-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LpE/NCcJkDWXs00xAl7xVP4Q3H3pss6yJk18HfwSFPlNIPbUIX4Pe4kO0Ys/NbrH nXYw8xG32JC48hykoo9t2Q== 0001058809-00-000029.txt : 20001206 0001058809-00-000029.hdr.sgml : 20001206 ACCESSION NUMBER: 0001058809-00-000029 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20001205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANTERBURY INFORMATION TECHNOLOGY INC CENTRAL INDEX KEY: 0000794927 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 232170505 STATE OF INCORPORATION: PA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-51258 FILM NUMBER: 783503 BUSINESS ADDRESS: STREET 1: 1600 MEDFORD PLZ STREET 2: RTE 70 & HARTFORD RD CITY: MEDFORD STATE: NJ ZIP: 08055 BUSINESS PHONE: 6099530044 MAIL ADDRESS: STREET 1: 1600 MEDFORD PLZ CITY: MEDFORD STATE: NJ ZIP: 08055 FORMER COMPANY: FORMER CONFORMED NAME: CANTERBURY CORPORATE SERVICES INC DATE OF NAME CHANGE: 19940323 FORMER COMPANY: FORMER CONFORMED NAME: CANTERBURY EDUCATIONAL SERVICES INC /PA/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CANTERBURY PRESS INC DATE OF NAME CHANGE: 19870615 S-3 1 0001.txt As Filed With the Securities and Exchange Commission on December 5, 2000. Registration No. 333- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 CANTERBURY INFORMATION TECHNOLOGY, INC. (Exact name of Registrant as specified in its charter) Pennsylvania 829 23-2170505 (State of Incorporation) (Primary Standard (I.R.S. Employer Industrial Classification Identification Number) Code No.) 1600 Medford Plaza, Route 70 & Hartford Road Medford, New Jersey 08055 (Address of principal place of business or intended principal place of business) Stanton M. Pikus, President CANTERBURY INFORMATION TECHNOLOGY, INC. 1600 Medford Plaza, Route 70 & Hartford Road Medford, New Jersey 08055 (609) 953-0044 (Name, address, including zip code, and telephone number) including area code, of agent for service) Copy to: William N. Levy, Esq. LEVY & LEVY, P.A. Suite 309, Plaza 1000, Main Street Voorhees, New Jersey 08043 (609) 751-9494 Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box./x/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the offering.//. If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / /. CALCULATION OF REGISTRATION FEE Title of Each Class Offering Amount Proposed Maximum Proposed Maximum Registration of Securities to be to be Registered(1) Offering Price Aggregate Offering Fee Registered Per Share (1) Price (1) - -------------------------------------------------------------------------------------------- Common Stock, $.001 66,428 $3.25 $215,891 $57 par value - --------------------------------------------------------------------------------------------
Total Registration Fee . . . . . . . . . . . . . . . . . . . . . . .. . . . $57 (1) Estimated solely for the purpose of calculating the registration fee. Pursuant to Rule 457(c) of the Securities Act of 1933, as amended, the Registrant's fee has been calculated based on a price of $3.25 per share, the price as reported in National Market NASDAQ for the Registrant's common stock on November 17, 2000. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS 66,428 Shares of Common Stock CANTERBURY INFORMATION TECHNOLOGY, INC. The Shareholders of Canterbury Information Technology, Inc. named in this Prospectus are offering and selling up to 66,428 shares of Common Stock, $.001 par value, under this Prospectus. We anticipate that the selling shareholders will offer shares of Common Stock for private or public sale on the NASDAQ National Market at the prevailing market prices on the date of sale or at privately negotiated prices. The Company will not receive any part of the proceeds from such sales, but will pay all expenses of this Offering which are estimated to be $25,000. ---------------------- Our common stock is traded on the NASDAQ National Market under the symbol "CITI". On November 17, 2000, the closing price of our Common Stock was $3.25 per share as reported by the NASDAQ Automated Quotation System. ---------------------- Any investment in the Common Stock offered under this Prospectus involves a high degree of risk. See "Risk Factors" commencing on Page 3. Neither the Securities and Exchange Commission nor any state regulatory authority has approved or disapproved of these securities or determined that this Prospectus is accurate or complete. Any representation to the contrary is a criminal offense. The date of this Prospectus is December , 2000. You should rely only on the information contained in this Prospectus. We have not authorized anyone to provide you with information different from that contained in this Prospectus. The selling shareholders are offering to sell, and seeking offers to buy, shares of Canterbury Information Technology, Inc. common stock only in jurisdictions where offers and sales are permitted. The information contained in this Prospectus is accurate only as of the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of the shares. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements other information with the SEC. You may read and copy any document we file at the SEC's public reference rooms at 450 Fifth Street N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our SEC filings are available to the public from the SEC's web site at "http://www.sec.gov." In addition, we maintain a web site on the Internet at "http://www.canterburyciti.com." The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this Prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the selling shareholders sell all of the shares under this Prospectus: 1. Annual Report on Form 10-K for the fiscal year ended November 30, 1999 filed on March 14, 2000. 2. Form 10-Q for the fiscal quarter ended February 28, 2000 filed on April 14. 2000. 3. Form 10-Q for the fiscal quarter ended May 31, 2000 filed on July 14, 2000. 4. Form 10-Q for the fiscal quarter ended August 31, 2000 filed on October 13, 2000. 5. Definitive Proxy Statement filed on September 1, 2000. You may request a copy of this filing, at no cost, by writing or telephoning our Executive Vice President and Chief Financial Officer at the following address: Kevin McAndrew, Executive Vice President Canterbury Information Technology, Inc. 1600 Medford Plaza Route 70 & Hartford Road Medford, New Jersey 08055 (609) 953-0044 This Prospectus is part of a registration statement we filed with the SEC. You should rely only on the information or representations provided in this Prospectus. We have not authorized anyone else to provide you with different information. The selling shareholders may not make an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this Prospectus is accurate as of any date other than the date on the front of the document. The Company's main corporate office is located at 1600 Medford Plaza, Route 70 & Hartford Road, Medford, New Jersey, 08055, (609) 953-0044. FORWARD-LOOKING STATEMENTS All statements other than statements of historical fact included in this Prospectus regarding the Company's financial position, business strategy and plans and objectives of management of the Company for future operations, are forward-looking statements. When used in this Prospectus, words such as "anticipate", "believe", "estimate", "expect", "intend" and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company's management, as well as assumptions made by and information currently available to the Company's management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors such as those disclosed under "Risk Factors," including but not limited to, competitive factors and pricing pressures, changes in legal and regulatory requirements, technological change or difficulties, product development risks, commercialization and trade difficulties and general economic conditions. Such statements reflect the current views of the Company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf are expressly qualified in their entirety by this paragraph. RISK FACTORS You should carefully consider the risks described below before making an investment decision. Please also note that there may be other risks and uncertainties not presently known to us or that we currently deem immaterial. If any of the following or such other risks actually occur, our business, financial condition or results of operations could be materially and adversely affected. 1. No assurance as to future profitable operations. There is no assurance that the Company will generate net income or successfully expand its operations in the future. The Company cannot predict with any certainty the success or failure of its operations. 2. We depend on our senior management to operate and grow We believe that our success depends to a significant extent on the efforts and abilities of certain of our senior management, in particular those of Stanton M. Pikus, President and Chief Executive Officer; Kevin McAndrew, Executive Vice President and Chief Financial Officer; and Jean Pikus, Vice President - Operations and Secretary. The loss of Mr. Pikus, Mr. McAndrew, Ms. Pikus or certain other key employees could have a material adverse affect on the Company. Therefore, we maintain key man life insurance policies and employment agreements with each key employee. We have insurance policies on the following officers for the following amounts: Corporate Officer Amount of Policy Stanton M. Pikus $1,000,000 Kevin J. McAndrew $1,000,000 Jean Z. Pikus $ 500,000 3. Our executive officers can influence control over our business and policies. Management as a group owns of record and controls beneficially 7% of the Company's Common Stock and is in a position to substantially influence the election of a majority of the Company's directors, and otherwise control the Company. 4. We face substantial competition from other training companies. We compete with a great variety of computer training and management training companies and information technology companies such as Executrain, EDS, Hewlett Packard, and Anderson Consulting as well as divisions of large corporations such as IBM. Many of our competitors are much larger and have greater development, marketing and financial resources. Additional competitors utilize non traditional delivery systems such as the internet, video conferencing and computer based training. Future competition is expected to be more intense, especially with the increasing utilization of both home computers and internet based training. To a great extent, such competition is defined by pricing, quality and customer satisfaction. 5. We may depend on additional financing in the event of restricted cash flow If the Company is not successful in generating cash flow from its operations sufficient to sustain its operations, the Company may need to secure additional financing to develop and maintain its business. There can be no assurance that additional financing, either through the sale of equity or placement of debt, will be available on terms acceptable to the Company. 6. No dividends and none anticipated. The Company has not paid any cash dividends, nor does it contemplate or anticipate paying any dividends upon its Common Stock in the foreseeable future. The Company's loan agreement with the principal lender prohibits the payment of dividends without its written consent. 7. Sales of substantial amounts of our common stock could decrease our stock price. Approximately 4,516,069 of the Company's presently outstanding shares of Common Stock are "restricted securities" within the meaning of Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), and thus may only be sold in compliance with an exemption from registration under the Securities Act or pursuant to a registration statement under the Securities Act. A sale of shares by shareholders, whether pursuant to Rule 144 or otherwise, may have a depressing effect upon the market price of the Common Stock. Excluding any options that could be exercised, the Company, as of the date of this Prospectus, had issued and outstanding 10,735,707 shares of its common stock, of which approximately 4,516,069 shares are restricted securities. (See "Principal Shareholders.") 8. Authorization of preferred stock may discourage takeovers and depress stock price. The Company's Amended Certificate of Incorporation authorizes the issuance of "blank check" preferred stock with such designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of the Company's Capital Stock. In addition, the issuance of such preferred stock may have the effect of rendering more difficult or discouraging an acquisition of the Company or changes in control of the Company. We do not have any Preferred Stock issued at this time. There can be no assurance that the Company will not do so in the future. Other than the authorization of "blank check" preferred stock, the Company does not have any other provisions in the Company's Certificate of Incorporation, Stock Option Plans, and/or Employment Agreements which may have an anti-takeover effect. The issuance of preferred stock with anti-takeover provisions may discourage bidders form making offers at a premium to the market price. In addition, the mere existence of an anti-takeover device may have a depressive effect on the market price of the Company's stock. 9. Our share price may be volatile in the future. Our stock price has been, and in the future is expected to be, volatile. We expect to experience market fluctuation as a result of a number of factors, including, but not limited to, current and anticipated results of operations, our future offerings or those of our competitors and factors unrelated to our operating performance. The trading price of our Common Stock may also vary as a result of changes in our business, operations, or financial results, the prospects of general market and economic conditions and other factors. 10. We could risk delisting from NASDAQ stock market Our stock is currently traded on the NASDAQ National Market, and we are in compliance with all maintenance criteria. However, if our common Stock cannot remain listed on the NASDAQ National Market, we would seek to have it listed on the NASDAQ Small Capitalization Market, although we give no assurance that this will occur. If our Common Stock was delisted from trading on the NASDAQ Stock Market ("NASDAQ") altogether, trading, if any, would be conducted in the over-the-counter market. It would be traded in the so-called "pink sheets" or the "Electronic Bulletin Board" of the National Association of Securities Dealers, Inc. and consequently an investor will likely find it more difficult to dispose of, or to obtain accurate quotations as to the price of our Common Stock. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. Regulations set forth by the commission generally define a penny stock to be an equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on NASDAQ or a national securities exchange and any equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for three years, (ii) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years or (iii) average annual revenue of at least $6,000,000, if such issuer has been in continuous operation for less than three years. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. In addition, if the Common Stock is not quoted on NASDAQ, or if the Company does not meet the other exceptions to the penny stock regulations cited above, trading in the Common Stock would be covered by Rule 15g-9 set forth under the Exchange Act for non-NASDAQ and non-national securities exchange listed securities. Under such rule, broker/dealers who recommend such securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale. Securities also are exempt from this rule if the market price is at least $5.00 per share. If our common Stock becomes subject to the regulations applicable to penny stocks, the market liquidity for our Stock could be adversely affected. In such event, the regulations on penny stock could limit the ability of broker/dealers to sell our Common Stock and thus the ability of purchasers of our Stock to sell their securities in the secondary market. THE COMPANY Canterbury Information Technology and its subsidiaries provide a wide variety of computer and management training programs and technology consulting services to Fortune 1000 companies. CALC/Canterbury is a Microsoft Solutions Provider and a Microsoft Certified Technical Education Canter (CTEC), as well a a Lotus Authorized Education Canter (LAEC). CALC/Canterbury provides technical and application computer training, technical services and consulting and portal development services. CALC Web University, an online training portal, developed and hosted by CALC/Canterbury, focuses on design and delivery of online training in both Internet and Intranet environments. USC/Canterbury Corp., a CTEC in the Mid-Atlantic area, provides network development and design. USC/Canterbury is also a premier value added reseller of hardware and software. MSI/Canterbury offers sales and management training and consulting to corporations nationwide. ATM/Canterbury is a software consulting and development company that specializes in document imaging, tracking and retrieval. DataMosaic/Canterbury Corp. and Canterbury Consulting Group are management and systems consulting companies that provide staffing augmentation solutions and consulting services to the information technology industry. Canterbury Information Technology was incorporated in the Commonwealth of Pennsylvania on March 19, 1981 and later qualified to do business in the State of New Jersey in April, 1985. COMPUTER TRAINING SERVICES In June, 1994, Canterbury Information Technology acquired Computer Applications Learning Center (CALC), a New Jersey based computer training company. The name was changed to CALC/Canterbury Corp. Since 1983 CALC/Canterbury has trained corporate employees at training centers in New York and New Jersey. CALC/Canterbury also teaches at many corporate locations. CALC/Canterbury is a Microsoft Certified Technical Education Center (CTEC) and a Lotus Authorized Education Center (LAEC) as well as an authorized training center for SBT and Corel software. CALC/Canterbury offers more than 500 technical and application classes. Listed below are the types of courses offered by CALC/Canterbury: * Operating Systems * Train-the-Trainer * Microsoft Windows NT * Microsoft Office 2000 * Word Processing * Spreadsheets * Accounting Software * Database Management * Presentation Graphics * E-Mail * Contact Management * Project Management * Network Concepts * Lotus Notes * Internet & World Wide Web * Microsoft Certified Technical Classes * Lotus Domino & Notes Certified Technical Classes * Non-certified Technical Classes CALC/Canterbury is also a technology services provider as well as a corporate trainer. We have formed strategic business partnerships with systems integrators, technical staffing companies and courseware providers to offer multiple services and products to our clients. HARDWARE/SOFTWARE SALES AND NETWORK DESIGN On October 18, 1999, USC/Canterbury Corp., a wholly owned subsidiary of Canterbury, purchased the business and certain assets of U.S. Communications, Inc. USC/Canterbury Corp. provides a broad range of information technology services that include hardware, software, training, network design and management, and is a premier value added reseller to mid-size companies and state and local government agencies. The Company predominantly resells Hewlett-Packard personal computers and servers as stand-alone desktops, workstations, and complete networks. Virtually no inventory is maintained. USC/Canterbury Corp. can ship from their wholesale suppliers to the client within 48 hours after acceptance of order. Since the Company has relationships with almost a half-dozen master distributors, management is able to satisfy client demand quickly and still obtain the best possible pricing in this viciously competitive hardware marketplace. USC/Canterbury Corp.'s training services include technical and applications software training as well as Internet-based training programs. The USC/Canterbury Corp. training facility is in USC/Canterbury Corp.'s Annapolis office. The Company is authorized by Microsoft as an "Authorized Technical Education Center" and is believed to be the only such center in the greater Annapolis market. The primary focus has been toward Microsoft NT certification courses, but other courses are offered as the demand calls for them. The company has approximately 300 clients that include: * Prince William County * City of Baltimore, Maryland * Calvert County Public Schools * Carroll County Board of Education * Maryland Environmental Services * Nationswide Insurance. MANAGEMENT TRAINING In September of 1993, Canterbury Information Technology acquired Motivational Systems, a New Jersey-based management and sales training company. The name was changed to MSI/Canterbury. Since 1970, MSI/Canterbury has trained managers and sales professionals from many Fortune 1000 companies. MSI/Canterbury conducts seminars in: * Executive development and coaching * Communications and personal growth * Sales training * Management and interpersonal development training * Problem solving/management consulting * Project management TECHNICAL STAFFING AUGMENTATION On August 1, 2000, the Company acquired 100% of the stock of DataMosaic International, Inc. of Norcross, Georgia for 221,420 restricted shares of Canterbury common stock valued at $859,000. DataMosaic is a management and systems consulting company, which provides staffing augmentation solutions and consulting services to the information technology industry. Short term and long term contracting along with permanent placement and project management of IT professionals is provided to mid-sized and Fortune 1000 corporations for: technical leaders and specialists, senior programming analysts, programmers, systems support and administration specialists experienced in networking, data communications, LAN/WAN, SQA/testing and technical writing. DataMosaic consultants have expertise in the following skill sets: Internet/Intranet applications, e-commerce, client server technologies, network/protocols and database design, mainframe/mini-computer. Specific expertise exists with respect to JAVA, WAP and all major hardware and software applications. After the acquisition, DataMosaic changed its name to DataMosaic/Canterbury Corp. In addition, the Registrant incorporated Canterbury Consulting Group, Inc., a wholly owned subsidiary, in the state of New Jersey on August 28, 2000. Canterbury Consulting Group, Inc. is a management and systems consulting company that provides staffing augmentation solutions and consulting services to the information technology industry. SOFTWARE DEVELOPMENT In May of 1997, Canterbury Information Technology acquired ATM Technologies, Inc. (ATM), a Texas-based software consulting and development company. The name was changed to ATM/Canterbury. ATM/Canterbury has been in business since 1984, and specializes in PC-based record management systems. The software developed uses Barcodes as the primary means of data entry allowing clients with large file rooms and/or inventory to: * Eliminate lost record and increase productivity * Quickly locate records * Lower human resource costs * Track and locate archived files * Generate status reports in minutes * Design and print labels on demand EMPLOYEES As of November 17, 2000, including all subsidiaries, we had approximately 150 employees: 90 full-time employees and 60 part-time employees. DESCRIPTION OF PROPERTIES We own land in Bedminster, New Jersey which was acquired as part of a previous acquisition. It is not used as part of our business operation. All other facilities, including our administrative offices, branch locations and sales offices, are leased. The aggregate annual rental payments under leases will approximate $1,046,000 in fiscal year 2000. The following table sets forth the locations, including square footage: Location Square Footage Canterbury Information Technology 4,200 1600 Medford Plaza Medford, New Jersey 08055 ATM/Canterbury Corp. 3,700 16840 Barker Springs, Suite C300 Houston, TX 77084 MSI/Canterbury 1,800 400 Lanid Drive Parsippany, New Jersey 07054 USC/Canterbury Corp. 2,000 801 Compass Way, Suite 205 Annapolis, Maryland 21401 CALC/Canterbury 23,500 500 Lanid Drive Parsippany, New Jersey 07054 CALC/Canterbury 4,200 780 Third Avenue, Concourse Level One New York, New York 10017 CALC/Canterbury 6,000 Woodbridge Place, Gill Lane at Route 1 Iselin, New Jersey 08830 CALC/Canterbury 5,926 Park 80 West Plaza Saddlebrook, New Jersey 07663 CALC/Canterbury 7,000 55 Broadway New York, New York 10006 DataMosaic/Canterbury Corp. 350 2 Sun Court, Suite 300 Norcross, Georgia 30092 Canterbury Consulting Group, Inc. 600 500 Lanid Drive Parsippany, New Jersey 07054 USE OF PROCEEDS All net proceeds from the sale of Common Stock under this Prospectus will go to the shareholders who offer and sell their shares. Accordingly, the Company will not receive any proceeds from such sales. SELLING SHAREHOLDERS The following shares covered by this Prospectus were issued by the Company in an Agreement Concerning the Exchange of Stock between Canterbury Information Technology, Inc. and the Shareholders of DataMosaic International, Inc. to certain selling shareholders with registration rights, which are now being exercised. 221,420 shares were issued to the Shareholders of DataMosaic International, Inc. in exchange for 100% of the issued and outstanding shares of DataMosaic International, Inc. Of the 221,420 shares issued, thirty percent (30%) or 66,428 shares of common stock are being registered herein in accordance with the registration rights set forth in the Agreement. The exchange by the Company of this common stock to the selling shareholders were made under an exemption from the registration requirements of the Security Act provided in Section 4(2). We agreed to register the Common Stock that was issued to the selling shareholders. Our registration of the Common Stock does not necessarily mean that the selling shareholders will sell all or any of their shares. All of the selling shareholders are employed by the wholly owned subsidiary DataMosaic/Canterbury Corp. of the Registrant and have had a material relationship with the Company within the past three years except as a result of the ownership of the shares or other securities of the Company. The following table shows: (i) the name of the selling shareholders; (ii) the number of shares of Common Stock beneficially owned by the selling shareholders; (iii) the aggregate number of shares of Common Stock to be sold by each shareholder from time to time under this Prospectus; and (iv) the number of shares beneficially owned after the sale of all of the shares offered under this Prospectus. This information is based upon information provided by the selling shareholders. The shares are being registered to permit public secondary trading of the shares, and the selling shareholders may offer the shares for resale from time to time. Mark Vallario 97,425 33,214 64,211 D. Kent Jordan 97,425 33,214 64,211
Name of Selling Shares Beneficially Shares to be Sold Shares Beneficially Shareholder Owned Prior to the Offering In the Offering Owned After the Offering - --------------------------------------------------------------------------------------------
As of the date of this Prospectus, we have issued 10,735,707 shares of our common stock and no shares of our preferred stock. PLAN OF DISTRIBUTION The selling shareholders may offer their shares of Common Stock at various times in one or more of the following transactions: - ordinary brokers transactions, which may include long or short sales; - transactions involving cross or block trades on the NASDAQ National Market; - purchases by brokers, dealers or underwriters as principal and resale by such purchasers for their own account pursuant to this Prospectus; - through market makers or in ways not involving market makers or established trading markets; - through transactions in options, swaps or other derivatives; - through hedging or option transactions or with broker-dealers; or - in a combination of any of the above transactions. The selling shareholders may sell their shares at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices. The selling shareholders may use broker-dealers to sell their shares. If this happens, broker-dealers may receive discounts or commissions from the selling shareholders, or they may receive commissions from purchasers of shares for whom they acted as agents. Usual and customary brokerage fees may be paid by the selling shareholders. The Company does not have knowledge of any existing arrangements between any selling shareholder and any other shareholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares of Common Stock. The selling shareholders do not have to sell any or all of their shares. LEGAL MATTERS Our legal counsel, Levy & Levy, P.A., has rendered an opinion to the effect that the Common Stock offered for resale pursuant to this Prospectus is duly and validly issued, fully paid and non-assessable. William N. Levy, Esq., a partner in this firm, is a non-affiliate stockholder and an option holder of Canterbury Information Technology, Inc. EXPERTS The consolidated financial statements of Canterbury Information Technology, Inc. included in Canterbury Information Technology, Inc.'s Annual Report (Form 10-K) for the year ended November 30, 1999, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. DESCRIPTION OF SECURITIES Description of Common Stock Holders of Common Stock are entitled to one vote per share on all matters requiring a vote of shareholders. The holders of Common Stock are entitled to receive dividends when and as declared by the Board of Directors. Upon liquidation or dissolution, each outstanding share of Common Stock will be entitled to share equally in the assets of the Company legally available for distribution to shareholders after the payment of all debts and other liabilities. Shares of Common Stock are not redeemable, have no conversion rights and carry no preemptive or other rights to subscribe to or purchase additional shares in the event of a subsequent offering. All outstanding shares of Common Stock are duly authorized and validly issued, fully paid and non-assessable and free of pre-emptive rights. Non-Cumulative Voting The Common Stock does not have cumulative voting rights which means that the holders of more than fifty percent of the Common Stock voting for election of directors can elect one hundred percent of the directors of the Company if they choose to do so. Description of Preferred Stock The Company is authorized to issue a new class or classes of up to 50,000,000 shares of Preferred Stock. The Board of Directors will have the authority to issue the Preferred Stock in one or more classes or series and to fix the rights, preferences, privileges and restrictions including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any classes or series of the designation of such classes or series, without further vote or action by the stockholders. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change in control of the Company, which might otherwise benefit the Company's shareholders, and affecting the voting and other rights of the holders of Common Stock. There are no ongoing negotiations or discussions concerning the issuance of any Preferred Stock. The Class A, B, C and D Preferred Stock was previously issued and are now fully retired. Currently, we have no intention of issuing any other class of Preferred Stock. Reports to Shareholders We will issue annual reports to our shareholders examined by independent auditors as soon as practicable at the end of each fiscal year. The Company will also issue quarterly reports to our shareholders. Transfer Company and Registrar The Transfer Agent and Registrar for the Common Stock of the Company is American Stock Transfer and Trust Company, 6201 15th Avenue, Brooklyn, New York, 11219. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers, and controlling persons of the Company pursuant to the foregoing provisions or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer, or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such directors, officers or controlling persons in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. =================================================================== No one (including any salesman or broker) is authorized to provide oral or written information about this offering that is not included in this Prospectus. TABLE OF CONTENTS Page Where You Can Find More Information . . . . . . . . . . . . . . . . 2 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 9 Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . .11 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Description of Securities. . . . . . . . . . . . . . . . . . . . . .12 Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . .12 Until December , 2000, all dealers effecting transactions in these registered securities, whether or not participating in this distribution, may be required to deliver a Prospectus. This is in addition to the obligation of dealers to deliver a Prospectus when acting as Underwriters. 66,428 Shares of Common Stock ($.001 Par Value) CANTERBURY INFORMATION TECHNOLOGY, INC. =================== P R O S P E C T U S =================== December , 2000 ===================================================================== PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth the estimated expenses to be borne by the Company in connection with the offering described in this Registration Statement: Securities and Exchange Commission Registration Fee $ 57.00 Legal Fees and Expenses $ 21,943.00* Accounting Fees and Expenses $ 3,000.00* ----------- Total Expenses $ 25,000.00 =========== ____________________ * Estimated. The Company is to pay all reasonable legal and accounting fees and filing and registration fees applicable to this Registration Statement. The selling shareholder is to pay all commissions, transfer taxes and those fees and expenses of counsel as retained by the selling shareholder. Item 15. Indemnification of Directors and Officers. The Company is a Pennsylvania corporation. Article XV of the Company's By-Laws contains the following provisions with respect to indemnification of Directors and Officers: "The corporation shall indemnify each of its directors and officers who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative to investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceedings, had no reasonable cause to believe his conduct was unlawful. Except as provided herein below, any such indemnification shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth above. Such determination shall be made : (a) by the Board of Directors by a majority vote of a quorum of directors who were or are not parties to such action, or proceedings, or (b) by the shareholders." Expenses (including attorneys' fees) incurred in defending a civil or criminal action, suit, or proceedings may be paid by the corporation in advance of the final disposition of such action or proceedings, if authorized by the Board of Directors and upon receipt of an undertaking by or on behalf of the director or officer to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation. To the extent that a director or officer has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to above, or in defense of any claim issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, without any further determination that he has met the applicable standard of conduct set forth above. Additionally, the Pennsylvania Statutes contain provisions entitling directors, officers and employees of the Company to indemnification for their expenses (including reasonable costs, disbursement and counsel fees) and liabilities (including amounts paid or received in satisfaction of settlements, judgments, fines and penalties), as the result of an action or proceeding in which they may be involved by reason of being or have been a director, officer or employee of a corporation provided said officer, directors or employees acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interest of the corporation. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company pursuant to the charter provision, by-law, contract, arrangements, statute or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 16. Exhibits. 3.1 Restated Certificate of Incorporation of the Registrant * 3.2 Bylaws of the Registrant ** 5 Opinion of Levy & Levy, P.A. 10.16 Agreement Concerning the Exchange of Stock between the Shareholders of DataMosaic International, Inc. and the Registrant 23.1 Consent of Levy & Levy, P.A. (included in the opinion under Exhibit 5) 24.1 Consent of Ernst & Young LLP * Incorporated by reference from Exhibit 3(e) in the Annual Report and Definitive Proxy Materials for the 1997 Annual Shareholders Meeting for fiscal year ended November 30, 1997 filed with the SEC on September 9, 1998. ** Incorporated by reference from the like-numbered exhibit to Form S18 Registration Statement, SEC. File No. 33-6381 filed on July 18, 1986. Item 17. Undertakings. The undersigned registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, to the extent that the information required to be included in the post-effective amendment is not contained in periodic reports filed by the Company with or furnished to the SEC pursuant to Section 13 or Section 15(d)of the Securities Exchange Act of 1934 and incorporated by reference herein; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement, to the extent that the information required to be included in the post-effective amendment is not contained in periodic reports filed by the Company with or furnished to the SEC pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 and incorporated by reference herein; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Medford, State of New Jersey on this 17th day of November, 2000. CANTERBURY INFORMATION TECHNOLOGY, INC. By: /s/Stanton M. Pikus Stanton M. Pikus, President and Chief Executive Officer By: /s/Kevin J. McAndrew Kevin J. McAndrew, Executive Vice President, Treasurer, Chief Financial Officer, and Director Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. /s/Stanton M. Pikus President, Chief Executive December 4, 2000 Stanton M. Pikus Officer, Director /s/Kevin J.McAndrew Executive Vice President, Treasurer, December 4, 2000 Kevin J. McAndrew Chief Financial Officer, Director /s/Alan Manin Director December 4, 2000 Alan Manin /s/Jean Zwerlein Pikus Vice President, Operations; December 4, 2000 Jean Zwerlein Pikus Secretary; Director /s/Stephen M. Vineberg Director December 4, 2000 Stephen M. Vineberg /s/Paul L. Shapiro Director December 4, 2000 Paul L. Shapiro /s/Frank Capiello Director December 4, 2000 Frank Capiello EXHIBIT INDEX 5.1 Opinion and Consent of Levy & Levy, P.A., Securities Counsel for Registrant 10.16 Agreement Concerning the Exchange of Stock between the Registrant and the Shareholders of DataMosaic International, Inc. 24.1 Consents of Ernst & Young LLP, Independent Auditors. EX-5.1 2 0002.txt EXHIBIT 5.1 OPINION AND CONSENT OF LEVY & LEVY, P.A. Levy & Levy, P.A. Plaza 1000, Suite 309 Voorhees, New Jersey 08043 (609) 7519494 (609) 751-9779 FAX December 4, 2000 Securities and Exchange Commission 450 Fifth Street, N.W. Judiciary Plaza Washington, D.C. 20549 Re: Canterbury Information Technology, Inc. Ladies and Gentlemen: We have acted as counsel for Canterbury Information Technology, Inc., a Pennsylvania corporation ("the Company"), in connection with the registration by the Company of up to an aggregate of 66,428 shares of the Company's common stock, without par value (the "Common Stock"), for the account of certain security holders of the Company (the "Registration") as described in the Company's Registration Statement on Form S-3 (the "Registration Statement") being filed this date under the Securities Act of 1933, as amended. In connection with the following opinion, we have reviewed the Registration Statement and are familiar with the action taken by the Company to date with respect to the approval and authorization of the Registration. We have examined originals, or copies, certified or otherwise authenticated to our satisfaction, of such corporate records of the Company, agreements and other instruments, certificates of public officials, officers and representatives of the Company and such other documents as we have deemed necessary as a basis for the opinion hereinafter expressed. We are furnishing this opinion in connection with the filing of the Registration Statement. Based upon the foregoing, we are of the opinion that, upon the effectiveness of the Registration Statement, the shares of Common Stock proposed to be registered by the Company under the Registration Statement will be, when sold, validly issued, fully paid and non-assessable. We hereby consent to the inclusion of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the prospectus constituting a part of the Registration Statement. Very truly yours, LEVY & LEVY, P.A. By: /s/ William N. Levy _________________________ William N. Levy, Esq. EX-10.16 3 0003.txt AGREEMENT AGREEMENT CONCERNING THE EXCHANGE OF STOCK BETWEEN CANTERBURY INFORMATION TECHNOLOGY, INC. ("CANTERBURY", "CITI", OR "BUYER") AND SHAREHOLDERS OF DATAMOSAIC INTERNATIONAL, INC. ("DMI" OR "SELLERS") TABLE OF CONTENTS 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1 2 EXCHANGE OF SECURITIES. . . . . . . . . . . . . . . . . . 4 (a) Exchange of Shares.. . . . . . . . . . . . . . . . . 4 (b) Exemption from Registration. . . . . . . . . . . . . 4 (c) Non-Taxable Transaction. . . . . . . . . . . . . . . 4 (d) Costs. . . . . . . . . . . . . . . . . . . . . . . . 4 (e) Additional Documentation.. . . . . . . . . . . . . . 5 (f) The Closing. . . . . . . . . . . . . . . . . . . . . 5 (g) Deliveries at the Closing. . . . . . . . . . . . . . 5 (h) Post-Closing Obligations .. . . . . . . . . . . 5 3 REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS. . . 5 (a) Organization.. . . . . . . . . . . . . . . . . . . . 5 (b) Authorization of Transaction.. . . . . . . . . . . . 5 (c) Noncontravention. . . . . . . . . . . . . . . . . . 5 (d) Title to Assets.. . . . . . . . . . . . . . . . 6 (e) Subsidiaries.. . . . . . . . . . . . . . . . . . . . 6 (f) Financial Statements.. . . . . . . . . . . . . . . . 6 (g) Events Subsequent to Most Recent Fiscal Year End.. . 6 (h) Undisclosed Liabilities. . . . . . . . . . . . . . . 8 (i) Legal Compliance.. . . . . . . . . . . . . . . . . . 8 (j) Tax and Other Returns and Reports . . . . . . . . . 8 (k) Intellectual Property. . . . . . . . . . . . . . . . 8 (l) Tangible Assets. . . . . . . . . . . . . . . . . . . 9 (m) Contracts . . . . . . . . . . . . . . . . . . . . . 9 (n) Federal Tax Contingency Reserve. . . . . . . . . . . . 10 (o) Powers of Attorney.. . . . . . . . . . . . . . . . . . 11 (p) Insurance. . . . . . . . . . . . . . . . . . . . . . . 11 (q) Litigation.. . . . . . . . . . . . . . . . . . . . . . 11 (r) Employees. . . . . . . . . . . . . . . . . . . . . . . 11 (s) Employee Benefits. . . . . . . . . . . . . . . . . . 11 (t) Guaranties.. . . . . . . . . . . . . . . . . . . . . . 11 (u) Environment, Health, and Safety. . . . . . . . . . . . 11 (v) Certain Business Relationships With DMI. . . . . . . . 12 (w) Disclosure.. . . . . . . . . . . . . . . . . . . . . 12 (x) Intentionally Omitted .. . . . . . . . . . . . . . . . 12 (y) Assets Free and Clear. . . . . . . . . . . . . . . . . 12 (z) Accounts Receivable Collectability Guaranty. . . . . 12 4 REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . . . . 12 (a) Organization of the Buyer. . . . . . . . . . . . . . . 12 (b) Authorization of Transaction.. . . . . . . . . . . . . 12 (c) Noncontravention.. . . . . . . . . . . . . . . . . . . 13 (d) Securities Filings. . . . . . . . . . . . . . . . 13 (e) Disclosure. . . . . . . . . . . . . . . . . . . . 13 5. PRE-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . 13 (a) General. . . . . . . . . . . . . . . . . . . . . . . . 13 (b) Notices and Consents.. . . . . . . . . . . . . . . . . 13 (c) Operation of Business. . . . . . . . . . . . . . . . . 13 (d) Preservation of Business.. . . . . . . . . . . . . . . 14 (e) Full Access. . . . . . . . . . . . . . . . . . . . . . 14 (f) Notice of Developments.. . . . . . . . . . . . . . . . 14 (g) Exclusivity. . . . . . . . . . . . . . . . . . . . . . 14 (h) Termination of IRS Subchapter "S" Election. . . . 14 6. CONDITIONS TO OBLIGATION TO CLOSE.. . . . . . . . . . . . . 14 (a) Conditions to Obligation of the Buyer. . . . . . . . . 14 (b) Conditions to Obligation of the Sellers. . . . . . . . 15 7. TERMINATION.. . . . . . . . . . . . . . . . . . . . . . . . 16 (a) Termination of Agreement.. . . . . . . . . . . . . . . 16 8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 16 (a) Survival of Representations and Warranties . . . . . . 16 (b) Indemnification Provisions for Benefit of the Buyer 16 (c) Matters Involving Third Parties. . . . . . . . . . . . 17 (d) Indemnification Provisions for Benefit of the Sellers 18 (e) Limitations and Conditions on Indemnification. . 18 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 18 (a) Registration of Stock of Canterbury. . . . . . . . . . 19 (b) Litigation Support. . . . . . . . . . . . . . . . 20 (c) Restrictive Covenants. . . . . . . . . . . . . . . . . 21 (d) No Third-Party Beneficiaries . . . . . . . . . . . . . 21 (e) Entire Agreement . . . . . . . . . . . . . . . . . . . 21 (f) Succession and Assignment. . . . . . . . . . . . . . . 21 (g) Counterparts . . . . . . . . . . . . . . . . . . . . . 21 (h) Headings. . . . . . . . . . . . . . . . . . . 21 (i) Notices... . . . . . . . . . . . . . . . . . . . . . . 21 (j) Governing Law. . . . . . . . . . . . . . . . . . . . . 22 (k) Amendments and Waivers.. . . . . . . . . . . . . . . . 22 (l) Severability.. . . . . . . . . . . . . . . . . . . . . 22 (m) Expenses.. . . . . . . . . . . . . . . . . . . . . . . 22 (n) Brokers'/Finders' Fees.. . . . . . . . . . . . . . . . 22 (o) Construction.. . . . . . . . . . . . . . . . . . . . . 23 (p) Incorporation of Exhibits and Schedules. . . . . . . . 23 (q) Specific Performance.. . . . . . . . . . . . . . . . . 23 (r) Arbitration. . . . . . . . . . . . . . . . . . 23 EXHIBIT 1 - Allocation of DMI's Shareholders EXHIBIT 2 - Investment Letter EXHIBIT 3(a) - Employment Agreement of D. Kent Jordan EXHIBIT 3(b) - Employment Agreement of Mark Vallario EXHIBIT 4(a) - Financial Statements - 1998 and 1999 Balance Sheets and Income Statements EXHIBIT 4(b) - Financial Statements - Unaudited Balance Sheet and Income Statements for the Six Months Ended June 30, 2000 EXHIBIT 4(c) - Financial Statements - Unaudited Balance Sheet and Income Statements for the One Month Ended July 31, 2000 EXHIBIT 5(a) - Disclosure Schedule - Section 3 - Litigation EXHIBIT 5(b) - Disclosure Schedule - Section 3 - Guarantor Obligations EXHIBIT 6 - Disclosure Schedule - Section 4 AGREEMENT THIS AGREEMENT made this 1st day of August, 2000 by and between CANTERBURY INFORMATION TECHNOLOGY, INC., a Pennsylvania Corporation ("CITI"); and one hundred (100%) percent of the Shareholders ("Shareholders") of DATAMOSAIC INTERNATIONAL, INC., a Georgia Corporation ("DMI" OR "SELLERS"), as set forth on the Signature Page of this Agreement. WHEREAS, CITI, a public Company, desires to acquire all of the issued and outstanding common stock of DMI from the Shareholders of DMI in a tax free reorganization; and WHEREAS, Shareholders desire to exchange all of their stock in DMI for certain shares of restricted common stock of CITI: and WHEREAS, the respective Boards of Directors of the Companies have authorized their proper corporate officers to effect the transactions contemplated herein; and WHEREAS, each of the parties desires to assist the other in effecting the transaction pursuant to the terms of this Agreement. NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto have agreed as follows: 1. DEFINITIONS "Accredited Investor" has the meaning set forth in Regulation D promulgated under the Securities Act. "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. "Affiliated Group" means any affiliated group within the meaning of Code Sec. 1504(a) [or any similar group defined under a similar provision of state, local, or foreign law]. "Basis" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could, with reasonable probability, form the basis for any specified consequence. "Buyer" means Canterbury Information Technology, Inc. "Cash" means cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements. "Canterbury" means Canterbury Information Technology, Inc. "Closing" has the meaning set forth in Section 2(f) below. "Closing Date " has the meaning set forth in Section 2(f) below. "Code" means the Internal Revenue Code of 1986, as amended. "Corporate Assets" means all right, title, and interest in and to all of the assets of DMI, including the name "Datamosaic International, Inc." and all of DMI's (a) real property, leaseholds and subleaseholds therein, improvements, fixtures, and fittings thereon( to the extent of DMI's interest therein), (b) tangible personal property (such as machinery, equipment, inventories of supplies, manufactured and purchased parts, work in process and finished work, furniture, automobiles and trucks,), (c) Intellectual Property, goodwill associated therewith, licenses and sublicenses granted and obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions, (d) leases, subleases, and rights thereunder, (e) agreements, contracts, indentures, mortgages, instruments, Security Interests, guaranties, other similar arrangements, and rights thereunder, (f) claims, deposits, prepayments, refunds, causes of action, choses in action, rights of recovery, rights of set off, and rights of recoupment (including any such item relating to the payment of Taxes), (g) franchises, approvals, permits, licenses, orders, registrations, certificates, variances, and similar rights obtained from governments and governmental agencies, (h) books, records, ledgers, files, documents, correspondence, lists, plats, architectural plans, drawings, and specifications, creative materials, advertising and promotional materials, studies, reports, and other printed or written materials, curricula, either finished, in process, or planned, and (i) rights in and with respect to the assets associated with its Employee Health and Disability Plans. The enumeration of asset categories set forth herein shall not imply that Sellers necessarily owns each such type of asset. "Disclosure Schedule" has the meaning set forth in Section 3 below. "Employee Benefit Plan "means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit plan or program. "Employee Pension Benefit Plan "has the meaning set forth in ERISA Sec. 3(2). "Employee Welfare Benefit Plan "has the meaning set forth in ERISA Sec. 3(l). "Environmental, Health, and Safety Laws" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970, each as amended, together with all other laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof) concerning pollution or protection of the environment, public health and safety, or employee health and safety, including laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as amended. "Fiduciary" has the meaning set forth in ERISA Sec. 3(21). "Financial Statement" has the meaning set forth in Section 3(f) and (g) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Intellectual Property" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (e) all computer software (including data and related documentation), (f) all other proprietary rights, and (g) all copies and tangible embodiments thereof (in whatever form or medium), (h) teaching or instructor notes, teaching plans, or other syllabus. "Knowledge" means actual knowledge after reasonable inquiry. "Liability" means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes. "Most Recent Balance Sheet" means the balance sheet of July 31, 2000. "Most Recent Financial Statements" has the meaning set forth in Section 3(f) and (g) below. "Most Recent Fiscal Month End" has the meaning set forth in Section3(f) and (g) below. "Most Recent Fiscal Year End" has the meaning set forth in Section 3(f) and (g) below. "Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37). "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "Party" has the meaning set forth in the preface above. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Security Interest" means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic's, materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings, (c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. "Sellers" means the Shareholders of Datamosaic International, Inc. ("DMI") as listed on the Signature Page of this Agreement "Stock of Canterbury" means restricted common stock of Canterbury Information Technology, Inc. "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. 2. EXCHANGE OF SECURITIES (a) Exchange of Shares. Subject to all the terms and conditions of this Agreement, CITI agrees to exchange, at Closing, two hundred twenty one thousand four hundred twenty (221,420) shares of previously authorized, but unissued unregistered CITI common stock, $.001 par value, ("CITI Shares") in exchange for all of the issued and outstanding shares of DMI in accordance with Exhibit 1 which shall set forth the allocation among the shareholders.. (b) Exemption from Registration. The parties hereto intend that the CITI Shares to be exchanged shall be unregistered and the issuance thereof is thus exempt from the registration requirements of the Securities Act of 1933, as amended (the "Act"), pursuant to Section 4(2) of the Act and the rules and regulations promulgated thereunder and exempt from the registration requirements of the applicable states. In furtherance thereof, Shareholders will execute and deliver to CITI at the Closing an investment letter suitable to CITI counsel, in form substantially as per Exhibit 2 attached hereto. (c) Non-Taxable Transaction. The parties intend to effect this transaction as a non-taxable reorganization pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. CITI shall be the surviving or parent corporation after the reorganization and DMI a wholly owned subsidiary of CITI. (d) Costs. Each party shall bear its own costs associated with this Agreement, the Closing, and all ancillary or related measures, including without limitation, costs of attorneys fees, accountants fees, or other costs or expenses, without right or recourse from the other. (e) Additional Documentation. The parties acknowledge that further agreements and documents both prior to and subsequent to Closing, in addition to the Exhibits appended hereto, may be required in order to effect the transactions contemplated hereunder. Each party agrees to provide and execute such other and further agreements or documentation as, in the opinions of respective counsel, are reasonably necessary to effect the transactions contemplated hereunder and to maintain regulatory and legal compliance. (f) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Levy & Levy, P.A., Plaza 1000, Suite 309, Main Street, Voorhees, New Jersey, 08043, commencing at 9:00 a.m, local time on the business day or at any other mutually agreed upon location or by Federal Express, following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take, at the closing itself) or such other date as the Parties may mutually determine (the "Closing Date"); provided, however, that the Closing Date shall be no later than August 31, 2000. (g) Deliveries at the Closing. At the Closing, (i) the Sellers will deliver to the Buyer their stock certificates properly endorsed and the various certificates, instruments, and documents referred to in this Agreement; (ii) the Buyer will deliver to the Sellers the instructions for Canterbury's transfer agent to issue the agreed upon CITI shares to Sellers; (iii) Employment Contracts between DMI and D. Kent Jordan and Mark Vallario in form and content mutually acceptable to them and to CITI as set forth in Exhibits 3(a) and 3(b), to be executed simultaneously with this Agreement at Closing. (h) Post-Closing Obligations. For a period of three years after the Closing, the Buyer shall afford each Seller and such Seller's representatives reasonable access to all the books and records relating to the Corporate Assets and the business of DMI for matters related to (i) the preparation of such Seller's tax returns, a tax investigation or audit of such Seller, (ii) any other reasonable need of such Seller relating to DMI's operation of its business prior to the Closing, or (iii) any claim asserted against such Seller. Such access shall be afforded by the Buyer upon the receipt of reasonable advance notice and during normal business hours and shall be had or done in such a manner so as not to interfere with the normal conduct of business of the Buyer. 3. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS Shareholders of DMI represent and warrant to the Buyer that the statements contained in this Section 3 are correct and complete as of the date of this Agreement except as set forth in the disclosure schedule accompanying this Agreement and initialed by the Parties (the "Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 3. (a) Organization. DMI is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (b) Authorization of Transaction. The Shareholders and DMI have full corporate power and authority, to execute and deliver this Agreement and to perform its obligations hereunder. Without limiting the generality of the foregoing, the board of directors of DMI has duly authorized the execution, delivery, and performance of this Agreement by DMI. This Agreement constitutes the valid and legally binding obligation of DMI enforceable in accordance with its terms and conditions. (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate in any material respect any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Sellers or DMI are subject, (ii) violate any provision of the charter or bylaws of DMI or (iii) conflict with, result in a material breach of, constitute a material default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which DMI is a party or by which it is bound or to which any of the Corporate Assets are subject (or result in the imposition of any Security Interest upon any of the Corporate Assets). DMI does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement. (d) Title to Assets. DMI has good and marketable title to, or a valid leasehold interest in, the assets used by it, located on its premises, or shown on the Most Recent Balance Sheet or acquired after the date thereof, free and clear of all Security Interests, except for assets disposed of in the Ordinary Course of Business since the date of the Most Recent Balance Sheet and except for liens disclosed in the Notes to the Financial Statements. Without limiting the generality of the foregoing, DMI has good and marketable title to all of the Corporate Assets, free and clear of any Security Interest or restriction on transfer, except for liens and leasehold interests disclosed in the Notes to the Financial Statements and in the Disclosure Schedule. (e) Subsidiaries. DMI does not have any Subsidiaries. (f) Financial Statements. Attached hereto as Exhibit 4 are the following financial statements (collectively the "Financial Statements"): (i) balance sheets, statements of income, retained earnings, and cash flows as of and for the last two fiscal years ended December 31, 1999 and December 31, 1998 and as adjusted for non-recurring expenses (the "Most Recent Fiscal Year End") for DMI; and (ii) unaudited balance sheet, statements of income, retained earnings, and cash flows (the "Most Recent Financial Statements" ) as of and for the six months ended June 30, 2000 and for the one month ending July 31, 2000 (the "Most Recent Fiscal Month End " ) for DMI. The Financial Statements (including the Notes thereto where applicable) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of DMI as of such dates and the results of operations of DMI for such periods, and are consistent with the books and records of DMI. The financial statements referenced in clause (ii) will be internally prepared by DMI and such financial statement information as of June 30, 2000 and July 31, 2000 is to the best of DMI's knowledge, true and correct. DMI hereby represents that DMI's financial statements are able to be audited for the time periods required under SEC and GAAP rules and guidelines within 3 months from closing. (g) Events Subsequent to Most Recent Fiscal Year End. Since the Most Recent Fiscal Year End, there has not been any material adverse change in the business, financial condition, operations, or results of operations of DMI or on behalf of DMI. Without limiting the generality of the foregoing, since that date. (i)DMI has not sold, leased, transferred, or assigned any of DMI's assets, tangible or intangible, of a value in excess of $1,000, other than for a fair consideration and in the Ordinary Course of Business; (ii)DMI has not entered into any agreement, contract, lease, or license (or series of related agreements, contracts, leases and licenses) outside the Ordinary Course of Business; (iii) No party (including DMI) has accelerated, terminated, modified, or canceled any material agreement, contract, lease or license (or series of related agreements, contracts, leases and licenses) to which the DMI is a party or by which it is bound; (iv) DMI has not permitted any Security Interest upon any of DMI's material assets, tangible or intangible; (v)DMI has not made any capital expenditure (or series of related capital expenditures) outside the Ordinary Course of Business; (vi) DMI has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions) ; (vii) DMI has not issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation; (viii) DMI has not delayed or postponed the payment of accounts payable and other Liabilities or DMI, other than as consistent with its Ordinary Course of Business. (ix) The Sellers have not canceled, compromised, waived, or released any right or claim (or series of related rights and claims in excess of $2,000), outside the Ordinary Course of Business. (x)The Sellers have not granted any license or sublicense of any rights under or with respect to any Intellectual Property; (xi) DMI represents that there has been no change made or authorized in the charter or bylaws of DMI; (xii) DMI has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of DMI's capital stock other than the equity securities issued to Messrs. Fischer and Hendrick; (xiii) DMI has not declared, set aside, or paid any dividend or made any distribution with respect to DMI's capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; (xiv) DMI has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (xv) DMI has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees outside the Ordinary Course of Business; (xvi) DMI has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement outside the Ordinary Course of Business; (xvii) Other than Ron Dilmore and David Hendrick, DMI has not granted any increase in the base compensation of any of its directors, officers, and employees outside the Ordinary Course of Business; (xviii) Intentionally Omitted. (xix) DMI has not made any other change in employment terms for any of DMI's directors, officers, and employees outside the Ordinary Course of Business; (xx) DMI has not made or pledged to make any charitable or other capital contribution. (xxi) DMI has not paid any amount to any third party with respect to any Liability or obligation (including any costs and expenses DMI has incurred or may incur in connection with this Agreement and the transactions contemplated hereby) which would not constitute an Assumed Liability if in existence as of the Closing, other than accounting fees equal in amount to the usual accounting costs which would have been incurred by DMI in the Ordinary Course of Business. (xxii) to the knowledge of DMI there has not been any other material occurrence, event, incident, action, failure to act, or transaction involving DMI which will have a material adverse effect upon the business of the Sellers; and (h) Undisclosed Liabilities. DMI does not have any undisclosed liabilities affecting their assets being sold herewith. There is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of the assets to be acquired giving rise to any liability. (i) Legal Compliance. DMI has complied in all material respects with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against it alleging any failure so to comply. (j) Tax and Other Returns and Reports. All federal, state, local and foreign Tax Returns and other similar filings required to be filed by DMI with respect to any federal, state, local or foreign tax have been filed with the appropriate governmental agencies in all jurisdictions in which such Tax Returns are required to be filed, and all such Tax Returns properly reflect the liabilities of DMI or Taxes for the periods, property or events covered thereby. All Taxes which are called for in the Tax Returns, or claimed to be due by any taxing authority from Sellers, have been properly accrued or paid. Sellers have not received any notice of assessment or proposed assessment in connection with any Tax Returns and there are no pending tax examinations of or tax claims asserted against the Acquired Assets. There are no tax liens (other than any lien for current taxes not yet due and payable) in any of the Acquired Assets. (k) Intellectual Property. (i)DMI owns or has the right to use pursuant to ownership, license, sublicense, agreement or permission all Intellectual Property used in the operation of the businesses of the Sellers as presently conducted. Each item of Intellectual Property owned or used by DMI immediately prior to the Closing hereunder will be owned or available for use by the Buyer on identical terms and conditions immediately subsequent to the Closing hereunder. (ii)To the knowledge of DMI, DMI has not interfered with, infringed upon, misappropriated, otherwise come into conflict with any material Intellectual Property rights of third parties, and none of DMI and the directors and officers of DMI has ever received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation. To the knowledge of DMI and the directors and officers of DMI, no significant competitor of DMI has interfered with infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of DMI for commercial purposes. (iii) Section 3(k)(iii) of the Disclosure Schedule identifies each item of Intellectual Property that any third party owns and that the Sellers use pursuant to license, sublicense, agreement, or permission (other than commercially available software which is subject to a "shrinkwrap" license (the "Shrinkwrap Software").The Sellers have delivered to the Buyer correct and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date) that are being purchased herewith. With respect to each item of Intellectual Property required to be identified in Section 3(k)(iii) of the disclosure Schedule, to the knowledge of DMI: (A) the license, sublicense, agreement, or permission covering the item is legal, valid, binding, enforceable, and in full force and effect; (B) the license, sublicense, agreement, or permission will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby (subject, however, to the assignments and assumptions referred to in Section 2 above and the receipt of any necessary consents); (C) to the knowledge of the Sellers, no party to the license, sublicense, agreement, or permission is in material breach or default, and no event has occurred which with notice or lapse of time would constitute a material breach or default or permit termination, modification, or acceleration thereunder; (D) no party to the license, sublicense, agreement, or permission has repudiated any provision thereof; (E) with respect to each sublicense, the representations and warranties set forth in subsections (A) through (D) above are true and correct with respect to the underlying license; (F) the Sellers have not granted any sublicense or similar right with respect to the license, sublicense, agreement, or permission. (iv) To the knowledge of any of the directors and officers of DMI, DMI will not interfere with, infringe upon, misappropriate, or otherwise come into conflict with, any Intellectual Property rights of third parties as a result of the continued operation of its business as presently conducted. (l) Tangible Assets. Substantially all of the tangible assets that are owned by DMI and used by DMI in the conduct of its business are in good operating condition and repair (subject to normal wear and tear), and is suitable for the purposes for which they presently are used, subject to technological obsolescence. Except as set forth immediately above, the Sellers make no representations or warranties of any kind, express or implied, with respect to the corporate tangible assets including, without limitation, any warranty of merchantability, non-infringement or fitness for a particular purpose. (m) Contracts. Section 3(m) of the Disclosure Schedule lists the following contracts and other agreements to which DMI is a party: (i)any agreement (or group of related agreements) for the lease of personal property to or from any Person providing for aggregate remaining lease payments in excess of $3,000; (ii)any agreement (or group of related agreements) for the purchase or sale of supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year, result in a material loss to the Sellers, or involve consideration in excess of $1,000; (iii) any agreement concerning a partnership or joint venture; (iv) any agreement (or group of related agreements) under which it has created, incurred, assumed, or, guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of $3,000 or under which it has imposed a Security Interest on any of its assets, tangible or intangible; (v) . . .any agreement concerning confidentiality or noncompetition; (vi) any agreement between DMI and its Affiliates. (vii) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of its current or former directors, officers, and employees which would result in liability to the Buyer; (viii) any collective bargaining agreement; (ix) any agreement for the employment of any individual on a full- time, part-time, consulting, or other basis providing annual compensation or providing severance benefits; (x)any agreement under which it has advanced or loaned any amount to any of its directors, officers, and employees outside the Ordinary Course of Business; (xi) any agreement under which the consequences of a default or termination could have a material adverse effect on the business, financial condition, operations, results of operations of DMI; or (xii) any other agreement (or group of related agreements) the performance of which involves consideration in excess of $5,000. The Sellers have furnished or made available to the Buyer a correct and complete copy of each written agreement listed in Section 3(m) of the Disclosure Schedule (as amended to date) and a written summary setting forth the terms and conditions of each oral agreement referred to in Section 3(m) of the Disclosure Schedule. With respect to each agreement required to be disclosed hereunder: (A) the agreement is legal, valid, binding, enforceable, and in full force and effect subject to laws limiting or affecting creditors' rights generally; (B) the agreement will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby (including and subject to the assignments and assumptions referred to in Section 2 above and the receipt of any necessary consents) subject to laws limiting or affecting creditors' rights generally; (C) no party is in breach or default, in any material respect, and no event has occurred which with notice or lapse of time would constitute a material breach or default, or permit termination, modification, or acceleration, under the agreement; and (D) to DMI's knowledge no party has repudiated any material provision of the agreement. With respect to verbal employment arrangements, the Disclosure Schedule shall only be required to list the name, title, base compensation, and full or part-time status of employees and those consultants currently performing active services for the Sellers. (n) Federal Tax Contingency Reserve. Shareholders agree that there will be a specific contingency reserve for any potential Internal Revenue Service (or any state taxing agency) for 1099 contractors paid by DMI from October 1998 to closing. The amount of the reserve will be $84,000 worth of Canterbury common stock (valued at the closing price of CITI stock on NASDAQ National Market on the day prior to closing). The reserves and statutory release dates are as follows: Year Reserve Release Date 1998 $ 4,000 January 1, 2001 1999 $26,000 January 1, 2002 2000 $54,000 January 1, 2003 It is also agreed that if there is sufficient documentation and/or proof of valid subcontractor status (to be determined by CITI and their accountants), the reserve for those particular individuals will be released prior to noted release date. (o) Powers of Attorney. There are no outstanding powers of attorney executed on behalf of the DMI or the Sellers. (p) Insurance. DMI's business has been insured through insurance policies maintained by DMI which at the time of closing will be current and in force. (q) Litigation. Section 3(q) of the Disclosure Schedule - Section 3, sets forth each instance in which DMI (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party or to DMI's knowledge, is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. None of the actions, suits, proceedings, hearings' and investigations set forth in Section 3(q) of the Disclosure Schedule could result in any material adverse change in the assets being sold and liabilities being assumed, business, financial condition, operations or results of operations of DMI. Neither DMI nor the directors and officers of DMI has any reason to believe that any such action, suit, proceeding, hearing, or investigation may be brought or threatened against DMI. (r) Employees. DMI has not been informed that any executive, key employee, employee engaged in training, or group of employees comprising the majority of the employees of any department that he, she or they intend to terminate employment with DMI. DMI is not a party to or bound by any collective bargaining agreement, nor has it experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes. DMI has not committed any unfair labor practice. DMI nor the directors and officers of DMI has any knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of DMI. (s) Employee Benefits. The employees of DMI are covered by employee benefit plans sponsored by DMI. (t) Guaranties. DMI is not a guarantor or otherwise liable for any Liability or obligation (including indebtedness) of any other Person except as set forth in Section 3(t) in Disclosure Schedule - Section 3. (u) Environment, Health, and Safety. (i)To the knowledge of the Sellers, DMI, the Sellers and their respective Affiliates have complied with all Environmental, Health, and Safety Laws, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply. Without limiting the generality of the preceding sentence, the Sellers have obtained and been in compliance with all of the material terms and conditions of all permits, licenses, and other authorizations which are required under, and has complied in all material respects with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables which are contained in, all Environmental, Health, and Safety Laws. (ii) DMI and the Sellers to the best of their knowledge do not have any Liability (and the Sellers have not handled or disposed of any substance, arranged for the disposal of any substance, exposed any employee or other individual to any substance or condition, or owned or operated any property or facility in any manner that could form the basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Sellers giving rise to any Liability) for damage to any site, location, or body of water (surface or subsurface), for any illness of or personal injury to any employee or other individual, under any Environmental, Health, and Safety Law except with respect to possible such liabilities associated with the use and operation of equipment used in the ordinary course of DMI's business, including electromagnetic radiation. (iii) To the knowledge of the Sellers and DMI, all properties and equipment used in the business of DMI have been free of asbestos, PCB'S, methylene chloride, trichloroethylene, 1,2-transdichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous Substances other than in de minimus quantities. (v) Certain Business Relationships With DMI. Neither of the Sellers have been involved in any business arrangement or relationship with DMI other than as stockholders, directors, officers and employees, within the past 12 months, and neither of the Sellers own any asset, tangible or intangible, which is used in the business of DMI or the assets being sold herewith. (w) Disclosure. The representations and warranties contained in this Section 3 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 3 not misleading. (x) Intentionally Omitted. (y) Assets Free and Clear. Shareholders hereby represent that at the time of Closing, DMI shall have the exclusive ownership of its assets free and clear of any liens or encumbrances except as set forth in an Exhibit to be prepared and attached to this contract and that no other liabilities, contingent liabilities or potential litigation exists. (z) Accounts Receivable Collectability Guaranty. The Balance Sheet as of July 31, 2000 shall be as set forth as attached in Exhibit 4(c), and the Shareholders shall personally indemnify CITI for the full collectability of any and all accounts receivable. 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer represents and warrants to the Sellers that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4), except as set forth in the Disclosure Schedule. The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 4. (a) Organization of the Buyer. Canterbury is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of Pennsylvania. (b) Authorization of Transaction. Canterbury has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Canterbury, enforceable in accordance with its terms and conditions. Each share of Stock of Canterbury to be issued to DMI at the closing will be duly and validly authorized and issued, free and clear of all liens and fully paid and non-assessable. (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in Section 2 above), will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is subject. Canterbury does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement (including the assignments and assumptions referred to in Section 2 above). (d) Securities Filings. Canterbury has made all filings required by the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and such filings did not contain any material misstatement or omit to state a material fact required to make the statements therein not misleading. (e) Disclosure. The representations and warranties contained in this paragraph 4 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this paragraph 4 not misleading. 5. PRE-CLOSING COVENANTS The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing. (a) General. Each of the Parties will use its best efforts to take all action, and to do all things necessary, in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 6 below). (b) Notices and Consents. Shareholders and DMI will give any notices to third parties that the Buyer reasonably may request in connection with the matters referred to in Section 3(c) above. Each of the Parties will give any notices to, make any filings with, and use its best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in Section 3(c) and Section 4(c) above. (c) Operation of Business. Shareholders and DMI will not engage in, and Shareholders and DMI will not cause DMI to engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business. Without limiting the generality of the foregoing, the Sellers will not cause DMI to (i) declare, set aside, or pay any dividend or make any distribution with respect to DMI's capital stock, (ii) pay any amount to any third party with respect to any Liability or obligation (including any costs and expenses the Sellers or DMI have incurred or may incur in connection with this Agreement and the transactions contemplated hereby other than Sellers' or DMI's usual accounting-related costs) which would not constitute a liability if in existence as of the Closing, or (iii) otherwise engage in any practice, take any action, or enter into any transaction of the sort described in Section 3(g) above. (d) Preservation of Business. Sellers will keep DMI's business and properties substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors, licensor, suppliers, customers, and employees. (e) Full Access. Sellers and DMI will permit representatives of the Buyer to have access at all reasonable times, and in a manner so as not to interfere with the normal business operations of DMI to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to DMI provided, however, that no activities will be carried out within DMI's premises except by prior arrangement with a representative of DMI who shall be designated for that purpose. Buyer shall use its best efforts to minimize the need to conduct on-site activities and, when they are necessary, to avoid unnecessary disruption of DMI's business. Sellers will make available to Buyer those of DMI's employees who are reasonably necessary in order for Buyer to complete its due diligence investigations. (f) Notice of Developments. Each Party will give prompt written notice to the other Party of any material adverse development causing a breach of any of its own representations and warranties in Section 3 and Section 4 above. No disclosure by any Party pursuant to this Section 5(f), however, shall be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant provided that if the party to whom a disclosure was made proceeds to closing, that party shall be deemed to have waived such breach and any remedies which may have been available with respect thereto. (g) Exclusivity. Sellers or DMI will not (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to the acquisition of any capital stock or other voting securities, or any substantial portion of the assets of DMI (including any acquisition structured as a merger, consolidation, or share exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing. (h) Termination of IRS Subchapter "S" Election. Sellers hereby agree to cause DMI to terminate IRS Subchapter "S" election as of August 1, 2000. 6. CONDITIONS TO OBLIGATION TO CLOSE (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3 above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Sellers shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator, wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect adversely and materially the right of the Buyer to own the Corporate Assets and to operate DMI; (iv) the Sellers shall have delivered to the Buyer a certificate to the effect that each of the conditions specified above in Section 6(a)(i)- (iv) is satisfied in all respects; (v) The Sellers and the Buyer shall have received all authorizations, consents, and approvals of governments and governmental agencies, if any, referred to in Section 3(c) and Section 4(c) above; (vi) all actions to be taken by the Sellers in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer. (vii) compliance with miscellaneous covenants in Paragraph 9 and elsewhere in this Agreement. The Buyer may waive any condition specified in this Section 6(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Sellers. The obligation of the Sellers to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 4 above shall be true and correct in all material respects at and as of the Closing Date; (ii) Canterbury shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, or charge shall be in effect); (iv) the Buyer shall have delivered to the Sellers a certificate to the effect that each of the conditions specified above in Section 6(b)(i)- (iii) is satisfied in all respects; (v) The Sellers, DMI and the Buyer shall have received all other authorizations, consents, and approvals of governments and governmental agencies referred to in Section 3(c) and Section 4(c) above; (vi) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Sellers. The Sellers may waive any condition specified in this Section 6(b) if it executes a writing so stating at or prior to the Closing. 7. TERMINATION (a) Termination of Agreement. Certain of the Parties may terminate this Agreement as provided below prior to Closing: (i) the Buyer and the Sellers may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Buyer may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing (A) in the event the Sellers have breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Sellers of the breach, and the breach has continued without cure for a period of 10 days after the notice of breach or (B) if the Closing shall not have occurred on or before August 31, 2000 by reason of the failure of any condition precedent under Section 6(a) hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and (iii) the Balance Sheet as of July 31, 2000 shall be as set forth as attached as Exhibit 4(c), and the Shareholders shall personally indemnify CITI for the full collectability of any and all accounts receivable. 8. INDEMNIFICATION (a) Survival of Representations and Warranties. All of the representations of the Buyer and the Sellers contained in this Agreement shall survive the Closing and continue in full force and effect thereafter for a period of two (2) years following the date of Closing (subject to any applicable statutes of limitations, the last day of which shall be the "Expiration Date"). (b) Indemnification Provisions for Benefit of the Buyer. Subject to the limitations set forth in Section 8(e) below: (i) In the event the Sellers breach (or in the event any third party alleges facts that, if true, would mean DMI has breached) any of its material representations, warranties, and covenants contained in this Agreement, and, provided that the Buyer makes a written claim for indemnification against the Sellers within the survival period set forth in Section8(a) above, then Sellers agree to indemnify the Buyer from and against the entirety of any losses the Buyer may suffer through and after the date of the claim for indemnification including any Losses the Buyer may suffer after the end of any applicable survival period resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach). (ii) The Sellers agree to indemnify the Buyer from and against the entirety of any Losses the Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by any Liability of DMI which is not a liability as set forth in the Closing Balance Sheet. This indemnity obligation with respect to Losses arising from any Third Party Claim (as defined below) shall not be limited to the survival period set forth in Paragraph 8(a) above. (iii) The Sellers agree to indemnify the Buyer against the failure of DMI to deliver to Buyer by October 31, 2000, two hundred nine thousand dollars ($209,000) from the collection of Receivables; to the extent of such deficiency; provided, however, that the remedy provided herein shall not duplicate any relief provided to Buyer under Section 2(c) and 7(a)(iii) hereof. (iv) For purposes of this Section8, the term "Losses" shall mean all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. (v) At the option of Buyer, Buyer may set off any damages or liabilities due Buyer by reducing Buyer's common stock issued to Sellers by the pro rata closing price per share of Buyer's stock on NASDAQ National market on the day the damages are claimed by Buyer, or the price of the original issuance, whichever is higher. (vi) Notwithstanding anything to contrary contained herein, Sellers do not agree to and shall not indemnify Buyer for any Losses which have a Basis that arises or occurs after the Closing. (c) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this Paragraph 8, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. (ii) Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notified the Indemnified Party in writing with 15 days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will, to the full extent required by this Agreement, indemnify the Indemnified Party from and against the entirety of any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party Claim involves only money damage and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a prejudicial custom or practice materially adverse to the continuing business interests of the Indemnified Party, and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. (iii) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section8(c)(ii) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably). (iv) In the event any of the conditions in Section8(c)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (B ) the Indemnifying Parties will reimburse the Indemnified party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses), and (C) the Indemnifying Parties will remain responsible for any Losses the Indemnified Party may suffer, result from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this paragraph 8. (d) Indemnification Provisions for Benefit of the Sellers. (i) The Buyer agrees to indemnify the Sellers from and against the entirety of Losses the Sellers may suffer resulting from, arising out of, relating to, in the nature of, or caused by Buyer's breach of any material representation, warranty or covenant. (ii) For purposes hereof, the term "Losses" shall have the same meaning as set forth in Section 8(a)(iv) above, and all other capitalized terms shall have the meaning elsewhere provided in this Agreement. (e) Limitations and Conditions on Indemnification. Except as otherwise specifically provided in this Agreement: (i) Indemnity obligations of Shareholders hereunder may at Buyer's election, be satisfied through the payment of cash or the delivery of Stock of Canterbury, or a combination thereof. For purposes of calculating the value of the Stock of Buyer received or delivered by Shareholders (for purposes of determining the amount of any indemnity paid), the value of Stock of Canterbury shall be determined as of the date of notice of the indemnity claim at the closing price per share of Canterbury's stock on NASDAQ National Market, or at the original price at Closing, whichever is higher. (ii) Except as specifically set forth in this Agreement, no party shall be entitled to indemnity for claims or conditions which have been waived, or deemed to be waived, by such party. (iii) Notwithstanding any provision herein to the contrary, no Indemnified Party shall be entitled to make any claim for indemnification hereunder after the appropriate Expiration Date, provided, however, that if prior to the close of business on the Expiration Date an Indemnifying Party shall have been notified of a claim for indemnity hereunder and such claim shall not have been finally resolved or disposed of at such date, the basis for such claim shall continue to survive with respect to such claim and shall remain a basis for indemnity hereunder with respect to such claim until such claim is finally resolved or disposed of in accordance with the terms hereof. (iv) Upon making a claim for indemnification, the Indemnifying Party shall be subrogated, to the extent of such payment, to any rights that the Indemnified Party may have against any other parties with respect to the subject matter underlying such indemnified claim. (v) Each party's rights under Section 8 hereof (as specifically limited thereby) shall be the exclusive means by which such party shall seek money damages against another party in connection with the transactions contemplated hereby. 9. MISCELLANEOUS (a) Registration of Stock of Canterbury. (i) In ninety (90) days from the closing, Canterbury shall: (A) prepare and file at its own expense with the SEC a registration statement on Form S-3 under the Securities Act covering thirty (30%) percent of the Stock of Canterbury (not including any reserve shares as set forth in Paragraph 3(n)) to be issued to Shareholders hereunder (the "Registration Statement"), (B) use its best efforts to have the Registration Statement declared effective by the SEC under the Securities Act as soon as possible thereafter, and (C) keep the Registration Statement continuously in effect, if necessary, until the earlier to occur of the first anniversary of the closing or the date on which all of the shares of Stock of Canterbury registered under the Registration Statement have been sold to Canterbury in accordance with Section 9(e) below or to the public. (ii) The Registration Statement, when filed, (A) will comply as to form with the requirements of the Securities Act in all material respects, and (B) will not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, provided, however, that Canterbury and the Buyer make no representation or warranty in respect of any information that Shareholders supply for use in the Registration Statement. (iii) As to the Stock of Canterbury registered pursuant to this Section 9(a), Canterbury and Buyer covenant and agree that: (A) It shall immediately advise Shareholders in writing of the occurrence and time of occurrence of each of the following events: (1) the issuance by the SEC of an order declaring the Registration Statement effective; (2) any request by the SEC for an amendment of the Registration Statement as originally filed or as amended or as effective or for any amendment or supplement to the final prospectus or preliminary prospectus contained therein, or for any additional information with respect to the registration Statement or such prospectus or any preliminary prospectus; (3) the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or any order suspending or preventing the use of such final prospectus or any such preliminary prospectus, or the initiation of any proceedings for such purpose. (B) At Sellers' expense, Canterbury will Blue Sky any sale of the Stock of Canterbury in any two jurisdictions that it qualifies for. (C) It shall timely file all reports required by the Securities Exchange Act and promptly amend or supplement the Registration Statement at any time during the period of its effectiveness in order to make the statements therein not misleading, or as otherwise may be required by the Securities Act and the rules and regulations promulgated thereunder; (D) It shall make every reasonable effort to prevent the issuance of any stop order and, if issued, to obtain the withdrawal thereof at the earliest practicable time; and (E) All expenses of the Registration Statement, and all amendments and supplements thereto, will be borne by Canterbury. Canterbury shall furnish such number of copies of the prospectus as Shareholders reasonably request in order to facilitate the disposition of the Stock of Canterbury, but in no event more than five (5) copies. (F) Buyer will indemnify Shareholders with respect to each registration which has been effected pursuant to this Section 9(a) against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration and related qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make statements therein not misleading, or any violation by Buyer of the Securities Act or the Securities Exchange Act or any rule or regulation applicable to Buyer and relating to action or inaction required of Buyer in connection with any such registration and related qualification or compliance, and will reimburse Shareholders for any reasonable legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that Buyer will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to Buyer by Shareholders in writing and stated to be specifically for use therein. (G) Shareholders will indemnify Buyer and Canterbury, and each of its directors and officers, and each Person who controls Buyer, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on (1) any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document made by Shareholders, or (2) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by Shareholders therein not misleading, and will reimburse Buyer and such directors, officers, or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to Buyer by Shareholders and stated to be specifically for use therein; provided, however, that the obligations of Shareholders hereunder shall be limited as set forth in Section 8(e) hereof. (H) The procedure for indemnity hereunder shall be as set forth in Section 8 hereof. (I) Shareholders hereby agree that whenever Shareholders desire to legally or contractually sell any Canterbury stock that they received as a result of this transaction, or any bonuses, conversions, or other issuances in the future of stock to them by CITI either for registered or unregistered shares of CITI common stock, Shareholders hereby agree to grant CITI or its designees a fifteen (15) business day First Right of Refusal. Shareholder must notify CITI in writing its intent to sell a certain number of shares to (i) any bonafide third party. CITI or its designees have the right within fifteen (15) business days to match such offer. If CITI or its designees decline to match same than Shareholder(s) has the right to complete said sale within thirty (30) days. If Shareholder fails to do so than Shareholder must reoffer any and all shares for CITI under the same procedures; (ii) if Shareholder(s) desires to sell any or all shares in the public market under any lawful exemption or Registration Statement, Shareholder(s) must notify CITI in writing after five (5) o'clock p.m. on the day of notice in utilizing the closing bid price on NASDAQ National Market of that day. CITI has fifteen (15) business days to purchase the number of shares set forth in the notice at the aforesaid price of the day of notice. If CITI or its designees fail to do so than Shareholder(s) is free to complete the sale within thirty (30) days thereafter, otherwise Shareholder(s) is required to follow same procedure as outlined above for any subsequent resale. (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceedings, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Sellers, each of the other parties will cooperate reasonably with the contesting or defending Party and his or its counsel in the contest or defense, make available his or its personnel, and provide such testimony and access to his or its books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Section 8). (c) Restrictive Covenants. (i) D. Kent Jordan and Mark Vallario have agreed to restrictive covenants as set forth in their Employment Agreements which are exhibits to this Agreement. Those Shareholders confirm and agree that they will abide the restrictive covenants as set forth in those Agreements. (d) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (e) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they related in any way to the subject matter hereof. (f) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). (g) Counterparts. This Agreement may be executed in any number of counterparts, including counterparts transmitted by telecopier or FAX, any one of which shall constitute an original of this Agreement. When counterparts of facsimile copies have been executed by all parties, they shall have the same effect as if the signature to each counterpart or copy were upon the same document and copies of such documents shall be deemed valid as originals. The parties agree that all such signatures may be transferred to a single document upon the request of any party. (h) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (i) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is personally delivered, sent by reputable overnight delivery service or by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to DMI: Copy to: Datamosaic International, Inc. Steve Dubner, Esq. Two Sun Court/Suite 300 Higgins & Dubner Norcross, GA. 30092 Atlanta Financial Center (770) 239-1818 3333 Peachtree Road (770) 239-1818 (fax) Atlanta, Georgia 30326 (404) 264-1011 (404) 264-1044 (fax) If to the Buyer: Copy to: Canterbury Information Technology, Inc. Levy & Levy, P.A. 1600 Medford Plaza Plaza 1000, Suite 309 Route 70 & Hartford Road Main Street Medford, NJ 08055 Voorhees, NJ 08043 (609) 953-0044 (856) 751-9494 (609) 953-0062 (fax) (856) 751-9779 (fax) Any Party may send any notice, request, demand, claim, or other communication hereunder to the recipient at the address set forth above using any other means (including personal delivery, expedite messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand other communication shall be deemed to have been duly given unless and until it actually is received by its intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other' communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. (j) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New Jersey without giving effect to any choice or conflict of law provision or rule (whether of the State of New Jersey, or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New Jersey. (k) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Sellers. The Sellers may consent to any such amendment at any time prior to the Closing with the prior authorization of its board of directors; provided, however, that any amendment effected has approved this Agreement will be subject to the restrictions contained in the Delaware General Corporation Law. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (l) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (m) Expenses. The Buyer and the Sellers will bear their own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. Buyer and Sellers agree that each will be solely responsible for all its own legal, accounting and consulting fees, if any, for the review and completion of this transaction, except that Buyer will pay the cost of the audit fee if required for its auditor Ernst & Young, LLP or any other auditor firm as designated by Buyer. (n) Brokers'/Finders' Fees. Sellers represent that they have not incurred or will become liable for any broker's commission or finder's fee relating to or in connection with the transactions contemplated by this Agreement. (o) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Disclosure Schedule identifies the exception with particularity and describes the relevant facts in reasonable detail. (p) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (q) Specific Performance. Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Party, shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter (subject to the provisions set forth in Section 9(t) below), in addition to any other remedy to which it may be entitled, at law or in equity (except as limited by this Agreement). (r) Arbitration. All claims, disputes and other matters in question hereunder arising out of or relating to this Agreement or the transactions contemplated herein shall be decided by binding arbitration in accordance with the rules of the American Arbitration Association unless the parties mutually agree otherwise. Such arbitration shall take place in Medford, New Jersey. The award rendered by the arbitrator shall be final, and judgment may be entered upon in accordance with applicable law in any court having jurisdiction thereof. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above written. CANTERBURY INFORMATION TECHNOLOGY, INC. /s/Kevin J. McAndrew /S/Stanton M. Pikus Kevin J. McAndrew, Executive Vice Stanton M. Pikus, President President SELLERS /s/ Mark Vallario /s/ D. Kent Jordan Mark Vallario D. Kent Jordan /s/Christopher D. Fischer /s/David Hendrick Christopher D. Fischer David Hendrick SCHEDULE 1 ALLOCATION OF DMI'S SHAREHOLDERS SCHEDULE 2 INVESTMENT LETTER SCHEDULE 3(a) EMPLOYMENT AGREEMENT D. KENT JORDAN SCHEDULE 3(b) EMPLOYMENT AGREEMENT MARK VALLARIO SCHEDULE 4(a) FINANCIAL STATEMENTS 1998 AND 1999 BALANCE SHEETS AND INCOME STATEMENTS SCHEDULE 4(b) FINANCIAL STATEMENTS UNAUDITED BALANCE SHEET AND INCOME STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 SCHEDULE 4(c) FINANCIAL STATEMENTS UNAUDITED BALANCE SHEET AND INCOME STATEMENTS FOR THE ONE MONTH ENDED JULY 31, 2000 SCHEDULE 5(a) DISCLOSURE SCHEDULE - SECTION 3 LITIGATION SCHEDULE 5(b) DISCLOSURE SCHEDULE - SECTION 3 GUARANTOR OBLIGATIONS SCHEDULE 6 DISCLOSURE SCHEDULE - SECTION 4 EX-24.1 4 0004.txt CONSENT OF ACCOUNTANTS EXHIBIT 24.1 CONSENT OF CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3 No. 333- ) and related Prospectus of Canterbury Information Technology, Inc. for the registration of 66,428 shares of its common stock and to the incorporation by reference therein of our report dated February 25, 2000, with respect to the consolidated financial statements of Canterbury Information Technology, Inc. included in its Annual Report (Form 10-K) for the year ended November 30, 1999, filed with the Securities and Exchange Commission. /s/Ernst & Young LLP Philadelphia, PA. 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