Licensor shall advise VAR in writing of such laws or regulations.

     11.17 This Agreement may be executed in counterparts, each of which shall
be deemed an original Agreement for all purposes and which collectively shall
constitute one and the same Agreement. A facsimile copy of any such executed
counterpart shall be deemed an executed original.

     11.18 The recitals to this Agreement shall be deemed to be part of the
terms of this Agreement.

                  [Remainder of page left blank intentionally]

                                      -17-
<Page>

     IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.

IMAGEWARE SYSTEMS, INC.

  /s/ Lori Rodriguez
------------------------------------
By:     Lori Rodriguez
   ---------------------------------

Its:    VP Sales & Marketing
    --------------------------------

VISIONICS CORPORATION

  /s/ Allen Ganz
------------------------------------
By:     Allen Ganz
   ---------------------------------

Its:    V.P. Business Development
    --------------------------------

                                      -18-
<Page>

                                  SCHEDULE 1.2

                                  DOCUMENTATION

IDENTIFICATION SDK

FaceIt Identification SDK
FaceItLocate API Documentation
FaceItRecognize API Documentation
FaceItMedia API Documentation

                                      -19-
<Page>

                                  SCHEDULE 2.6

                            SOFTWARE SUBLICENSE TERMS

                  IMAGEWARE SYSTEMS END USER LICENSE AGREEMENT

                                   *IMPORTANT*

CAREFULLY READ THE FOLLOWING TERMS AND CONDITIONS BEFORE USING THIS PRODUCT. IT
CONTAINS SOFTWARE, THE USE OF WHICH IS LICENSED BY IMAGEWARE SYSTEMS, INC., TO
ITS CUSTOMERS FOR THEIR USE ONLY AS SET FORTH BELOW. THIS IS A LEGAL AGREEMENT
BETWEEN YOU AND IMAGEWARE SYSTEMS, INC. IF YOU DO NOT AGREE TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT, DO NOT USE THE SOFTWARE. USING ANY PART OF THE
SOFTWARE INDICATES THAT YOU ACCEPT THESE TERMS.

1.   GRANT OF LICENSE. ImageWare Systems, Inc. ("ImageWare") grants you a
nonexclusive, nontransferable, license to install and execute the accompanying
software program(s) (the "SOFTWARE") subject to the terms and restrictions set
forth in this License Agreement ("License"). If ImageWare is delivering the
SOFTWARE to you electronically via the internet, you are also entitled to
download the SOFTWARE to a single computer for use in accordance with this
Agreement. This License permits you to use one copy of the specified version of
the SOFTWARE on any single computer, provided the SOFTWARE is in use on only one
computer at any time. If you have multiple Licenses for the SOFTWARE, then at
any time you may have as many copies of the SOFTWARE in use as you have
Licenses. The SOFTWARE is "in use" on a computer when it is loaded into the
temporary memory (i.e., RAM) or installed into the permanent memory (e.g., hard
disk, CD-ROM or other storage device) of that computer, except that a copy
installed on a network server for the sole purpose of distribution to other
computers is not "in use". If the anticipated number of users of the SOFTWARE
will exceed the number of applicable Licenses, then you must have a reasonable
mechanism or process in place to assure that the number of persons using the
SOFTWARE concurrently does not exceed the number of Licenses. If the SOFTWARE,
or any component thereof, you have licensed is license on a limited concurrent
user model as evidenced by the quote or purchase order related to such license,
then only the number of concurrent users for which you have paid shall be
entitled to access and execute the SOFTWARE or relevant component thereof
throughout the user community to which you and ImageWare have agreed upon in
writing. You must use the ImageWare provided process in place to assure that the
number of concurrent users of the SOFTWARE does not exceed the number for which
you have paid.

2.   INTELLECTUAL PROPERTY RIGHTS. The SOFTWARE and the Intellectual Property
Rights related thereto are owned solely and exclusively by ImageWare or its
suppliers. "Intellectual Property Rights" collectively means any and all right,
title and interest in or to any and all patents, patent registrations, patent
applications, business processes, copyrights, data rights, trademarks, trade
names, service marks, service names, trade secrets, know how or other similar
right arising or enforceable under any U.S. law, the law of any other
jurisdiction, or any international treaty regime. This license confers no title
or ownership in the SOFTWARE and confers no rights whatsoever in any associated
source code or other intellectual property of ImageWare. Except for the limited
license set forth in Section 1, this License does not grant you any rights to
patents, copyrights, trade secrets, trademarks, or any other rights in respect
to the SOFTWARE, and all such rights are reserved by ImageWare or its suppliers.
Therefore, you must treat the SOFTWARE like any other copyrighted material
(e.g., a book or musical recording) except that you may either (a) make one copy
of the SOFTWARE solely for backup or archival purposes, or (b) transfer the
SOFTWARE to a single hard disk provided you keep the original solely for backup
or archival purposes. You must reproduce and include all copyright notices and
any other proprietary rights notices appearing on the SOFTWARE on any copies
that you make. You may not copy the written materials accompanying the SOFTWARE.

3.   EXPORT RESTRICTIONS AND COMPLIANCE WITH APPLICABLE LAW. You agree that you
will not export or re-export the SOFTWARE or accompanying documentation (or any
copies thereof) or any products utilizing the SOFTWARE or such documentation in
violation of any applicable laws or regulations of the United States or the
country in which you obtained them. You also agree to comply with all other
applicable laws and regulations governing the use of the SOFTWARE.

4.   OTHER RESTRICTIONS. This ImageWare License Agreement is your proof of
license to exercise the rights granted herein and must be retained by you. You
may not (i) modify, reproduce, copy, alter, improve or create derivative works
from the SOFTWARE, (ii) sublicense, rent, lease, distribute, loan, export other
otherwise transfer or provide access to the SOFTWARE to any third party, (iii)
reverse engineer, decompile, disassemble or otherwise attempt to derive the
source code of the SOFTWARE, or (iv) use the SOFTWARE to develop a product that
is similar to the SOFTWARE or to operate a service bureau of any kind.

                                      -20-
<Page>

5.   CONFIDENTIALITY. You acknowledge and agree that the structure, source code,
sequence and organization of the SOFTWARE are the valuable trade secrets and
confidential information of ImageWare and its suppliers. You agree to protect
such confidential information and trade secrets and prohibit the unauthorized
duplication, use or disclosure of such confidential information and trade
secrets. You also acknowledge and agree that the vector templates and full
templates generated by the SOFTWARE ("Templates") shall be treated with the same
care as other confidential information.

6.   LIMITED WARRANTY. ImageWare warrants that the SOFTWARE will perform
substantially in accordance with the accompanying written materials for a period
of forty-five (45) days after the date of receipt. Some states do not allow
limitations on duration of an implied warranty, so the above limitation may not
apply to you.

7.   CUSTOMER REMEDIES. ImageWare's entire liability and your exclusive remedy
shall be, at ImageWare's option, either (a) return of the price paid or (b)
repair or replacement of the SOFTWARE that does not conform to the limited
warranty set forth in Section 6 and that is returned to ImageWare with a copy of
your receipt. This Limited Warranty is void if failure of the SOFTWARE or
hardware has resulted from accident, abuse, or misapplication, or if a warranty
claim is received by ImageWare after the expiration of the forty-five (45) day
warranty period. Any replacement SOFTWARE will be warranted for the remainder of
the original warranty period or thirty (30) days, whichever is longer. NEITHER
THESE REMEDIES NOR ANY PRODUCT SUPPORT SERVICES OFFERED BY IMAGEWARE ARE
AVAILABLE FOR THIS U.S.A. VERSION PRODUCT OUTSIDE OF THE UNITED STATES OF
AMERICA.

8.   NO OTHER WARRANTIES. IMAGEWARE EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES,
EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
SOFTWARE, THE ACCOMPANYING WRITTEN MATERIALS, AND ANY ACCOMPANYING HARDWARE.
THIS LIMITED WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS. YOU MAY HAVE OTHERS WHICH
VARY FROM STATE TO STATE.

9.   NO LIABILITY FOR CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL IMAGEWARE OR ITS
SUPPLIERS BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT OR
EXEMPLARY DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF
BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION) ARISING
OUT OF THE USE OF OR INABILITY TO USE THIS IMAGEWARE PRODUCT, EVEN IF IMAGEWARE
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL THE TOTAL
LIABILITY OF IMAGEWARE AND ITS SUPPLIERS TO YOU OR ANOTHER PERSON OR ENTITY
ARISING FROM OR RELATED TO THIS AGREEMENT EXCEED ONE HUNDRED UNITED STATES
DOLLARS (US $100). BECAUSE SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION
OF LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES THE ABOVE LIMITATION MAY
NOT APPLY TO YOU.

10.  U.S. GOVERNMENT END USERS. The SOFTWARE is a "commercial item" as that term
is defined at 48 C.F.R. 2.101, consisting of "commercial computer software" and
"commercial computer software documentation" as such terms are used in 48 C.F.R.
12.212. Consistent with 48 C.F.R. 12.212 and 48 C.F.R. 227.7202-1 through
227.7202-4, all U.S. Government end users acquire the SOFTWARE with only those
rights set forth herein.

11.  TERM AND TERMINATION. This License is effective as of the date you agree to
its terms and remains in effect until terminated. You may terminate this License
at any time by destroying the SOFTWARE, documentation and Templates together
with all copies and merged portions in any form. This License will also
automatically terminate immediately if you fail to comply with any term or
condition of this License. Upon such termination you agree to destroy the
SOFTWARE and documentation, together with all copies and merged portions in any
form. Sections 2, 3, 4, 5, 8, 9, 10, 11, 12, 13 and 14 shall survive any
termination of this License.

12.  GOVERNING LAW. This license shall be governed by the laws of the State of
California and by the laws of the United States, excluding their conflicts of
laws principles. The United Nations Convention on Contracts for the
International Sale of Goods (1980) is hereby excluded in its entirety from
application to this License.

13.  SEVERABILITY. In the event any provision of this License is found to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
any of the remaining provisions shall not in any way be affected or impaired and
a valid, legal and enforceable provision of similar intent and economic impact
shall be substituted therefore.

14.  ENTIRE AGREEMENT. This license constitutes the entire agreement between the
parties with respect to the use of the SOFTWARE and related documentation and
supersedes all prior or contemporaneous agreements. No amendment or modification
of this license will be binding unless in writing and signed by a duly
authorized representative of ImageWare.

                                      -21-
<Page>

15.  ASSIGNMENT. You may not assign any of your rights or obligations, in whole
or in part, under this Agreement without the advance written consent of
ImageWare. Any assignment of this Agreement may require the payment of
additional license fees.

16.  THIRD PARTY SOFTWARE. If the ImageWare SOFTWARE requires use of any third
party software, it is your responsibility to legally obtain, either through
ImageWare or otherwise, a license to such third party software. If such third
party software is obtained through ImageWare and the licensor is Microsoft
Corporation ("Microsoft"), then the following applies to you: The Microsoft
products contained or referenced in the accompanying Microsoft software packages
or Microsoft license agreements have been integrated or pre-installed as part of
the ImageWare solution. Each Microsoft product is subject to its respective
Microsoft End User License Agreement contained in the accompanying software
packages or license agreements with the exception that the Microsoft product
functionality as integrated in the ImageWare solution may differ from a
nonintegrated Microsoft product and any issues concerning the functionality or
performance of the ImageWare solution and the Microsoft products should be
directed to ImageWare and not to Microsoft. Please be advised that if the
accompanying Microsoft product software package is in the form of a "Microsoft
License Pack," or a "Microsoft Open License" (as opposed to a full packaged
product), the right to make additional copies of the Microsoft product has
already been exercised by ImageWare in integrating or pre-installing the
Microsoft product in this solution. You may not, therefore, make additional
copies of the product pursuant to the Microsoft License Pak or the Microsoft
Open License notwithstanding any license terms in such document. YOU AGREE TO BE
BOUND BY THE TERMS OF THE MICROSOFT END USER LICENSE AGREEMENTS AND THIS
PARAGRAPH BY INSTALLING, COPYING, OR OTHERWISE USING THE MICROSOFT PRODUCTS. IF
YOU DO NOT AGREE, DO NOT INSTALL OR USE THE PRODUCT; YOU MAY RETURN IT TO YOUR
PLACE OF PURCHASE FOR A FULL REFUND.

                                      -22-
<Page>

                                  SCHEDULE 7.1

                                  LICENSE FEES
<Table>
<Caption>
DESCRIPTION                                 ITEM#                     1ST TO 10TH     11TH TO         26TH TO         51ST TO 100TH
                                                                      LICENSE         25TH            50TH            LICENSE
                                                                      ANNUALLY*       LICENSE         LICENSE         ANNUALLY*
                                                                                      ANNUALLY*       ANNUALLY*
<S>                                         <C>                         <C>             <C>              <C>           <C>
AUTOMATED FACIAL ALIGNMENT ENGINE           FaceIt - AFAE               [...***...]     [...***...]      [...***...]   [...***...]
FACE FIND COM OBJECT
INCLUDES FACE FINDING, EYE FINDING AND
IMAGE QUALITY EVALUATOR ENGINE              * the discounted price is based on all FaceIt - AFAE licenses sold during a 12
                                            month period not specifically per account  this is not an annual re-occurring
                                            cost

Image Quality Evaluator Engine              FaceIt - IQCEE             [...***...]
LICENSE FOR THIS CAPABILITY BY ITSELF
WHERE NO FACEFINDING OR EYE FINDING IS
PERFORMED

     IDENTIFICATION DATABASE LICENSES:
FaceIt Identification SDK COM Engine:
FACE RECOGNIZE COM OBJECT
INCLUDES TEMPLATE CREATION AND MATCHING                              FACE RECOGNIZE VERSION
ENGINE

                            DATABASE SIZE                                 C-I             C-II            C-III
                                Up to 500   FaceIt-DB-500              [...***...]      [...***...]      [...***...]
                              Up to 1,000   FaceIt-DB-1K               [...***...]      [...***...]      [...***...]
                              Up to 5,000   FaceIt-DB-5K               [...***...]      [...***...]      [...***...]
                             Up to 10,000   FaceIt-DB-10K              [...***...]      [...***...]      [...***...]
                             Up to 50,000   FaceIt-DB-50K              [...***...]      [...***...]      [...***...]
                            Up to 100,000   FaceIt-DB-100K             [...***...]      [...***...]      [...***...]
                            Up to 250,000   FaceIt-DB-250K             [...***...]      [...***...]      [...***...]
                            Up to 500,000   FaceIt-DB-500K             [...***...]      [...***...]      [...***...]
                          Up to 1,000,000   FaceIt-DB-1M               [...***...]      [...***...]      [...***...]

          DATABASE SIZE> 1,000,000
ENGINE PRICE FOR 1M PLUS ADDITIONAL FEE FOR RECORDS IN EXCESS OF 1M   PRICE PER TEMPLATE
AS SPECIFIED IN SCHEDULE BELOW:

                        500,000 Templates   FaceIt-TER-500K            [...***...]
                      1,000,000 Templates   FaceIt-TER-1M              [...***...]
                      2,500,000 Templates   FaceIt-TER-2.5M            [...***...]
                      5,000,000 Templates   FaceIt-TER-5M              [...***...]
</Table>

PRICING NOTES:
FACEIT DB COM ENGINE:
1) FaceIt DB COM engines comes in three grades C-I, C-II and C-III which have
identical search speeds and accuracy, but differ in the rate of queries that can
be processed per minute. C-I is designed to serve in a stand alone configuration
or a small number of clients (up to 2 queries per minute. C-II handles medium
load requirements (up to 5 queries per minute) and C-III is unlimited.
2) Prices of FaceIt AFAE and FaceIt IQCEE are per copy of COM, per CPU/Client.
3) Database Upgrades can be subsequently purchased for the incremental
difference in the prices indicated above.
4) For database sizes beyond 1 Million the price is determined by the price for
the engine for 1 Million plus the additional fee for records in access of 1M as
indicated in the schedule above.
5)The above pricing schedule is applicable solely for WIN32 Platform (Versions
also available in UNIX, pricing available upon request).

                                             ***Confidential Treatment Requested

                                      -23-
<Page>

ANNUAL MAINTENANCE FEES: Visionics maintenance is available on an annual basis
for an annual Maintenance Fee of [...***...] of the License Fees (after
discounts). Upgrades to the Licensed Technology shall only be provided to VAR or
a particular End-User, as applicable, if the applicable Maintenance Fees have
been paid to Licensor.

                                             ***Confidential Treatment Requested

                                      -24-QuickLinks
 -- Click here to rapidly navigate through this document

 
 

EXHIBIT 10.15(c)    
  

        SETTLEMENT AND PURCHASE AGREEMENT

        THIS
SETTLEMENT AND PURCHASE AGREEMENT, dated as of September 7, 2001 (this "Agreement"), is made by and among Microsoft
Corporation, a Washington corporation ("Microsoft"), MS Channel Initiatives Corp., a Nevada corporation and a wholly owned subsidiary of
Microsoft ("MSCI"), divine, inc., a Delaware corporation ("divine"), and
divine/Whittman-Hart, inc., an Illinois corporation and a wholly owned subsidiary of divine ("DWH"). 

        WHEREAS, each of marchFIRST, Inc., a Delaware corporation ("marchFIRST"), and
marchFIRST Consulting, Inc., a Delaware corporation and a wholly owned subsidiary of marchFIRST ("Consulting," and collectively with marchFIRST,
the "Debtors"), is a debtor and a debtor in possession in cases (the "Cases") filed in the United States
Bankruptcy Court for the District of Delaware under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") on April 12,
2001, which Cases were converted on April 27, 2001 to cases filed under Chapter 7 of Title 11 of the United States Code, which Cases were transferred to United States Bankruptcy
Court for the Northern District of Illinois, Eastern Division (such finally assigned court, the "Bankruptcy Court"); 

        WHEREAS, Microsoft and Consulting are parties to that certain Alliance Agreement dated as of April 1, 2000 (the
"Alliance Agreement"); 

        WHEREAS, Consulting is the maker of that certain loan agreement and unsecured promissory note in the amount of $12,000,000 in the favor of
MSCI dated July 5, 2000 (the "MSCI Note"); 

        WHEREAS, DWH desires to purchase the HostOne assets of marchFIRST and Consulting as set forth in that certain Asset Purchase Agreement
among marchFIRST, Consulting and DWH dated as of April 16, 2001, as amended (the "HostOne APA"), and marchFIRST and Consulting desire to sell,
convey, assign and transfer to DWH, the assets and properties set forth therein, all in the manner and subject to the terms and conditions set forth therein and in accordance with the Bankruptcy Code; 

        WHEREAS, DWH's agreement to enter into the HostOne APA is based upon Microsoft's and MSCI's agreement, by letter dated April 12,
2001, to waive any amounts outstanding or potential claims arising under the Alliance Agreement or the MSCI Note (the "Agreed Settlement"); and 

        WHEREAS, the parties desire to consummate the HostOne APA and the Agreed Settlement as promptly as practicable and concurrently with the
Bankruptcy Court's order approving the settlement of certain disputes between DWH and the Debtors becoming a final order (the "Settlement Order"). 

        NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth
herein and subject to the approval of the Bankruptcy Court, the parties hereby stipulate, consent and agree to the following terms and conditions: 

ARTICLE 1.

SETTLEMENT  

        SECTION
1.01    Settlement.    On the terms and subject to the conditions precedent set forth in this Agreement, at
the Closing, (a) the Alliance Agreement and the MSCI Note shall be terminated without payment or liability, (b) Microsoft's claims against or debts or other amounts outstanding owed by
either Debtor, divine or DWH to Microsoft or any of its Affiliates arising under the Alliance Agreement (including without limitation any such claims for royalty payments under Section 7 of the
Alliance Agreement, but excluding without limitation any claims against or debts or other amounts outstanding owed by either Debtor, divine or DWH to Microsoft or any of its Affiliates arising under
any other agreement (including without limitation any Microsoft Master Consulting Services Agreement, Microsoft Consulting Services Work Order, Microsoft Master Services Agreement, or Microsoft
Services Description for software support services)) shall be forever released, waived and discharged and (c) MSCI's claims against or debts or other amounts outstanding owed by either 

 

Debtor, divine or DWH to MSCI or any of its Affiliates arising under the MSCI Note shall be forever released, waived and discharged. 

        SECTION
1.02    Authorization of the Class A Common Stock.    At or prior to the Closing, divine shall
authorize the, and reserve for, issuance to Microsoft of up to Eight Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three (8,333,333) shares of its Class A Common Stock. Upon
issuance of shares pursuant to either Section 5.04(a) or Section 5.04(c)(i), divine's authorization and reservation for issuance of any unissued shares shall be rescinded. If the amount of
shares authorized and reserved for issuance hereunder is insufficient to comply with Section 5.04, divine hereby agrees to authorize and reserve for issuance such amount of shares of its
Class A Common Stock necessary to comply with Section 5.04. 

ARTICLE 2.

THE CLOSING  

        SECTION
2.01    Closing.    The consummation of the Agreed Settlement (the
"Closing") shall take place contemporaneously with the HostOne Closing. 

        SECTION
2.02    Deliveries at Closing.    

        (a)  At
the Closing, Microsoft and MSCI shall deliver to (i) DWH, the MSCI Note; (ii) divine and DWH, the officers' certificate set forth under Section 6.03(b);
and (iii) divine or DWH, as applicable, such other customary closing documents, instruments or certificates required to be delivered as a condition precedent to divine's and DWH's obligations
under this Agreement. 

        (b)  At
the Closing, divine shall deliver to Microsoft: (i) opinions of Latham & Watkins, dated as of the Closing, substantially in the forms of Exhibits A1 and
A2 attached hereto; (ii) an opinion of the General Counsel of divine, dated as of the Closing, substantially in the form of Exhibit B attached hereto; (iii) the officer's certificate set
forth under Section 6.02(e); and (iv) such other customary closing documents, instruments or certificates required to be delivered as a condition precedent to obligations of Microsoft or MSCI
under this Agreement. 

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF DIVINE  

        As a material inducement to Microsoft and MSCI to enter into this Agreement, divine hereby represents and warrants that: 

        SECTION
3.01    Organization and Corporate Power.    divine is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do business in every jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse
effect on the financial condition, operating results or assets of divine. divine possesses all requisite corporate power and authority necessary to carry out the transactions contemplated by this
Agreement. 

        SECTION
3.02    Authorization; No Breach.    

        (a)  The
execution, delivery and performance of each of the Transaction Agreements has been duly authorized by divine. The Transaction Agreements will each constitute a valid
and binding obligation of divine, enforceable in accordance with its respective terms. 

        (b)  The
execution and delivery by divine of the Transaction Agreements, the issuance of the Class A Common Stock hereunder and the fulfillment of and compliance with
the respective terms hereof and thereof by divine do not and will not as of the Closing (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute
a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon divine's or any subsidiary's 

2

 

capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any Governmental Authority pursuant to divine's Certificate of Incorporation or divine's
amended and restated bylaws, or any material law, statute, rule or regulation to which divine is subject, or any agreement, instrument, order, judgment or decree to which divine is subject,
except for any filings required after the date hereof under federal or state securities laws. 

        SECTION
3.03    Title to Shares.    Upon issuance in accordance with the terms hereof, the Class A Common Stock
to be issued hereunder will be duly and validly issued, fully paid, nonassessable, and Microsoft will have good and marketable title to such shares, free and clear of all liens, claims and
encumbrances of any kind, other than (a) transfer restrictions under federal and state securities laws and (b) liens, claims or encumbrances imposed due to the actions of Microsoft. 

        SECTION
3.04    Governmental Consent, etc.    Other than the filing of a registration statement (the
"Registration Statement") with the SEC to register the issuance of the Securities to Microsoft or Microsoft's resale of the Securities under the
Securities Act and the SEC's declaration of the Registration Statement's effectiveness, no permit, consent, approval or authorization of, or declaration to or filing with, any Governmental Authority
is required in connection with the execution, delivery and performance by divine of the Transaction Agreements, or the consummation by divine of any other transactions contemplated hereby. 

        SECTION
3.05    SEC Documents.    divine has timely filed all required reports, schedules, forms, statements and other
documents with the Securities and Exchange Commission (the "SEC") since December 31, 1999 (the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with requirements of the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be,
and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any
SEC Document has been revised or superseded by a later document filed with the SEC and publicly available prior to the date of this Agreement, none of the SEC Documents contains any untrue statement
of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The financial statements of divine included in
the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared
in accordance with U.S. generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial position of divine and its consolidated subsidiaries as of the dates thereof and the consolidated results of their
operation and cashflows for the periods then ending in accordance with GAAP (subject, in the case of the unaudited statements, to normal year end audit adjustments and the absence of footnotes).
Except as disclosed in financial statements included in the SEC Documents, neither divine nor any of its subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of divine and its consolidated subsidiaries or in the notes thereto and which can reasonably be expected to
have a material adverse effect on divine and its subsidiaries taken as a whole. 

        SECTION
3.06    Absence of Certain Changes or Events.    Since the date of the most recent audited financial
statements included in the filed SEC Documents, except as set forth in the SEC Documents filed since such date, divine has conducted its business only in the ordinary course, and there has not been
(i) any declaration, setting aside, or payment of any dividend or distribution (whether in cash, stock or property) with respect to any of divine's capital stock, (ii) any split, combination or 

3

 

reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock,
(iii) any damage, destruction or loss, whether or not covered by insurance, that has or is likely to have a material adverse effect on divine and its subsidiaries taken as a whole, or
(iv) any change in accounting methods, principles or practices by divine materially affecting its assets, liabilities, or business, except insofar as may have been required by a change in GAAP. 

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF MICROSOFT AND MSCI  

        As a material inducement to divine to enter into this Agreement and issue Class A Common Stock to Microsoft, each of Microsoft and MSCI hereby represents and
warrants to divine that: 

        SECTION
4.01    Organization and Corporate Power.    Microsoft is a corporation duly organized, validly existing and
in good standing under the laws of the State of Washington. MSCI is a corporation duly
organized, validly existing and in good standing under the laws of the State of Nevada. Each of Microsoft and MSCI possesses all requisite corporate power and authority necessary to carry out the
transactions contemplated by this Agreement. 

        SECTION
4.02    Authorization; No Breach.    The execution, delivery and performance of each of the Transaction
Agreements has been duly authorized by each of Microsoft and MSCI. This Agreement constitutes a valid and binding obligation of each of Microsoft and MSCI, enforceable in accordance with its terms as
of the Closing. 

        SECTION
4.03    Governmental Consent, etc.    No permit, consent, approval or authorization of, or declaration to or
filing with, any Governmental Authority is required in connection with the execution, delivery and performance by either Microsoft or MSCI of this Agreement or the consummation by either Microsoft or
MSCI of any other transactions contemplated hereby. 

        SECTION
4.04    Investment Representations.    

        (a)  Investment
Purpose. Microsoft is acquiring the Unregistered Securities, if at all, for its own account, not as a nominee or agent, for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution thereof. 

        (b)  Accredited
Investor Status. Microsoft is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D. 

        (c)  Reliance
on Exemptions. Microsoft understands that the Unregistered Securities are being offered and sold to it, if at all, in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and that divine is relying in part upon the truth and accuracy of, and Microsoft's compliance with, the representations,
warranties and agreements of Microsoft set forth herein in order to determine the availability of such exemptions and the eligibility of Microsoft to acquire the Unregistered Securities, if at all. 

        (d)  Information.
Microsoft has been furnished with all materials relating to the business, finances and operations of divine and materials relating to the issuance of the
Securities or the Unregistered Securities that have been requested by Microsoft. Microsoft has been afforded the opportunity to ask questions of divine. Microsoft understands that its investment in
the Securities or the Unregistered Securities involves a high degree of risk. Microsoft has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities or the Unregistered Securities. 

        (e)  No
Governmental Review. Microsoft understands that no Governmental Authority has passed on or made any recommendation or endorsement of the Securities or the
Unregistered Securities or the fairness or suitability of the investment in the Securities or the Unregistered 

4

 

Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities or the Unregistered Securities. 

        (f)    Transfer
or Resale. Microsoft understands that the Unregistered Securities have not been and are not being registered under the Securities Act or any state securities
laws except upon Microsoft's request pursuant to the Registration Rights Agreement, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder
or (B) sold in reliance on an exemption therefrom. In this regard, Microsoft represents that it is familiar with SEC Rule 144, and understands the resale limitations imposed thereby and
by the Securities Act. Microsoft is able to bear the economic risk of its investment in the Securities or the Unregistered Securities for an indefinite period of time. 

        (g)  Sophistication.
Microsoft is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, has knowledge and
experience in financial and business matters, knows of the high degree of risk associated with investments generally and particularly investments in the securities of companies in the development
stage, is capable of evaluating the merits and risks of an investment in the Securities or the Unregistered Securities and is able to bear the economic risk of an investment in the Securities or the
Unregistered Securities in the amount contemplated. Microsoft has adequate means of providing for its current financial needs and contingencies and will have no current or anticipated future needs for
liquidity which would be jeopardized by the investment in the Securities or the Unregistered Securities. Microsoft can afford a complete loss of its investment in the Securities or the Unregistered
Securities. 

        (h)  Further
Limitations of Disposition. Without in any way limiting the representations set forth above, Microsoft agrees not to make any disposition of all or any portion
of the Securities or the Unregistered Securities unless and until: 

          (i)  There
is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such
registration statement; or 

        (ii)  Microsoft
shall have notified divine of the proposed disposition and shall have furnished divine with a reasonably detailed statement of the circumstances surrounding
the proposed disposition. 

        SECTION
4.05    Microsoft and MSCI's Principal Place of Business.    Microsoft represents that its principal place of
business is One Microsoft Way, Redmond, Washington. 

ARTICLE 5.

COVENANTS  

        SECTION
5.01    Additional Matters.    Subject to the terms and conditions herein, each of the parties hereto agrees
to use all commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable, including under applicable laws and
regulations, to consummate and make effective the Agreed Settlement, including using all commercially reasonable efforts to obtain all necessary waivers, consents and approvals required under this
Agreement. 

        SECTION
5.02    Public Announcements.    The parties hereto shall consult with each other before issuing any press
release or making any public statement or other public communication with respect to the Transaction Agreements or the Agreed Settlement. The parties hereto shall not issue any such press release or
make any such public statement or public communication without the prior consent of the other party, which shall not be unreasonably withheld or delayed; provided,
however, that a party may, 

5

 

without the prior consent of the other party, issue such press release or make such public statement as may, upon the advice of counsel, be required by law or any listing agreement with any national
securities exchange. 

        SECTION
5.03    divine Alliance Agreement Amendment.    The parties hereto agree to use their respective best efforts
to amend the Alliance Agreement, dated as of January 28, 2000, by and between Microsoft, divine and Host Divine, Inc. in accordance with the terms specified on the term sheet attached
hereto as Exhibit D (or to otherwise specify in a written agreement), no later than October 31, 2001. 

        SECTION
5.04    Issuance of Class A Common Stock.    

        (a)  As
consideration of the agreements of Microsoft and MSCI in this Agreement, including without limitation Section 1.01, divine shall issue to Microsoft that number of
shares of divine's Class A Common Stock equal to a number determined by dividing $5,000,000 by the average closing price of the Class A Common Stock as publicly reported by the Nasdaq
National Market as of 4:00 p.m. Eastern Standard Time on the five (5) trading days prior to the Closing (the "Securities"), which such
Securities are deliverable to Microsoft pursuant to and in compliance with Section 5.04(b). 

        (b)  On
or before the ninetieth (90th) day following Closing at which the Acquired Assets are conveyed to DWH, divine shall deliver to Microsoft one or more
stock certificates evidencing the Securities to be issued to Microsoft pursuant to Section 5.04(a), registered in Microsoft's name. The Securities shall be either (i) issued under an effective
registration statement under the Securities Act or (ii) subject to an effective registration statement for resale under the Securities Act. 

        (c)  If
divine fails to deliver the Securities to Microsoft pursuant to and in compliance with Section 5.04(b), divine shall transfer to Microsoft, upon Microsoft's request
and as Microsoft's sole and exclusive remedy for breach of Section 5.04(b) as liquidated damages, either, as determined in the sole discretion of divine: 

          (i)  in
lieu of the issuance of the Securities, that number of shares of divine's Class A Common Stock equal to a number determined by dividing $6,250,000 by the
lesser of (X) the average closing price of the Class A Common Stock as publicly reported by the Nasdaq National Market as of 4:00 p.m. Eastern Standand Time on the five (5) trading days
prior to the ninetieth (90th) day following Closing or (Y) the average closing price of the Class A Common Stock as publicly reported by the Nasdaq National Market as of 4:00 p.m.
Eastern Standard Time on the five (5) trading days prior to the Closing (the "Unregistered Securities"); or 

        (ii)  in
lieu of the issuance of the Securities, $5,000,000 in immediately available funds. 

        (d)  The
Unregistered Securities shall not be registered under the Securities Act; provided, however, that if divine elects
delivery of the Unregistered Securities as Microsoft's liquidated damages, then, upon delivery of the Unregistered Securities to Microsoft, each of divine and Microsoft shall enter into the
Registration Rights Agreement. 

        SECTION
5.05    Registration Procedures.    If divine delivers the Securities pursuant to Section 5.04(b), then divine
shall have: 

        (a)  prepared
and filed with the SEC the Registration Statement with respect to the Securities and have caused the Registration Statement to become and shall cause the
Registration Statement to remain effective for the period of the distribution contemplated in Section 5.05(c) (provided that not less than five (5) days before filing the Registration
Statement or prospectus or any 

6

 

amendments or supplements thereto, divine will furnish to Microsoft's counsel copies of all such documents proposed to be filed, which documents will be subject to review of such counsel); 

        (b)  used
its reasonable best efforts to ensure that: (i) the Registration Statement and any amendment thereto and any prospectus forming part thereof and any
amendment or supplement thereto (and each report or other document incorporated therein by reference) complies in all material respects with the Securities Act and the Exchange Act and the respective
rules and regulations thereunder; (ii) the Registration Statement and any amendment thereto did not, when it became effective, and shall not, for so long as it remains effective, contain
an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) any prospectus
forming part of the Registration Statement, and any amendment or supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under which they were made, not misleading; 

        (c)  notified
Microsoft of the effectiveness of the Registration Statement filed hereunder and, for as long as it remains effective, it shall prepare and file with the SEC
such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to comply with the Securities Act; and, as may be necessary to keep
the Registration Statement effective for a period of either (i) not less than two years (subject to extension pursuant to Section 5.08) or, if the Registration Statement relates to an
underwritten offering, such period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of the Securities by an underwriter or
dealer or (ii) such shorter period as will terminate when all of the Securities have been disposed of in accordance with the intended methods of disposition by Microsoft or the underwriters, as
applicable (but in any event not before the expiration of any longer period required under the Securities Act), and to comply with the provisions of the Securities Act with respect to the disposition
of the Securities covered by the Registration Statement until such time as all of the Securities have been disposed of in accordance with the intended methods of disposition by Microsoft set forth in
the Registration Statement. 

        (d)  furnished
to Microsoft such number of copies of the Registration Statement, each amendment and supplement thereto, the prospectus(es) included in the Registration
Statement (including each preliminary prospectus) and such other documents as Microsoft may reasonably request in order to facilitate the disposition of the Securities owned by Microsoft; 

        (e)  notified,
and shall continue to notify, Microsoft, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in the Registration Statement, as then in effect, contains an untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading in light of the circumstances under which they were made, and, at the request of Microsoft, divine will prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of the Securities, such prospectus will not contain any untrue statement of a material fact or omit to state any fact necessary to make the statements therein
not misleading in light of the circumstances under which they were made (and Microsoft shall suspend the use of the prospectus until the requisite changes thereto have been made); 

        (f)    used
its reasonable best efforts to cause all the Securities to be listed on each securities exchange or market on which divine's Class A Common Stock is then
listed; 

        (g)  used
its reasonable best efforts to cause the Securities to be registered or qualified with or approved by such other governmental agencies or authorities in such
jurisdictions as may be necessary to consummate the disposition of the Securities; 

7

 

        (h)  provided
a transfer agent and registrar for all the Securities not later than the effective date of the Registration Statement; 

        (i)    entered
into such customary agreements (including underwriting agreements in customary form) and taken such other actions as are reasonably required in order to expedite
or facilitate the disposition of the Securities; 

        (j)    made
available for inspection by Microsoft, any underwriter participating in any disposition pursuant to the Registration Statement, and any attorney, accountant or
other agent retained by Microsoft or underwriter, all financial and other records, pertinent corporate documents and properties of divine, and cause divine's officers, directors, employees and
independent accountants to supply all information reasonably requested by Microsoft or any such underwriter, attorney, accountant or agent in connection with the Registration Statement; 

        (k)  otherwise
used and shall continue to use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and made and shall continue
to make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of divine's first full
calendar quarter after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder; 

        (l)    advised,
and shall continue to advise, Microsoft, promptly after divine receives notice or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of the Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if any such stop order shall be issued (and, if such stop order shall be issued, Microsoft shall suspend the use of the prospectus until it shall be
withdrawn); and 

        (m)  at
the request of the managing underwriters in connection with an underwritten offering, furnished on the date or dates provided for in the underwriting agreement
(i) an opinion of counsel, addressed to the underwriters and, if permitted by applicable professional standards, to Microsoft, covering such matters as such underwriters and Microsoft may
reasonably request, including such matters as are
customarily furnished in connection with an underwritten offering; and (ii) a letter or letters from divine's independent certified public accountants addressed to the underwriters and, if
permitted by applicable professional standards, to Microsoft, covering such matters as such underwriters or Microsoft may reasonably request, in which letter(s) such accountants shall state, without
limiting the generality of the foregoing, that they are independent certified public accountants within the meaning of the Securities Act and that in their opinion the financial statements and other
financial data of divine included in the Registration Statement, the prospectus(es), or any amendment or supplement thereto, comply in all material respects with the applicable accounting requirements
of the Securities Act. 

        Notwithstanding
any provision of this Section 5.05 to the contrary, divine shall not be required to amend or supplement a prospectus if such amendment of supplement would require
divine to disclose a material financing, acquisition or other transaction then being pursued by divine and the Executive Committee of divine's Board of Directors shall determine in good faith that
such disclosure is not in the best interests of divine or would interfere with such transaction; provided that divine shall give immediate notice thereof to Microsoft. 

        SECTION
5.06    Registration Expenses.    

        (a)  divine's
Expenses. All expenses incident to divine's performance of or compliance with this Agreement, including without limitation all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws, listing fees, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for divine and all independent
certified public 

8

 

accountants, underwriters (excluding discounts and commissions) and other Persons retained by divine shall be borne by divine. 

        (b)  Reimbursement.
In connection with the Registration Statement, divine will reimburse Microsoft for the reasonable fees and disbursements of one counsel chosen by
Microsoft. 

        (c)  Microsoft's
Expenses. Notwithstanding anything to the contrary contained herein, Microsoft shall bear and pay all underwriting discounts and commissions and transfer
taxes applicable to the Securities sold for its account. 

        SECTION
5.07    Indemnification.    

        (a)  By
divine. divine agrees to indemnify, to the extent permitted by law, Microsoft, its managers, officers and directors and each Person who controls Microsoft (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including without limitation, attorneys'
fees) ("Liabilities") caused by any untrue or alleged untrue statement of material fact contained in the Registration Statement, prospectus or
preliminary prospectus, or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any information furnished in writing to divine by Microsoft expressly for use therein or by Microsoft's failure to deliver a
copy of the Registration Statement or prospectus or any amendments or supplements thereto after divine has furnished Microsoft with a sufficient number of copies of the same. In connection with an
underwritten offering, divine shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of Microsoft. The payments required by this Section 5.07(a) will be made periodically during the course of the investigation or
defense, as and when bills are received or expenses incurred. 

        (b)  By
Microsoft. Microsoft shall furnish to divine in writing such information and affidavits as divine reasonably requests for use in connection with the Registration
Statement or prospectus and, to the extent permitted by law, shall indemnify divine, its directors and officers and each Person who controls divine (within the meaning of the Securities Act) against
any Liabilities resulting from any untrue or alleged untrue statement of material fact contained in the Registration Statement, prospectus or preliminary prospectus, or any amendment thereof or
supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so furnished in writing by Microsoft expressly for use in the Registration Statement or prospectus. 

        (c)  Procedure.
Any Person entitled to indemnification under this Section 5.07 shall (i) give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person's right to indemnification hereunder to the extent such failure has not prejudiced the
indemnifying party) and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such
claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be
subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such
claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. 

9

 

        (d)  Contribution.
To the extent any indemnification by an indemnifying party provided for in this Section 5.07 is prohibited or limited by law, the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Liabilities in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such
Liabilities, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 

        The
parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5.07 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 

        (e)  Other
Indemnification Provisions. The indemnification and contribution provided for in this Section 5.07 will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the transfer of securities. 

        SECTION
5.08    Underwritten Registrations.    No registration hereunder may be underwritten unless Microsoft
(a) agrees to sell the Securities on the basis provided in any underwriting arrangements approved by divine or any other Person or Persons entitled to approve such arrangements, and
(b) completes and executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents reasonably required under the terms of such
underwriting arrangements. Microsoft agrees that, upon receipt of any notice from divine of the happening of any event of the kind described in Section 5.05(e) above, Microsoft will forthwith
discontinue the disposition of the Securities pursuant to the Registration Statement until Microsoft's receipt of the copies of a supplemented or amended prospectus as contemplated by such Section
5.05(e). In the event divine shall give any such notice, the applicable time period mentioned in Section 5.05(c) during which the Registration Statement is to remain effective shall be extended
by the number of days during the period from and including the date of the giving of such notice pursuant to this Section 5.08 to and including the date when Microsoft shall have received the copies
of the supplemented or amended prospectus contemplated by Section 5.05(e). 

        SECTION
5.09    Adjustments Affecting the Securities.    divine will not take any action, or permit any change to
occur, with respect to its securities (i) which would materially and adversely affect the ability of Microsoft to have (A) the issuance of the Securities registered pursuant to the Registration
Statement pursuant to this Agreement or (B) the Securities subject to an effective registration statement for resale under the Securities Act or (ii) which would adversely affect the
marketability of the Securities in any such registration (including, without limitation, effecting a stock split or a combination of shares). 

ARTICLE 6.

CONDITIONS PRECEDENT  

        SECTION
6.01    Conditions Precedent to Obligation of the Parties .    The respective obligations of each party to
effect the Agreed Settlement shall be subject to the satisfaction of the following conditions: 

10

 

        (a)  the
Bankruptcy Court shall have entered the Settlement Order and such order shall be final and in full force and effect without any amendment or modifications thereto
and the Acquired Assets shall have been transferred to DWH; 

        (b)  there
shall be no injunction, order or decree of any nature of any court or government authority of competent jurisdiction that is in effect that prohibits or materially
restrains the consummation of the Agreed Settlement; and 

        (c)  no
statute, rule or regulation shall have been promulgated by any Governmental Authority that prohibits the consummation of the Agreed Settlement. 

        SECTION
6.02    Conditions Precedent to Obligation of Microsoft and MSCIs .    The obligation of Microsoft and MSCI to
effect the Agreed Settlement is subject to the satisfaction or waiver at or prior to the Closing of the following additional conditions: 

        (a)  the
representations and warranties of divine contained in Article 3, except for those stated to be made as of the date hereof, shall be true and correct in all material
respects at and as of the Closing as though then made, except to the extent of changes caused by the transactions expressly contemplated herein; 

        (b)  divine
shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with
by it on or before the Closing; 

        (c)  Microsoft
shall have received from Latham & Watkins, opinions, dated as of the Closing, substantially in the forms of Exhibits A1 and A2 attached hereto; 

        (d)  Microsoft
shall have received from the General Counsel of divine, an opinion, dated as of the Closing, substantially in the form of Exhibit B attached hereto; and 

        (e)  divine
shall deliver to Microsoft and MSCI an Officer's Certificate, stating that: (i) the conditions described in Sections 6.02(a) through (d) have been
satisfied or waived; (ii) except for the Registration Statement, divine has made all filings under all applicable federal and state securities laws necessary to consummate the transactions
contemplated by the Transaction Agreements in compliance with such laws; and (iii) all corporate and other proceedings required to be taken by such party in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing have been taken. 

        SECTION
6.03    Conditions Precedent to Obligation of divine and DWH .    The obligation of the divine and DWH to
effect the Agreed Settlement shall be subject to the satisfaction or waiver at or prior to the Closing of the following additional conditions: 

        (a)  the
representations and warranties of Microsoft and MSCI contained in Article 4, except for those stated to be made as of the date hereof, shall be true and
correct in all material respects at and as of the Closing as though then made, except to the extent of changes caused by the transactions expressly contemplated herein; and 

        (b)  Microsoft
and MSCI shall deliver to divine and DWH an Officer's Certificate, stating that: (i) the conditions described in Section 6.03(a) have been satisfied or
waived; (ii) Microsoft and MSCI have made all filings under all applicable federal and state securities laws necessary to consummate the transactions contemplated by the Transaction Agreements
in compliance with such laws; and (iii) all corporate and other proceedings required to be taken by such party in connection with the transactions contemplated hereby to be consummated at or
prior to the Closing have been taken. 

11

 

ARTICLE 7.

TERMINATION  

        SECTION
7.01    Termination.    This Agreement may be terminated: 

        (a)  by
mutual written agreement of the parties prior to the Closing; or 

        (b)  at
any time after the termination of the HostOne APA, by any party hereto. 

        SECTION
7.02    Effect of Termination.    If this Agreement is terminated under Section 7.01(b), written notice
thereof will forthwith be given to the other parties hereto. This Agreement will thereafter become void and have no further force and effect and, except for those provisions that expressly survive the
termination of this Agreement, all further obligations of the parties to each other under this Agreement will terminate without further obligation or liability of any such party to the other parties,
except that each party will return all documents, workpapers and other material of any other party relating to the Agreed Settlement, whether so obtained before or after the execution of this
Agreement, to the party furnishing the same, and all confidential information received by any party to this Agreement with respect to the business of any other party will be treated in accordance with
the applicable confidentiality agreements between the parties. 

ARTICLE 8.

INDEMNIFICATION  

        SECTION
8.01    Indemnification by divine.    In consideration of Microsoft's and MSCI's execution and delivery of
this Agreement and acquiring the Securities hereunder and in addition to all of divine's other obligations under this Agreement, divine shall defend, protect, indemnify and hold harmless Microsoft and
MSCI and all of their officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and
disbursements (the "Indemnified Liabilities"), incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to any
misrepresentation in or breach of any of the representations and warranties or any nonfulfillment or breach of any covenant or agreement on the part of divine under this Agreement, provided that
divine shall not be liable to an Indemnitee under this Section 8.01 for any liability if such liability is caused solely by such Indemnitee's fraud, willful misconduct or gross negligence or default
or breach under this Agreement. To the extent that the foregoing undertaking by divine may be unenforceable for any reason, divine shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities that is permissible under applicable law. 

        SECTION
8.02    Indemnification by Microsoft and MSCI.    In consideration of divine's execution and delivery of this
Agreement and all of divine's obligations under this Agreement, Microsoft and MSCI shall defend, protect, indemnify and hold harmless divine and all of its officers, directors, employees and agents
(including, without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "divine Indemnitees") from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such divine Indemnitee is a party to the action for which indemnification hereunder
is sought), and including reasonable attorneys' fees and disbursements (the "divine Indemnified Liabilities"), incurred by the divine Indemnitees or any
of them as a result of, or arising out of, or relating to any misrepresentation in or breach of any of the representations and warranties or any nonfulfillment or breach of any covenant or agreement
on the part of Microsoft and MSCI under this Agreement, provided that Microsoft and MSCI shall not be liable to a divine 

12

 

Indemnitee under this Section 8.02 for any liability if such liability is caused solely by such divine Indemnitee's fraud, willful misconduct or gross negligence or default or breach under this
Agreement. To the extent that the foregoing undertaking by Microsoft and MSCI may be unenforceable for any reason, Microsoft and MSCI shall make the maximum contribution to the payment and
satisfaction of each of the divine Indemnified Liabilities that is permissible under applicable law. 

ARTICLE 9.

GENERAL PROVISIONS  

        SECTION
9.01    Survival of Representations and Warranties.    The representation and warranties of divine and
Microsoft and MSCI contained in this Agreement shall survive the Closing of the applicable period set forth in this Section 9.01, and any and all claims and causes of action for indemnification under
Article 8 arising out of the inaccuracy or breach of any representation or warranty of divine or Microsoft and MSCI must be made prior to the termination of the applicable survival period. All
of the representations and warranties of divine and Microsoft and MSCI contained in this Agreement and any and all claims and causes of action for indemnification under Article 8 with respect
thereto shall terminate one (1) year after the Closing; provided, that (a) the representations and warranties of divine contained in
Sections 3.01, 3.02 and 3.03 and (ii) and the representations and warranties of Microsoft and MSCI contained in Sections 4.01, 4.02 and 4.03 shall survive indefinitely, it being understood that
in the event notice of any claim for indemnification under Section 8.01(a) or Section 8.02(a) shall have been given within the applicable survival period, the representations and
warranties that are the subject of such indemnification claim shall survive until such time as such claim is finally resolved. 

        SECTION
9.02    Notices.    All notices, claims, demands and other communications hereunder shall be in writing and
shall be deemed given upon (a) confirmation of receipt of a facsimile transmission, (b) confirmed delivery by a standard overnight carrier or when delivered by hand, or (c) the
expiration of three (3) business days after the day when mailed by registered or certified mail (postage prepaid, return receipt requested), addressed to the respective parties at the following
addresses (or such other address for a party as shall be specified by like notice): 

	(a)
	If
to divine or DWH, to

divine,
inc.

1301 North Elston Avenue

Chicago, Illinois 60622

Telecopy: 773-394-6603

Attention: Jude Sullivan, General Counsel

with
a copy (which shall not constitute notice) to: 

Latham &
Watkins

233 South Wacker Drive

Sears Tower — Suite 5800

Chicago, Illinois 60606

Telecopy: 312-993-9767

Attention: Mark D. Gerstein 

	(b)
	If
to Microsoft or MSCI, to 

Microsoft
Corporation

One Microsoft Way

Redmond, WA 98052

Telecopy:

Attention: Deputy General Counsel, Finance and Operations 

13

 

with
a copy (which shall not constitute notice) to: 

Preston
Gates & Ellis

701 Fifth Avenue, Suite 5000

Seattle, WA 98104-7078

Telecopy: 206-623-7022

Attention: Mark Barreca 

        SECTION
9.03    Descriptive Headings; Certain Terms.    The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references to "$" or dollars shall be to United States dollars and all references to "days" shall be
to calendar days unless otherwise specified. 

        SECTION
9.04    Entire Agreement, Assignment; Competing Agreements.    This Agreement (including the Exhibits,
schedules and the other documents and instruments referred to herein) (i) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them, with respect to the subject matter hereof, including any transaction between or among the parties hereto and (ii) shall not be assigned by operation of law or
otherwise; provided, however, that Microsoft and/or MSCI may assign all or part of its rights or obligations under this Agreement to one of its wholly
owned subsidiaries so long as Microsoft and/or MSCI, as applicable, remains liable for its obligations hereunder. 

        SECTION
9.05    Expenses.    Except as set forth in this Agreement, whether or not the Agreed Settlement is
consummated, all costs and expenses incurred in connection with this Agreement and the Agreed Settlement shall be paid by the party incurring such expenses. The foregoing shall not affect the legal
right, if any, that any party hereto may have to recover expenses from any other party that breaches its obligations hereunder. 

        SECTION
9.06    Amendment.    This Agreement and the Exhibits and Schedules hereto may not be amended except by an
instrument in writing signed on behalf of all the parties hereto. 

        SECTION
9.07    Waiver.    At any time prior to the Closing, the parties hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party. 

        SECTION
9.08    Counterparts; Effectiveness.    This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which shall constitute one and the same agreement. This Agreement shall become effective when each party hereto shall have received counterparts
thereof signed by all the other parties hereto. 

        SECTION
9.09    Severability; Parties of Interest.    If any provision of this Agreement or the application thereof to
any Person or circumstance is held invalid or unenforceable, the remainder of this Agreement, and the application of such provision to other Persons or circumstances, shall not be affected thereby,
and to such end, the provisions of this Agreement are agreed to be severable. Nothing in this Agreement, express or implied, is intended to confer upon any Person not a party to this Agreement any
rights or remedies of any nature whatsoever under or by reason of this Agreement. 

        SECTION
9.10    Further Assurances.    In addition to the provisions of this Agreement and the Registration Rights
Agreement, from time to time after the Closing, divine, DWH and Microsoft and MSCI will use commercially reasonable efforts to execute and deliver such other instruments of conveyance, transfer, or
assumption, as the case may be, and take such other action as may be reasonably required to implement the transactions contemplated hereby and thereby. 

14

 

        SECTION
9.11    Remedies.    Each holder of the Securities shall have all rights remedies set forth in the Transaction
Agreements and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law. 

        SECTION
9.12    Legends.    

        (a)  The
certificates evidencing the Unregistered Securities will include the legend set forth below, which Microsoft has read and understands: 

THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. 

        (b)  By
accepting the certificates bearing the aforesaid legend, Microsoft agrees, prior to any transfer of the Unregistered Securities represented by the certificates and
subject to the restrictions in Section 9.13, to give written notice to divine expressing its desire to effect such transfer and describing briefly the proposed transfer. Upon receiving such notice,
divine shall present copies thereof to its counsel and the following provisions shall apply: 

          (i)  subject
to Section 9.13, if, in the reasonable opinion of counsel to divine, the proposed transfer of such Unregistered Securities may be effected without
registration under the Securities Act and applicable state securities acts, divine shall promptly thereafter notify Microsoft, whereupon Microsoft shall be entitled to transfer such Unregistered
Securities, all in accordance with the terms of the notice delivered by Microsoft and upon such further terms and conditions as shall be required to ensure
compliance with the Securities Act and the applicable state securities acts, and, upon surrender of the certificate evidencing such Unregistered Securities, in exchange therefor, a new certificate not
bearing a legend of the character set forth above if such counsel reasonably believes that such legend is no longer required under the Securities Act and the applicable state securities acts; and 

        (ii)  subject
to Section 9.13, if, in the reasonable opinion of counsel to divine, the proposed transfer of such Unregistered Securities may not be effected without
registration under the Securities Act or the applicable state securities acts, a copy of such opinion shall be promptly delivered to Microsoft, and such proposed transfer shall not be made unless such
registration is then in effect. 

        (c)  divine
may, from time to time, make stop transfer notations in its records and deliver stop transfer instructions to its transfer agent to the extent its counsel
considers it necessary to ensure compliance with the Securities Act and the applicable state securities laws. 

ARTICLE 10.

DEFINITIONS  

        As used herein, the terms below shall have the following meanings. 

        "Acquired Assets" has the meaning set forth in the HostOne APA. 

        "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control
with such other Person. 

15

 

        "Agreed Settlement" has the meaning set forth in the Recitals. 

        "Agreement" has the meaning set forth in the Preamble. 

        "Alliance Agreement" has the meaning set forth in the Recitals. 

        "Bankruptcy Code" has the meaning set forth in the Recitals. 

        "Bankruptcy Court" has the meaning set forth in the Recitals. 

        "Cases" has the meaning set forth in the Recitals. 

        "Class A Common Stock" means divine's Class A Common Stock, par value $0.001 per share. 

        "Closing" has the meaning set forth in Section 2.01. 

        "Consulting" has the meaning set forth in the Recitals. 

        "Debtors" has the meaning set forth in the Recitals. 

        "divine" has the meaning set forth in the Preamble. 

        "divine Indemnified Liabilities" has the meaning set forth in Section 8.02. 

        "divine Indemnitees" has the meaning set forth in Section 8.02. 

        "DWH" has the meaning set forth in the Preamble. 

        "Exchange Act" has the meaning set forth in Section 3.05. 

        "GAAP" has the meaning set forth in Section 3.05. 

        "Governmental Authority" means any nation or government, any state or provincial or other political subdivision thereof, any province,
city or municipality, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, any governmental authority, agency, department, board, commission or instrumentality of
the United States, any State of the United States, or any political subdivision thereof, any government authority, agency, department, board, commission or instrumentality of the United States or any
political subdivision thereof and any tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory organization. 

        "HostOne APA" has the meaning set forth in the Recitals. 

        "HostOne Closing" has the meaning set forth in the HostOne APA. 

        "including" shall always be read as "including without limitation." 

        "Indemnified Liabilities" has the meaning set forth in Section 8.01. 

        "Indemnitees" has the meaning set forth in Section 8.01. 

        "Liabilities" has the meaning set forth in Section 5.07(a). 

        "marchFIRST" has the meaning set forth in the Recitals. 

        "Microsoft" has the meaning set forth in the Preamble. 

        "MSCI" has the meaning set forth in the Preamble. 

        "MSCI Note" has the meaning set forth in the Recitals. 

        "Person" means an individual, corporation, partnership, limited liability company, limited partnership, syndicate, person (including,
without limitation, a "Person" as defined in Section 

16

 

13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government. 

        "Registration Rights Agreement" means the registration rights agreement in the form attached hereto as Exhibit C. 

        "Registration Statement" has the meaning set forth in Section 3.04. 

        "SEC" has the meaning set forth in Section 3.05. 

        "SEC Documents" has the meaning set forth in Section 3.05. 

        "Securities" has the meaning set forth in Section 5.04(a). 

        "Securities Act" means the Securities Exchange Act of 1933, as amended. 

        "Settlement Order" has the meaning set forth in the Recitals. 

        "Transaction Agreements" means this Agreement and, if entered into, a subsequently entered into Registration Rights Agreement. 

        "Unregistered Securities" has the meaning set forth in Section 5.04(c)(i). 

        [Remainder
of page intentionally blank; next page is signature page] 

17

   
        IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on their behalf by their officers thereunto duly authorized, as of the date first above written. 

	

 	

MICROSOFT CORPORATION
	

 	

By:	

/s/  JEAN FRANCOIS HEITZ      
 a duly authorized signatory
	

 	

MS CHANNEL INITIATIVES CORP.
	

 	

By:	

/s/  JEAN FRANCOIS HEITZ      
 a duly authorized signatory
	

 	

DIVINE, INC.
	

 	

By:	

/s/  JUDE SULLIVAN      
 Name: Jude Sullivan

Title: Vice President
	

 	

DIVINE/WHITTMAN-HART, INC.
	

 	

By:	

/s/  JUDE SULLIVAN      
 Name: Jude Sullivan

Title: Vice President

S-1

   EXHIBIT A1

FORM OF OPINION OF LATHAM & WATKINS

WITH RESPECT TO

SETTLEMENT AND PURCHASE AGREEMENT  

        We have acted as special counsel to divine, inc., a Delaware corporation ("divine"), and in that capacity, we are furnishing this opinion to you pursuant to
Section 2.02(b)(i) of that certain Settlement and Purchase Agreement (the "S&P Agreement"), dated as of September 7, 2001, by and among Microsoft Corporation, a Washington corporation
("Microsoft"), MS Channel Initiatives Corp., a Nevada corporation ("MSCI"), divine and divine/Whittman-Hart, inc., an Illinois corporation. 

        As
such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of rendering the opinions expressed below, except where a
statement is qualified as to knowledge or awareness, in which case we have made no or limited inquiry as specified below. We have examined, among other things, the following: 

	(a)
	the
S&P Agreement;

	(b)
	divine's
Certificate of Incorporation, as amended to date; and

	(c)
	divine's
Bylaws, as amended to date. 

        With
your consent we have relied upon the foregoing and other certificates of officer(s) of divine and of public officials with respect to certain factual matters. We have not
independently verified such factual matters. Whenever a statement herein is qualified by "to our knowledge" or a similar phrase, it is intended to indicate that those attorneys in this firm who have
rendered legal services in connection with the transactions contemplated by the S&P Agreement do not have current actual knowledge of the inaccuracy of such statement. However, except as otherwise
expressly indicated, we have not undertaken any independent investigation to determine the accuracy of any such statement. 

        We
are opining herein as to the effect on the subject transaction only of the federal laws of the United States, the internal laws of the State of Illinois and the General Corporation
Law of Delaware (the "DGCL"), and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction and, in the case of Delaware, any other
laws, or as to any matters of municipal law or the laws of any other local agencies within any state. Our opinions set forth in paragraph 4 below are based upon our consideration of only those
statutes, rules and regulations which, in our experience, are normally applicable to private placements of securities and settlement agreements of the nature of the S&P Agreement. We express no
opinion herein as to the form of Registration Rights Agreement attached as an exhibit to the S&P Agreement. Our opinions with respect to the form of Registration Rights Agreement are set forth in a
separate opinion of even date herewith. 

        Subject
to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof: 

        1.    divine
is a corporation and is validly existing and in good standing under the laws of the State of Delaware with corporate power and authority to enter into the S&P
Agreement and perform its obligations thereunder. 

        2.    The
execution, delivery and performance of the S&P Agreement has been duly authorized by all necessary corporate action of divine, and the S&P Agreement has been duly
executed and delivered by divine. 

        3.    The
S&P Agreement constitutes a legally valid and binding obligation of divine, enforceable against divine in accordance with its terms. 

A-1

 

        4.    The
execution and delivery of the S&P Agreement by divine, and the consummation by divine of the transactions contemplated by the S&P Agreement, on the date hereof do
not: 

        (a)  violate
any federal or Illinois statute, rule or regulation applicable to divine or the DGCL, 

        (b)  violate
the provisions of divine's Certificate of Incorporation or Bylaws, each as amended to date, or 

        (c)  to
our knowledge, require any consents, approvals, authorizations, registrations, declarations or filings by divine under any federal or Illinois statute, rule or
regulation applicable to divine or the DGCL other than the filings contemplated by Section 5.04(b) of the S&P Agreement. No opinion is expressed in clauses (a) and (c) of this
paragraph 4 as to the application of Section 548 of the federal Bankruptcy Code and comparable provisions of state law or of any antifraud laws and state "blue sky" laws. 

        5.    The
shares of divine Class A Common Stock to be issued by divine pursuant to the S&P Agreement have been duly authorized and reserved and, when issued in
accordance with the terms of the S&P Agreement, will be validly issued, fully paid and non-assessable and free of statutory preemptive rights, and, upon issuance, will be free of any liens,
encumbrances or restrictions on transfer created by divine. 

        6.    Assuming
(a) the accuracy of the representations and warranties of divine and Microsoft set forth in the S&P Agreement and (b) the due performance by divine
and Microsoft of the covenants and agreements set forth in the S&P Agreement, the issuance of divine Class A Common Stock to Microsoft pursuant to the S&P Agreement, does not require
registration under the Securities Act of 1933, as amended, it being understood that we express no opinion as to any subsequent reoffer or resale of such shares. 

        The
opinions expressed in paragraph 3 above are further subject to the following limitations, qualifications and exceptions: 

        (a)  such
opinions are subject to the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors
generally; 

        (b)  enforceability
of the S&P Agreement is subject to the effect of general principles of equity, including without limitation concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific performance or injunctive relief regardless of whether considered in a proceeding in equity or at law; 

        (c)  the
unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect
to a liability where such indemnification is contrary to public policy; and 

        (d)  the
unenforceability under certain circumstances under law or court decisions of provisions providing for liquidated damages. 

        With
respect to our opinion in paragraph 5 above, we note that any subsequent resale or other transfer of shares of divine Class A Common Stock issued by divine pursuant to the
S&P Agreement will be subject to compliance with the Securities Act of 1933, as amended, and applicable state securities laws. 

        To
the extent that the obligations of divine may be dependent upon such matters, we assume for purposes of this opinion that: (i) all parties to the S&P Agreement other than
divine are duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation; (ii) all parties to the S&P Agreement other than divine
have the requisite corporate power and authority to execute and deliver the S&P Agreement and to perform their respective 

A-2

 

obligations under the S&P Agreement; (iii) the parties to the S&P Agreement other than divine have duly authorized, executed and delivered the S&P Agreement and the S&P Agreement constitutes
their legally valid and binding obligations, enforceable against them in accordance with their terms; and (iv) divine is not an "investment company" under the Investment Company Act of 1940, as
amended. We express no opinion as to (x) compliance by any parties to the S&P Agreement with any state or federal laws or regulations applicable to the subject transactions because of the nature of
their business or (y) the effect of federal or state antitrust laws. 

        Latham &
Watkins and certain members of Latham & Watkins, including persons counseling divine on this transaction, own beneficial interests in less than 1% of divine's
Class A Common Stock. 

        This
opinion is rendered only to you and is solely for your benefit in connection with the transactions covered hereby. This opinion may not be relied upon by you for any other purpose,
or furnished to, quoted to or relied upon by any other person, firm or corporation for any purpose, without our prior written consent. 

A-3

 
EXHIBIT A2

FORM OF OPINION OF LATHAM & WATKINS

WITH RESPECT TO

FORM OF REGISTRATION RIGHTS AGREEMENT  

        We have acted as special counsel to divine, inc., a Delaware corporation ("divine"), and in that capacity, we are furnishing this opinion to you pursuant to
Section 2.02(b)(i) of that certain Settlement and Purchase Agreement (the "S&P Agreement"), dated as of September 7, 2001, by and among Microsoft Corporation, a Washington corporation
("Microsoft"), MS Channel Initiatives Corp., a Nevada corporation ("MSCI"), divine and divine/Whittman-Hart, inc., an Illinois corporation. 

        As
such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of rendering the opinions expressed below, except where a
statement is qualified as to knowledge or awareness, in which case we have made no or limited inquiry as specified below. We have examined, among other things, the following: 

        (a)  the
S&P Agreement; 

        (b)  divine's
Certificate of Incorporation, as amended to date; 

        (c)  divine's
Bylaws, as amended to date; and 

        (d)  the
form of Registration Rights Agreement (the "Registration Rights Agreement," and, collectively with the S&P Agreement, the "Transaction Agreements"). 

        With
your consent we have relied upon the foregoing and other certificates of officer(s) of divine and of public officials with respect to certain factual matters. We have not
independently verified such factual matters. Whenever a statement herein is qualified by "to our knowledge" or a similar phrase, it is intended to indicate that those attorneys in this firm who have
rendered legal services in connection with the transactions contemplated by the Transaction Agreements do not have current actual knowledge of the inaccuracy of such statement. However, except as
otherwise expressly indicated, we have not undertaken any independent investigation to determine the accuracy of any such statement. 

        We
are opining herein as to the effect on the subject transaction only of the federal laws of the United States, the internal laws of the State of Illinois and the General Corporation
Law of Delaware (the "DGCL"), and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction and, in the case of Delaware, any other
laws, or as to any matters of municipal law or the laws of any other local agencies within any state. Our opinions set forth in paragraph 4 below are based upon our consideration of only those
statutes, rules and regulations which, in our experience, are normally applicable to private placements of securities of the nature of the Registration Rights Agreement. Subject to the
foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof: 

        1.    divine
has the corporate power and authority to enter into the Registration Rights Agreement and perform its obligations thereunder. 

        2.    The
execution, delivery and performance of the Registration Rights Agreement has been duly authorized by all necessary corporate action of divine. 

        3.    If
the Registration Rights Agreement were duly executed and delivered on the date hereof, it would constitute, a legally valid and binding obligation of divine,
enforceable against divine in accordance with its terms. 

        4.    If
the Registration Rights Agreement were executed and delivered by divine, and if the transactions contemplated by the Registration Rights Agreement were consummated by
divine on the date hereof, the Registration Rights Agreement would not: 

A-4

 

        (a)  violate
any federal or Illinois statute, rule or regulation applicable to divine or the DGCL, 

        (b)  violate
the provisions of divine's Certificate of Incorporation or Bylaws, each as amended to date, or 

        (c)  to
our knowledge, require any consents, approvals, authorizations, registrations, declarations or filings by divine under any federal or Illinois statute, rule or
regulation applicable to divine or the DGCL other than the filings contemplated by the Registration Rights Agreement. 

No
opinion is expressed in clauses (a) and (c) of this paragraph 4 as to the application of Section 548 of the federal Bankruptcy Code and comparable provisions of state law or of any
antifraud laws and state "blue sky" laws. 

        The
opinions expressed in paragraph 3 above are further subject to the following limitations, qualifications and exceptions: 

        (a)  such
opinions are subject to the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors
generally; 

        (b)  enforceability
of the Registration Rights Agreement is subject to the effect of general principles of equity, including without limitation concepts of materiality,
reasonableness, good faith and fair dealing
and the possible unavailability of specific performance or injunctive relief regardless of whether considered in a proceeding in equity or at law; and 

        (c)  the
unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect
to a liability where such indemnification is contrary to public policy. 

        To
the extent that the obligations of divine may be dependent upon such matters, we assume for purposes of this opinion that: (i) all parties to the Transaction Agreements other
than divine are duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation; (ii) all parties to the Transaction Agreements other
than divine have the requisite corporate power and authority to execute and deliver the Transaction Agreements and to perform their respective obligations under the Transaction Agreements;
(iii) the parties to the Transaction Agreements other than divine have duly authorized, executed and delivered the Transaction Agreements and the Transaction Agreements constitute their legally
valid and binding obligations, enforceable against them in accordance with their terms; and (iv) divine is not an "investment company" under the Investment Company Act of 1940, as amended; and
(v) the execution, delivery and performance of the Registration Rights Agreement has been duly authorized by all necessary corporate action of divine, and the Registration Rights Agreement has
been duly executed and delivered by divine. 

        We
express no opinion as to (x) compliance by any parties to the Registration Rights Agreement with any state or federal laws or regulations applicable to the subject transactions
because of the nature of their business or (y) the effect of federal or state antitrust laws. 

        We
advise you that you have requested this opinion with respect to an assumed state of affairs that may not be the case at the time of the execution, delivery or performance of the
Registration Rights Agreement and that, therefore, your future reliance upon this opinion may be of limited value and meaningfulness. We further advise you that, after the date of this opinion, among
other things: (i) the corporate, regulatory (including self-regulatory organization) and other statuses of the parties to the Transaction Agreements (including divine) and their securities may
change; (ii) the corporate power and authority of the parties to the Registration Rights Agreement (including divine) including their specific authority and that of their representatives to
enter into and consummate such agreement may change; (iii) the federal or Illinois statutes, rules or regulations applicable to divine or the DGCL or 

A-5

 

judicial interpretations thereof may change; (iv) the provisions of divine's Certificate of Incorporation or Bylaws, each as amended to date, may change; and (v) consents, approvals,
authorizations, registrations, declarations or filings by divine not required as of the date hereof under any federal, DGCL or Illinois statute, rule or regulation applicable to divine other
than the filings contemplated by the Transaction Agreements may be required. 

        Latham &
Watkins and certain members of Latham & Watkins, including persons counseling divine on this transaction, own beneficial interests in less than 1% of divine's
Class A Common Stock. 

        This
opinion is rendered only to you and is solely for your benefit in connection with the transactions covered hereby. This opinion may not be relied upon by you for any other purpose,
or furnished to, quoted to or relied upon by any other person, firm or corporation for any purpose, without our prior written consent. 

A-6

   EXHIBIT B

FORM OF OPINION OF GENERAL COUNSEL OF DIVINE  

        I am General Counsel of divine, inc., a Delaware corporation ("divine"), and in that capacity, I am furnishing this opinion to you pursuant to Section
2.02(b)(ii) of that certain Settlement and Purchase Agreement (the "S&P Agreement"), dated as of September 7, 2001, by and among Microsoft Corporation, a Washington corporation (the
"Purchaser"), MS Channel Initiatives Corp., a Nevada corporation, divine and divine/Whittman-Hart, inc., an Illinois corporation ("DWH"). 

        In
connection with this opinion, I, or other lawyers in divine's law department acting under my supervision, have examined the provisions of divine's Certificate of Incorporation and
Bylaws, as each is amended to date, the S&P Agreement and such other documents as I have deemed necessary as a basis for the opinions set forth below. 

        In
connection with this opinion, I have assumed the accuracy and completeness of all documents and records that I, or other lawyers in divine's law department acting under my
supervision, have reviewed, the genuineness of all signatures other than those on behalf of divine, the authenticity of the documents submitted to divine as originals and conformity to authentic
original documents of all documents submitted to divine as certified, conformed or reproduced copies. I have further assumed that: 

	(i)
	All
natural persons involved in the transaction contemplated by the S&P Agreement (the "Transaction") have sufficient legal capacity to enter into and
perform their respective obligations under the S&P Agreement and to carry out their roles in the Transaction.

	(ii)
	Each
party to the Transaction other than divine (collectively, the "Other Parties") has satisfied all legal requirements that are applicable to it to
the extent necessary to make the S&P Agreement enforceable against it.

	(iii)
	Each
of the Other Parties has complied with all legal requirements pertaining to its status as such status relates to its rights to enforce the S&P
Agreement against divine.

	(iv)
	The
conduct of the parties to the Transaction complies with any requirement of good faith, fair dealing and conscionability.

	(v)
	There
has not been any mutual mistake of fact or misunderstanding, fraud, duress or undue influence.

	(vi)
	All
statutes, judicial and administrative decisions, and rules and regulations of governmental agencies, applicable to this opinion, are
generally available to lawyers practicing in Illinois and are in a format that makes legal research reasonably feasible.

	(vii)
	The
Registration Rights Agreement has been duly executed and delivered by divine 

        In
rendering this opinion, as to questions of fact material to this opinion, I have relied to the extent I have deemed such reliance appropriate, without investigation, on certificates
and other communications from public officials and from divine's officers and on divine's representations set forth in the S&P Agreement. 

        Wherever
I indicate that my opinion with respect to the existence or absence of facts is based on my knowledge, my opinion is based solely on my current knowledge. The opinions set forth
below are subject to the following qualifications: 

	(i)
	the
effects of bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws affecting the rights and remedies of creditors
generally;

	(ii)
	the
effects of general principles of equity, whether applied by a court of law or equity, with respect to the performance and enforcement of the S&P
Agreement or the form of Registration Rights Agreement attached as an exhibit to the S&P Agreement (the "Registration Rights Agreement"), if executed and delivered on the date hereof; 

B-1

 

	(iii)
	I
express no opinion as to any of the following, or their effect: federal or state securities laws or antitrust laws; and

	(iv)
	the
unenforceability under certain circumstances under law or court decisions of provisions providing for liquidated damages. 

        Based
upon and subject to the foregoing and to the last paragraph of this letter, it is my opinion that: 

	1.
	divine
has all requisite corporate power and authority to own its properties and to carry on its business as now being conducted.

	2.
	Upon
the Closing, pursuant to the terms of the S&P Agreement, the shares of Class A Common Stock issued pursuant to the S&P Agreement will not be subject to any contractual,
preemptive rights with respect to the issuance of such Class A Common Stock, and the certificates representing the shares of Class A Common Stock purchased by the Purchaser at that
Closing will have been duly authorized.

	3.
	The
execution, delivery and consummation by divine of the S&P Agreement, the sale and issuance of the Class A Common Stock, and the fulfillment of and compliance with the
respective terms thereof by divine do not and will not, and the execution and delivery of the Registration Rights Agreement by divine, and the consummation by divine of the transactions contemplated
by the Registration Rights Agreement, if executed and delivered on the date hereof, would not, (A) violate, conflict with, or constitute a default under, (B) result in the creation of
any lien, mortgage, security interest, charge or other encumbrance upon divine's capital stock or assets pursuant to, or (C) result in a breach or termination of, constitute a default under or
give any third party the right to accelerate any obligation under any material agreement, instrument, order, judgment or decree to which divine is subject.

	4.
	divine
is not (i) an investment company or a company controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended, or (ii) a
holding company or a subsidiary company or an affiliate of a holding company within the meaning of the Public Utility Holding Company Act of 1935, as amended. 

        I
hereby confirm to you that based solely on my, or other lawyers in divine's law department acting under my supervision, review of our litigation docket, to my knowledge, other than a
Complaint at Law filed on May 1, 2001 by GlobalView Software, Inc. against DWH in the Circuit Court of Cook County, Illinois, County Department, Law Division (No. 01L05109), there are no
actions or proceedings against divine pending or overtly threatened in writing, before any court, governmental agency or arbitrator that (1) would effect divine's ability to consummate the
Transaction or (2) would have a material adverse impact on divine. 

        My
opinions expressed above are limited to the laws of the State of Illinois, the General Corporation Law of the State of Delaware, and the laws of the United States of America, and I do
not express any opinion herein concerning any other law. In addition, I express no opinion herein concerning any statutes, offices, administrative decisions, rules or regulations of any county,
town, municipality or special political subdivision (whether created or enabled through legislative action at the federal, state or regional level). This opinion is given as of the date hereof and I
assume no obligation to advise you of changes that may hereafter be brought to my attention. This opinion is solely for the information of the addressees hereof and is not to be quoted in whole or in
part or otherwise referred to, nor is it to be filed with any governmental agency or any other person without my prior written consent. No one other than the addressees hereof is entitled to rely on
this opinion. This opinion is rendered solely for the purposes of the Transaction and should not be relied upon for any other purpose. 

B-2

   EXHIBIT C

FORM OF REGISTRATION RIGHTS AGREEMENT  

C-1

 
 

Exhibit C    
  

REGISTRATION RIGHTS AGREEMENT  

        THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of            ,
 2001, by and among divine,
inc., a Delaware corporation (the "Corporation"), and Microsoft Corporation, a Washington corporation (the
"Purchaser"). 

        Pursuant
to that Settlement and S&P Agreement, dated as of the date hereof, by and among Microsoft and MS Channel Initiatives Corp., a Nevada corporation and a wholly owned subsidiary of
the Purchaser, the Corporation, and divine/Whittman-Hart, inc., an Illinois corporation and a wholly owned subsidiary of the Corporation (the "S&P
Agreement"), the other documents and instruments referred to therein and consummation of the transactions contemplated thereby, the Purchaser is acquiring shares of the
Corporation's Class A Common Stock, $0.001 par value per share (the "Class A Common Stock"). 

        In
order to induce the Purchaser to enter into the S&P Agreement and the other agreements contemplated thereby and to acquire the Class A Common Stock in the manner contemplated
thereby, the Corporation has agreed to provide the registration rights set forth in this Agreement. 

        Except
as otherwise indicated herein, capitalized terms used herein shall have the meanings set forth in Section 1 hereof. 

        Notwithstanding
anything to the contrary herein, this Agreement shall apply to all parties hereto only with respect to periods beginning upon the Closing of the HostOne APA (as defined
in the S&P Agreement). 

        To
the extent the S&P Agreement is terminated in accordance with its terms with respect to any party hereto, this Agreement shall have no further force and effect with respect to such
party. 

AGREEMENTS  

        In consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows: 

        SECTION
1.    Definitions.    As used in this Agreement. 

        "Class A Common Stock" means the Class A Common Stock, $0.001 par value per share of the Corporation. 

        "Class C Common Stock" means the Class C Common Stock, $0.001 par value per share, of the Corporation. 

        "Commission" means the United States Securities and Exchange Commission or any successor thereto. 

        "Common Stock" means, collectively, the Class A Common Stock and the Class C Common Stock. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, as the same shall be in effect from
time to time. 

        "Founders Shares" means at any time any shares of Class A Common Stock then outstanding which were sold by the Corporation prior to
the date hereof at a purchase price of $0.001 per share; provided that Founders Shares shall not include any shares which have been disposed of pursuant
to an effective registration statement under the Securities Act or sold pursuant to Rule 144. 

        "Other Registrable Shares" means shares of the Corporation's outstanding or issuable Class A Common Stock with respect to which the
holder thereof has a contractual registration right that is pari passu in order of priority to the Purchaser Registrable Shares, whether or not such agreement is entered into as of or after the date
of this Agreement, but excluding Founders Shares. 

 

        "Person" means an individual, corporation, partnership, limited liability company, limited partnership, syndicate, person (including,
without limitation, 

        a
"Person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision,
agency or instrumentality of a government. 

        "Public Offering" means any offering by the Corporation of its equity securities to the public pursuant to an effective registration
statement under the Securities Act. 

        "Purchaser Registrable Shares" means at any time any shares of Class A Common Stock then outstanding which were issued to the
Purchaser pursuant to the S&P Agreement; provided, however, that Purchaser Registrable Shares shall cease to be Purchaser Registrable Shares when such
Purchaser Registrable Shares have been (a) disposed of pursuant to an effective registration statement under the Securities Act, (b) sold or otherwise transferred in a transaction in
which the rights under the provisions of this Agreement have not been properly assigned, or (c) sold pursuant to Rule 144. For purposes of this Agreement, a Person will be deemed to be a
holder of Purchaser Registrable Shares whenever such Person has the then-existing right to acquire such Purchaser Registrable Shares, whether or not such acquisition actually has been effected.
Subject to the foregoing, Purchaser Registrable Shares shall continue to constitute Purchaser Registrable Shares in the hands of any permitted transferee of the Purchaser. 

        "Rule 144" means Rule 144 (including Rule 144(k)) of the Commission under the Securities Act or any similar provision
then in force under the Securities Act. 

        "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, as the same shall be in effect from time to
time. 

        SECTION
2.    Piggyback Registration.    

        2.1    Right to Piggyback.    Whenever the Corporation proposes to register Common Stock under the Securities Act
(other than pursuant to a registration statement filed on Form S-8 or Form S-4, or any successor forms, or otherwise filed in connection with a merger, acquisition, exchange offer or other business
combination transaction or an offering of securities solely to the Corporation's existing security holders or employees) whether for sale on its own account or pursuant to a demand for registration by
other holders of shares of Common Stock, and the registration form to be used may be used for the registration of any Purchaser Registrable Shares (a "Piggyback
Registration"), the Corporation will give prompt written notice to all holders of the Purchaser Registrable Shares of its intention to effect such a registration and will
include in such registration all Purchaser Registrable Shares (subject to, and in accordance with, the priorities set forth in Sections 2.2 and Section 2.3 below) with respect to which the Corporation
has received written requests for inclusion within twenty (20) days after the Corporation's notice. Notwithstanding the foregoing, if a Piggyback Registration is not an underwritten registration, the
Corporation shall not be required to include any Purchaser Registrable Shares held by any Person in such Piggyback Registration if such Person at the time of the filing of the registration statement
for such Piggyback Registration would be permitted to sell all of the Purchaser Registrable Shares held by such Person, without registration, pursuant to Rule 144. 

        2.2    Priority on Non-Demand Registrations.    If a Piggyback Registration is an underwritten registration on behalf
of the Corporation that does not constitute a "demand" registration required pursuant to an agreement with the Corporation, and the managing underwriters advise the Corporation in writing that in
their opinion the number of shares of Common Stock requested to be included in such registration exceeds the number which can be marketed (a) at a price per share reasonably related to the
then-current market value per share of the Common Stock, and (b) without materially and adversely affecting the entire offering, the Corporation will include in such registration up to the
amount determined advisable by the underwriters: 

2

 

          (i)  first,
the shares of Common Stock that the Corporation proposes to sell; 

        (ii)  second,
the Purchaser Registrable Shares and the Other Registrable Shares requested to be included in such registration, pro rata among the holders of such Purchaser
Registrable Shares and Other Registrable Shares based on the number of shares of Common Stock requested to be included in such registration by the holders thereof; and 

        (iii)  third,
any other shares of Common Stock held by stockholders of the Corporation which are not Other Registrable Shares (including the Founders Shares), requested to be
included in such registration, pro rata among the holders of such other shares on the basis of the number of shares which are owned by such holders and requested to be included in such registration,
or otherwise pursuant to any contractual registration rights applicable to such shares. 

        2.3    Priority on Demand Registrations.    If a Piggyback Registration is an underwritten registration pursuant to a
demand for registration (other than a Demand Registration under Section 3 hereof, the priority of which will be governed by Section 3.4 below) by holders of Other Registrable Shares and the managing
underwriters advise the Corporation in writing that in their opinion the number of shares of Common Stock requested to be included in such registration exceeds the number which can be marketed
(a) at a price per share reasonably related to the then-current market value per share of the Common Stock, and (b) without materially and adversely affecting the entire offering, the
Corporation will include in such registration up to the amount determined advisable by the underwriters: 

          (i)  first,
(A) the shares of Common Stock requested to be included therein by the holders of Other Registrable Shares on behalf of whom such registration has been
initially requested; (B) the Purchaser Registrable Shares requested to be included in such registration by the holders of Purchaser Registrable Shares hereunder; and (C) any securities
that the Corporation proposes to sell, pro rata, among the parties in clauses (A), (B) and (C) based on the number of shares of Common Stock requested to be included in such registration
by the holders thereof; and 

        (ii)  second,
any other shares of Common Stock held by stockholders of the Corporation which are not entitled to be pari passu with the Purchaser Registrable Shares with
respect to such registration (including the Founders Shares), requested to be included in such registration, pro rata among the holders of such other shares on the basis of the number of shares which
are owned by such holders and requested to be included in such registration, or otherwise pursuant to any contractual registration rights applicable to such shares. 

        Without
limiting this Section 2.3 or Section 2.2, (i) no Founders Shares shall be included in an underwritten registration by the Corporation unless all of the Purchaser
Registrable Shares requested to be included in such registration pursuant to this Agreement are permitted to be included in such registration, and (ii) no shares of Common Stock (including
Founders Shares) held by executive officers of the Corporation shall be included in an underwritten registration if the managing underwriters advise the Corporation that the inclusion of shares of
Common Stock held by executive officers of the Corporation will adversely affect the offering. 

        2.4    Right to Terminate Registration.    The Corporation shall have the right to withdraw any registration initiated
by it under this Section 2 prior to the effectiveness of such registration whether or not any holder of its securities has elected to include securities in such registration. 

        SECTION
3.    Demand Registrations.    

        3.1    Requests for Registration.    The holders of the outstanding Purchaser Registrable Shares may require the
Corporation to effect a maximum of two (2) registrations under the Securities Act and the securities laws of any states reasonably designated by the holders for an offering to be made on a
delayed or
continual basis pursuant to Rule 415 under the Securities Act (a "Demand Registration") of all or any portion of its Purchaser Registrable
Shares. The request for a Demand Registration shall 

3

 

specify the approximate number of Purchaser Registrable Shares requested to be registered, the anticipated per share price range for such offering and whether the offering shall be underwritten by a
nationally recognized investment bank. 

        3.2    [Intentionally Omitted]    

        3.3    Short-Form Registrations.    Demand Registrations will be made on a Form S-3 Registration Statement or any
similar short form registration statement whenever the Corporation is permitted to use any such applicable short form and shall be underwritten by a nationally recognized investment bank designated
pursuant to Section 3.6 at the Purchaser's option; provided, that the Corporation's ineligibility to use such applicable short form shall not excuse its obligations hereunder to the holders of
the Purchaser Registrable Shares. 

        3.4    Priority on Demand Registrations.    The Corporation will not include in any Demand Registration any securities
which are not Purchaser Registrable Shares (except for Other Registrable Shares) without the prior written consent of the holders of a majority of the Purchaser Registrable Shares. 

        3.5    Restrictions on Demand Registrations.    The Corporation will not be obligated to effect any Demand
Registration within six months after the effective date of a previous Demand Registration. The Corporation may postpone for up to ninety (90) days (but not more than once in a nine (9) month
period) the filing or the effectiveness of a registration statement for a Demand Registration if the Corporation's board of directors determines that such Demand Registration is reasonably likely to
have an adverse effect on any proposal or plan by the Corporation or any of its subsidiaries to engage in any acquisition of assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or any other material financing or transaction; provided that, in such event, the holders of Purchaser Registrable Shares
initially requesting such Demand Registration will be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration will not count as one of the Demand Registrations
hereunder and the Corporation will pay all Registration Expenses in connection with such withdrawn registration. 

        3.6    Selection of Underwriters.    The holders of a majority of the Purchaser Registrable Shares initially
requesting registration will have the right to approve (which approval will not be unreasonably withheld) the investment banker(s) and manager(s) selected by the Corporation's board of directors to
administer the offering. 

        SECTION
4.    Registration Procedures.    Whenever the holders of Purchaser Registrable Shares have requested that any
Purchaser Registrable Shares be registered pursuant to this Agreement, the
Corporation will use its reasonable best efforts to effect the registration and sale of such Purchaser Registrable Shares in accordance with the intended method of disposition thereof, and, pursuant
thereto, the Corporation will as expeditiously as reasonably possible: 

        (a)  prepare
and file with the Commission not later than thirty (30) days (and, notwithstanding the foregoing, any registration made pursuant to the proviso in Section 3.3
shall be prepared and filed with the Commission as soon as is reasonably practicable, but not less than sixty (60) days after the Demand Registration shall have been requested) following the
Corporation's receipt of the request for a Demand Registration pursuant to Section 3.1 hereof a registration statement with respect to such Purchaser Registrable Shares and thereafter use its
reasonable best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby, determined as hereinafter provided (provided that
not less than five (5) days before filing a registration statement or prospectus or any amendments or supplements thereto with respect to a Demand Registration, the Corporation will furnish to
the counsel selected by the holders of a majority of the Purchaser Registrable Shares initiating such registration statement copies of all such documents proposed to be filed, which documents will be
subject to review of such counsel); 

4

 

        (b)  use
its reasonable best efforts to ensure that: (A) any registration statement and any amendment thereto and any prospectus forming part thereof and any amendment
or supplement thereto (and each report or other document incorporated therein by reference) complies in all material respects with the Securities Act and the Securities Exchange Act of 1934, as
amended, and the respective rules and regulations thereunder; (B) any registration statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (C) any prospectus forming part of any
registration statement, and any amendment or supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading; 

        (c)  notify
each holder of Purchaser Registrable Shares of the effectiveness of each Registration Statement filed hereunder and prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to comply with the Securities Act; and, with respect to Demand
Registrations, as may be necessary to keep such registration statement effective for a period of either (i) not less than six months (subject to extension pursuant to Section 8) or, if such
registration statement relates to an underwritten offering, such period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of
Purchaser Registrable Shares by an underwriter or dealer or (ii) such shorter period as will terminate when all of the securities covered by such registration statement have been disposed of in
accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement (but in any event not before the expiration of any longer period required
under the Securities Act), and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of
such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; 

        (d)  furnish
to each seller of Purchaser Registrable Shares such number of copies of such registration statement, each amendment and supplement thereto, the prospectus(es)
included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Purchaser
Registrable Shares owned by such seller; 

        (e)  notify
each seller of such Purchaser Registrable Shares, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such registration statement, as then in effect, contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading in light of the circumstances under which they were made, and, at the request of any such seller, the Corporation will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such Purchaser Registrable Shares, such prospectus will not contain any untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading in light of the circumstances under which they were made (and such sellers shall suspend the use of the prospectus until the requisite
changes thereto have been made); 

        (f)    use
its reasonable best efforts to cause all such Purchaser Registrable Shares to be listed on each securities exchange or market on which the Common Stock is then
listed; 

        (g)  use
its reasonable best efforts to cause such Purchaser Registrable Shares to be registered or qualified with or approved by such other governmental agencies or
authorities in such jurisdictions as may be necessary to consummate the disposition of such Purchaser Registrable Shares; 

5

 

        (h)  provide
a transfer agent and registrar for all such Purchaser Registrable Shares not later than the effective date of such registration statement; 

        (i)    enter
into such customary agreements (including underwriting agreements in customary form) and take such other actions as are reasonably required in order to expedite or
facilitate the disposition of such Purchaser Registrable Shares; 

        (j)    make
available for inspection by any seller of Purchaser Registrable Shares, any underwriter participating in any disposition pursuant to such registration statement,
and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Corporation, and cause the
Corporation's officers, directors,
employees and independent accountants to supply all information reasonably requested by any such seller or underwriter, attorney, accountant or agent in connection with such registration statement; 

        (k)  otherwise
use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Corporation's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; 

        (l)    advise
each seller of such Purchaser Registrable Shares, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if any such stop order shall be issued (and, if such stop order shall be issued, such sellers shall suspend the use of the prospectus until it
shall be withdrawn); and 

        (m)  at
the request of the managing underwriters in connection with an underwritten offering, furnish on the date or dates provided for in the underwriting agreement
(i) an opinion of counsel, addressed to the underwriters and, if permitted by applicable professional standards, to the sellers of Purchaser Registrable Shares, covering such matters as such
underwriters and sellers may reasonably request, including such matters as are customarily furnished in connection with an underwritten offering; and (ii) a letter or letters from the
independent certified public accountants of the Corporation addressed to the underwriters and, if permitted by applicable professional standards, to the sellers of Purchaser Registrable Shares,
covering such matters as such underwriters or sellers may reasonably request, in which letter(s) such accountants shall state, without limiting the generality of the foregoing, that they are
independent certified public accountants within the meaning of the Securities Act and that in their opinion the financial statements and other financial data of the Corporation included in the
registration statement, the prospectus(es), or any amendment or supplement thereto, comply in all material respects with the applicable accounting requirements of the Securities Act. 

        Notwithstanding
any provision of this Section 4 to the contrary, the Corporation shall not be required to amend or supplement a prospectus if such amendment of supplement would require
the Corporation to disclose a material financing, acquisition or other transaction then being pursued by the Corporation and the Executive Committee of the Board of Directors of the Corporation shall
determine in good faith that such disclosure is not in the best interests of the Corporation or would interfere with such transaction; provided that the Corporation shall give immediate notice thereof
to holders of Purchaser Registrable Shares. 

        For
purposes of Section 4(a) and Section 4(b), the period of distribution of Purchaser Registrable Shares in a firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Purchaser Registrable Shares in any other registration shall be deemed
to extend until 

6

 

the earlier of (i) the sale of all Purchaser Registrable Shares covered thereby and (ii) the end of the period of distribution for the holders of its shares of Common Stock on whose
behalf the registration has been made. 

        SECTION
5.    Registration Expenses.    

        5.1    Corporation's Expenses.    All expenses incident to the Corporation's performance of or compliance with this
Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, listing fees, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Corporation and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by
the Corporation (all such expenses being herein called "Registration Expenses") shall be borne by the Corporation. 

        5.2    Reimbursement.    In connection with each Demand Registration, the Corporation will reimburse the holders of
Purchaser Registrable Shares covered by such registration for the reasonable fees and disbursements of one counsel chosen by the holders of a majority of the Purchaser Registrable Shares initially
requesting such registration. In connection with each Demand Registration and each Piggyback Registration, the Corporation shall reimburse the holders of Purchaser Registrable Shares included in such
registration for the reasonable fees and disbursements of each additional counsel retained by any holder of Purchaser Registrable Shares for the purpose of rendering any legal opinion required by the
Corporation or the managing underwriter(s) to be rendered on behalf of such holder in connection with any underwritten Demand Registration or Piggyback Registration. 

        5.3    Holder's Expenses.    Notwithstanding anything to the contrary contained herein, each holder of Purchaser
Registrable Shares shall bear and pay all underwriting discounts and commissions and transfer taxes applicable to the Purchaser Registrable Shares sold for such holder's account. 

        SECTION
6.    Indemnification.    

        6.1    By the Corporation.    The Corporation agrees to indemnify, to the extent permitted by law, each holder of
Purchaser Registrable Shares, its managers, officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses (including without limitation, attorneys' fees) ("Liabilities") caused by any untrue or alleged untrue statement of material fact contained
in any registration statement, prospectus or preliminary prospectus, or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Corporation by such holder
expressly for use therein or by such holder's
failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Corporation has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Corporation shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Purchaser Registrable Shares. The payments required by this Section 6.1 will be made
periodically during the course of the investigation or defense, as and when bills are received or expenses incurred. 

        6.2    By Each Holder.    In connection with any registration statement in which a holder of Purchaser Registrable
Shares is participating, each such holder shall furnish to the Corporation in writing such information and affidavits as the Corporation reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law, shall indemnify the Corporation, its directors and officers and each Person who controls the Corporation (within the meaning
of the Securities Act) against any Liabilities resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus, 

7

 

or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder expressly for use in such registration statement or
prospectus; provided that the obligation to indemnify under this Section 6.2 or to contribute under Section 6.4 below will be several, not
joint and several, among such holders of Purchaser Registrable Shares, and the liability of each such holder of Purchaser Registrable Shares under this Section 6.2 and under Section 6.4
shall be limited to the net amount received by such holder from the sale of Purchaser Registrable Shares pursuant to such registration statement. 

        6.3    Procedure.    Any Person entitled to indemnification hereunder shall (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person's right to indemnification hereunder to
the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim. 

        6.4    Contribution.    To the extent any indemnification by an indemnifying party provided for in this Section 6 is
prohibited or limited by law, the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such
Liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such
Liabilities,
as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 

        The
parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6.4 were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the immediately preceding paragraph; provided that the limits in the final proviso of Section 6.2 shall apply to this
Section 6.4. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. 

        6.5    Other Indemnification Provisions.    The indemnification and contribution provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will
survive the transfer of securities. 

        SECTION
7.    Compliance with Rule 144.    So long as the Corporation (a) has registered a class of
securities under Section 12 of the Exchange Act, or (b) files reports under Section 13 or 15(d) of the Exchange Act, then at the request of any holder who proposes to sell securities in
compliance with Rule 144 of the Commission, the Corporation will (i) forthwith furnish to such holder, upon request, a 

8

 

written statement of compliance with the filing requirements of the Commission as set forth in Rule 144, as such rule may be amended from time to time, and (ii) use its
reasonable best efforts to make available to the public and such holders such information as will enable the holders to make sales pursuant to Rule 144. 

        SECTION
8.    Participation in Underwritten Registrations.    No Person may participate in any registration hereunder
which is underwritten unless such Person (a) agrees to sell its shares of Common Stock on the basis provided in any underwriting arrangements approved by the Corporation or any other Person or
Persons entitled to approve such arrangements, and (b) completes and executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangements. Each Person that is participating in any registration hereunder agrees that, upon receipt of any notice from the
Corporation of the happening of any event of the kind described in Section 4(e) above, such Person will forthwith discontinue the disposition of its Purchaser Registrable Shares pursuant to the
registration statement until such Person's receipt of the copies of a supplemented or amended prospectus as contemplated by such Section 4(e). In the event the Corporation shall give any such notice,
the applicable time period mentioned in Section 4(c) during which a registration statement is to remain effective shall be extended by the number of days during the period from and including
the date of the giving of such notice pursuant to this Section 8 to and including the date when each seller of Purchaser Registrable Shares
covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 4(e). 

        SECTION
9.    Holdback Agreements.    Each holder of Purchaser Registrable Shares agrees not to effect any public sale
or distribution of equity securities of the Corporation or any securities convertible into or exchangeable or exercisable for such securities during the seven (7) days prior to and during the
ninety (90) days following the effective date of any underwritten Public Offering (except as part of such underwritten registration) unless the underwriters managing the Public Offering otherwise
agree to a shorter period and unless any of the holders of Founders Shares, directors, officers and/or 5% shareholders of the Corporation are subject to a shorter period. Each holder of Purchaser
Registrable Shares agrees to enter into customary lock-up agreements consistent with the foregoing if requested by any underwriter of any such Public Offering. 

        SECTION
10.    Miscellaneous.    

        10.1    Assignment of Registration Rights.    The registration rights of any Purchaser under this Agreement with
respect to any Purchaser Registrable Shares may be assigned to any Person who acquires such Purchaser Registrable Shares; provided that (a) the assigning Purchaser shall give the Corporation
notice at or prior to the time of such assignment stating the name and address of the assignee and identifying the shares with respect to which the rights under this Agreement are being assigned;
(b) such assignee shall agree in writing, in form and substance reasonably satisfactory to the Corporation, to be bound as a Purchaser by the provisions of this Agreement; and
(c) immediately following such assignment the further disposition of such securities by such assignee is restricted under the Securities Act. 

        10.2    No Inconsistent Agreements.    The Corporation is not a party to and will not hereafter enter into any
agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Purchaser Registrable Shares in this Agreement. 

        10.3    Adjustments Affecting Purchaser Registrable Shares.    The Corporation will not take any action, or permit any
change to occur, with respect to its securities which would materially and adversely affect the ability of the holders of Purchaser Registrable Shares to include such Purchaser Registrable Shares in a
registration undertaken pursuant to this Agreement or which would adversely affect the marketability of such Purchaser Registrable Shares in any such registration (including, without limitation,
effecting a stock split or a combination of shares). 

9

 

        10.4    Successors and Assigns.    Except as otherwise expressly provided herein, all covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the
benefit of the respective permitted successors and assigns of the parties hereto, whether so expressed or not. 

        10.5    Severability.    Whenever possible, each provision of this Agreement will be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of this Agreement. 

        10.6    Descriptive Headings.    The descriptive headings of this Agreement are inserted for convenience of reference
only and do not constitute a part of, and shall not be utilized in interpreting, this Agreement. 

        10.7    Notices.    Any notices required or permitted to be sent hereunder shall be delivered personally or mailed,
certified mail, return receipt requested, or delivered by overnight courier service to the following addresses, or such other address as any party hereto designates by written notice to the
Corporation, and shall be deemed to have been given upon delivery, if delivered personally, three days after mailing, if mailed, or one business day after delivery to the courier, if delivered by
overnight courier service: 

If
to the Corporation, to: 

divine,
inc.

1301 North Elston Avenue

Chicago, Illinois 60622

Telecopy: 773-394-6603

Attention: Jude Sullivan, General Counsel 

with
a copy (which shall not constitute notice) to: 

Latham &
Watkins

233 South Wacker Drive

Sears Tower — Suite 5800

Chicago, Illinois 60606

Telecopy: 312-993-9767

Attention: Mark D. Gerstein. 

        If
to the Purchaser or other holders of Purchaser Registrable Shares, to the addresses set forth in the stock records of the Corporation. 

        10.8    Governing Law.    All questions concerning the construction, validity and interpretation of this Agreement,
and the performance of the obligations imposed by this Agreement, shall be governed by the laws of the State of Delaware applicable to contracts made and wholly to be performed in that state. 

        10.9    Amendments and Waivers.    The provisions of this Agreement may be amended upon the written agreement of the
Corporation and the holder or holders of (a) at least a majority of the outstanding Purchaser Registrable Shares. Any waiver, permit, consent or approval of any kind or character on the part of
any holders of any provision or condition of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in writing. 

        10.10    Final Agreement.    This Agreement, constitutes the complete and final agreement of the parties concerning
the matters referred to herein and supersedes all prior agreements and understandings. 

10

 

        10.11    Execution.    This Agreement may be executed in any number of counterparts, each of which when so executed
and delivered shall be deemed an original, and such counterparts together shall constitute one instrument. 

        10.12    No Strict Construction.    The language used in this Agreement will be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of strict construction will be used against any party. 

        IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. 

	 	 	MICROSOFT CORPORATION
	

 	
 	

By:	
 	

	 	 	 	 	a duly authorized signatory
	

 	
 	

DIVINE, INC.
	

 	
 	

By:	
 	

	 	 	Name:

Title:

11

   EXHIBIT D

COMMERCIAL TERMS TO BE INCLUDED IN NEW ALLIANCE AGREEMENT  

Application Services Agreement:  

	1.
	Divine
and Microsoft agree to sign an Application Services Agreement (ASA) no later than October 31, 2001. The ASA will allow Divine to license certain Microsoft products on a
subscription basis. 

Material Terms of Alliance Agreement (to be executed no later than October 31, 2001):  

	1.
	Divine
will commit to a Microsoft platform as the key foundation for delivery of products/services to its targeted market(s).

	2.
	Microsoft
will embrace Divine as dot.net poster child and deliver appropriate carriage similar to other named collaborators of similar consequence.

	3.
	Divine
will work with Microsoft SharePoint Server, Office, NSP, EPG and other appropriate groups within Microsoft in determining technical and go-to-market path of highest opportunity
for both companies — Microsoft will establish corporate management relationship(s) with Divine and create a joint go-to-market model that benefits both companies.

	4.
	Divine
and Microsoft will redefine existing financial/operational commitments agreed to a more appropriate model based on new joint technology/market plan. 

D-1

QuickLinks

EXHIBIT 10.15(c)

Exhibit C

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