Exhibit 10.12

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT (“this Lease”) is entered into as of the 16th day of June,
2003 between C P INVESTMENTS, INC., an Alabama corporation (hereinafter referred
to as the “Landlord”), and COMPUTER PROGRAMS AND SYSTEMS, INC., a Delaware
corporation (hereinafter referred to as the “Tenant”).

 

WITNESSETH:

 

The Landlord, for and in consideration of the rents, conditions, terms and
covenants herein specified to be paid, performed and observed by the Tenant,
does hereby let, lease and demise to the Tenant, and the Tenant does hereby
lease and take from the Landlord, that certain real estate with accompanying
improvements and appurtenances located at 6508 Wall Street in the City and
County of Mobile, State of Alabama and more particularly identified as Building
8 on Exhibit A attached hereto and incorporated herein by reference (the
“Demised Premises”) upon the following terms and conditions:

 

NOW, THEREFORE, in consideration of the premises and the rents, covenants and
conditions hereinafter contained, the Landlord and the Tenant do hereby
covenant, promise and agree as follows:

 

1. Landlord does hereby lease unto Tenant and Tenant does hereby lease from
Landlord the Demised Premises for a term of one hundred twenty (120) calendar
months commencing as of June 16, 2003 (hereinafter referred to as the “Lease
Term”).

 

2. Tenant shall during the first year of the Lease Term, pay to the Landlord an
annual rental of Seventy Two Thousand, and No/100 Dollars ($72,000.00) unless
abated or diminished as hereinafter provided, in equal monthly installments of
Six Thousand, and No/100 Dollars ($6,000.00) in advance, on the 1st day of each
month, commencing upon the 16th day of June, 2003. For each of the remaining
nine years of the Lease Term, the rental rate shall be adjusted, as of May 31,
2004 and on May 31 of each year thereafter, in accordance with changes in the
Consumer Price Index (“CPI”) as published by the Bureau of Labor Statistics for
All Urban Consumers (CPI-U), 1982-84 = 100. Upon each such lease rate adjustment
date, the lease rate for the upcoming year of the Lease Term shall be an amount
equal to the monthly lease rate for the immediately preceding year multiplied by
a fraction, the denominator of which shall be the CPI for April, 2004 and the
numerator of which shall be the CPI for the month of such lease rate adjustment.
It is the intention of the parties that the determination of the adjusted lease
rate shall not be distorted by any changes in the method by which the CPI is
determined or the form in which the CPI is presented, including but not limited
to, changes in the reference year on which the CPI is based or changes in the
components of the CPI. Accordingly, if the method by which the CPI is determined
or the form in which the CPI is presented is hereafter changed, the index used
in the numerator of the fraction described above shall be adjusted so that such
index is determined and presented on the same basis as the CPI used in the
denominator of such fraction. To the extent possible, such

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adjustment shall be based on any adjustment factor published by the U.S.
Department of Labor or any successor governmental agency. If for any reason the
index used in the numerator of such fraction cannot be determined on the same
basis as the CPI used in the denominator of such fraction, or if the CPI is not
hereafter published, the adjusted lease rate shall be determined by reference to
the index of consumer prices then published by the U.S. Government, or an agency
thereof, that most nearly resembles the CPI as in effect for April, 2004.

 

In addition to the foregoing, the rental may also be re-negotiated at such
future times that additional rental space may become available for use by Tenant
at the Demised Premises.

 

Notwithstanding the foregoing, the parties hereby agree that ninety (90) days
prior to the expiration of the first five (5) years of the Lease Term, they
shall obtain an appraisal, in accordance with the procedures set forth below, in
order to determine the Fair Market Rental Value of the Demised Premises. Upon
the completion of such appraisal, the rental rate for the sixth (6th) year of
the Lease Term shall be adjusted to an amount equal to the Fair Market Rental
Value as set forth in said appraisal.

 

On or about the date that is ninety (90) days prior to the expiration of the
fifth (5th) year of the Lease Term, Landlord and Tenant shall consult with one
another for the purpose of appointing a mutually acceptable qualified
independent appraiser. If the parties are unable to agree on an appraiser within
ten (10) days, such Fair Market Rental Value shall be determined by a panel of
three independent appraisers, one of whom shall be selected by each of Landlord
and Tenant within five (5) days thereafter. If one party appoints an appraiser
pursuant to the immediately preceding sentence, and if the other party fails to
appoint a second appraiser within the applicable time limit, the appraisal shall
be made by such appraiser. On or before the tenth day after appointment of the
second appraiser, a third appraiser shall be selected by agreement of the first
two appraisers. Landlord and Tenant shall split all fees and expenses of the
appraisers. Each appraiser appointed pursuant to the foregoing procedure shall
be experienced, have equivalent qualifications to those of a senior member of
the American Society of Appraisers, shall be independent of Landlord and Tenant,
and shall be instructed to determine Fair Market Rental Value in accordance with
the uniform standards for professional appraisal practice or the equivalent,
before the 45th day after the appointment of the last of such appraisers to be
appointed, and such determination shall be final, binding and conclusive upon
the parties. If three appraisers shall be appointed, the determination of Fair
Market Rental Value shall be the average of the three appraisals rendered by the
appraisers. In the event, however, that the lowest or the highest of the three
appraisals, or both, varies by more than ten percent (10%) from the middle
appraisal, the appraisal or appraisals so varying shall be disregarded and the
average of the remaining appraisals, or the remaining appraisal, shall be the
determination of Fair Market Rental Value.

 

For purposes of this section, (i) “Fair Market Rental Value” means an amount
determined by an Independent Appraisal (as defined below) on the basis of, and
shall be equal in amount to, the rental rate which would be obtained in an
arm’s-length transaction between an informed and willing tenant under no
compulsion to lease and an informed and willing landlord under no compulsion to
rent; and (ii) “Independent Appraisal” means the procedure specified above for
determining Fair Market Rental Value.

 

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3. Landlord represents and warrants that (A) it is the owner in fee simple of
the Demised Premises; (B) the Demised Premises are free and clear of all liens
and encumbrances other than the lien of current ad valorem taxes, easements for
roads and utilities serving the Demised Premises, setbacks and other conditions
of title as may be set forth in any recorded plat, easements and restrictions of
record that do not interfere with the present use of the Demised Premises, and
those liens and encumbrances set forth on Exhibit B attached hereto (the
“Permitted Encumbrances”); (C) Landlord has not received any notification from
any governmental authority of any pending public improvements affecting the
Demised Premises or requiring any repairs, replacements or alterations to the
Demised Premises that have not been satisfactorily made; (D) Landlord has no
knowledge of any pending or threatened condemnation or appropriation of all or
any part of the Demised Premises by any governmental authority or other entity
having the right of eminent domain; and (E) to the best of Landlord’s knowledge
and belief, there are no applicable laws, ordinances or regulations that would
prohibit or interfere with the use of the Demised Premises by Tenant for its
intended use thereof.

 

Landlord covenants that Tenant, by paying the rent herein reserved and
performing and observing all of the covenants and agreements herein agreed by
Tenant to be kept and performed, may peaceably hold and enjoy the Demised
Premises with exclusive control and possession thereof during the full Lease
Term without hindrance or interruption by Landlord and that Landlord will
warrant and defend Tenant in peaceful and quiet enjoyment of the Demised
Premises against the claims of all persons claiming through or under Landlord,
except condemning and similar authorities.

 

4. The Tenant shall assess the Demised Premises and shall pay promptly as and
when they become due all real estate taxes and all assessments, water rates and
water charges, and other governmental levies and charges, general and special,
ordinary and extraordinary, unforeseen as well as foreseen, of any kind, which
are assessed or imposed upon the Demised Premises or any part thereof, or become
payable during the term of this Lease.

 

During the term of this Lease, Tenant may attempt to have the assessed valuation
of the Demised Premises reduced or may initiate proceedings to contest the Taxes
and Assessments. If requested by Tenant, Landlord shall join in any such
proceedings initiated by Tenant; provided that Tenant shall pay all costs and
expenses in connection therewith, including reasonable costs and expenses
incurred by Landlord. Upon the final determination of any such proceedings,
Tenant immediately shall pay the Taxes and Assessments, together with all costs,
charges, interest and penalties, incidental to the proceedings.

 

5. Landlord hereby demises said premises in “as is” condition and Tenant accepts
same “as is”. Tenant shall make and pay for all repairs and replacements to the
Demised Premises including all water, plumbing, gas or electrical lines or
conduits originally furnished by the Landlord.

 

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6. Tenant may, at its own expense, from time to time, make such alterations,
additions or changes, structural or otherwise, in and to the Demised Premises as
it may deem necessary or suitable; provided, however, Tenant shall obtain
Landlord’s prior written consent to plans and specifications for structural
alterations, additions or changes; provided, further, Landlord shall not
unreasonably withhold its consent thereto if the structural strength or value of
the building will not be reduced or impaired by such work. The term “structural
changes”, as used herein, shall not include moving of stud partitions, minor
plumbing and electrical work, modification and rearrangement of fixtures or
other minor changes.

 

7. Tenant shall contract in its own name for and pay when due, all charges and
bills for utility services used on or charged against the Demised Premises,
including, without limitation, all gas, water, sewer, electricity and telephone
services, during the term of this Lease, and any extensions or renewals thereof.

 

8. If, as the result of any neglect of the Tenant, its agents, servants or
invitees, or the nature of the use and occupancy of the Demised Premises by the
Tenant, any Federal, State or Municipal government or any department or division
thereof has or hereafter shall condemn the Demised Premises or any part thereof
as unsafe or as not in conformity with the laws, regulations or orders relating
to the use, occupancy and construction thereof, or has ordered or required or
shall hereafter order or require any rebuilding, alteration or repair thereof or
installation therein, the Tenant, at its own expense, will proceed with due
diligence to comply with such laws, regulations or orders and no abatement of
rent shall be effective.

 

9. Tenant shall comply with, at all times and in all respects, all laws and
ordinances relating to nuisances, health, safety and sanitation as respects
Tenant’s use of the Demised Premises and the street abounding same. Tenant will
not commit any waste or permit the same to be done, and shall keep the Demised
Premises in a neat and orderly condition.

 

10. Tenant shall insure the Demised Premises against damage or destruction by
fire and other casualties insured under a standard extended coverage
endorsement. Said insurance shall be in an amount equal to not less than eighty
percent (80%) of the insurable value of the permanent improvements thereof. The
cost of such insurance shall be borne by the Tenant and all policies with
respect to the Demised Premises shall bear endorsements naming the Landlord and
Tenant as loss payees as their interest may appear.

 

In the event that, at any time during the Lease Term the permanent improvements
then constituting the Demised Premises shall be damaged or destroyed (partially
or totally) by fire, the elements or any other casualty, Landlord shall, with
due diligence repair, rebuild and restore the same as nearly as practicable to
the condition existing just prior to such damage or destruction. The cost of
such repair, restoration and rebuilding shall be borne by Tenant, provided that
if (a) the amount recovered on said insurance is less than eighty percent (80%)
of the reasonably estimated cost of such repairs, restoration and rebuilding and
(b) such estimated cost is more than $100,000.00, then either party may
terminate this Lease as of the date of such damage or destruction by giving
written notice to the other party within thirty (30) days after receipt of such
estimate and Tenant shall have an additional sixty (60) days within which to
remove its property from the Demised Premises.

 

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During any period commencing upon the date of any such damage or destruction and
ending upon the completion of the repairs, rebuilding and restoration required
herein, there shall be a reasonable abatement in the annual rental and any other
charges payable under this Lease equal to any insurance proceeds received by
Landlord therefor.

 

11. In the event of condemnation or sale under threat of condemnation, in whole
or in part, of the Demised Premises, the proceeds therefrom shall be paid to
Landlord and Tenant as owners and Tenant shall not receive compensation in
addition thereto because of the termination in whole or in part of Tenant’s
tenancy.

 

In the event the Demised Premises, or such portion thereof rendering the same
untenable, shall be expropriated by public or quasi-public authority, this Lease
shall terminate as of the date Tenant shall be deprived of the physical
possession thereof.

 

12. The Demised Premises shall not be used for any unlawful purpose.

 

13. If the rent reserved in this Lease, or any part thereof, shall remain unpaid
for a period of thirty (30) days or if Tenant shall be in default under any
other provision of this Lease and shall remain so for a period of thirty (30)
days after notice to Tenant of said nonpayment or other default, then Landlord
may, by giving notice to Tenant at any time thereafter during the continuance of
such default, terminate this Lease and either (a) re-enter the Demised Premises
by summary proceedings or otherwise, expel Tenant and remove all property
therefrom, relet the same and receive the rent therefrom, and Tenant shall
remain liable for the equivalent of the amount of all rent reserved herein less
the net rent received from reletting, if any, after deducting therefrom the cost
(including attorney’s fees) of obtaining possession of the Demised Premises and
of any repairs and alterations necessary to prepare it for reletting, or (b) sue
for and recover the entire unpaid rent for the remainder of the term of this
Lease. In the event of default by Tenant in payment of any rental due hereunder
and employment of an attorney for the collection of the same, Tenant agrees to
pay a reasonable attorney’s fee for the services of such attorney.

 

14. If a petition in bankruptcy shall be filed by Tenant, or if Tenant shall be
adjudicated bankrupt, or if Tenant shall make a general assignment for the
benefit of creditors, or if in any proceeding based upon the insolvency of
Tenant a receiver of all the property of Tenant shall be appointed, then
Landlord may, at its option, terminate this Lease by giving notice to Tenant of
its intention so to do.

 

15. During the Lease Term, Tenant and its assignees and sublessees shall
indemnify and save Landlord harmless against all penalties, claims, or demands
arising from Tenant’s negligence or wrongful use of the Demised Premises, except
those which shall result from the act, default or negligence of Landlord,
Landlord’s employees, agents, licensees, invitees or contractors.

 

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In addition, Tenant agrees to maintain insurance against all liabilities for
damages on account of injuries to property or person, including death, sustained
by any person or persons while on the Demised Premises, in a general liability
combined limits policy or policies in the amount of One Million and No/100
Dollars ($1,000,000.00) with respect to injury to any one person, to any one
accident or disaster, and with respect to damage to property.

 

16. In the event Landlord shall fail to perform any obligations on any mortgage
or encumbrance affecting title to the Demised Premises and to which this Lease
shall be subordinate, or shall fail to perform any obligation specified in this
Lease, then Tenant may, after the thirty (30) days notice thereof by Tenant,
cure such default, all on behalf of and at the expense of Landlord, and do all
necessary work and make all necessary payments in connection therewith, and
Landlord shall on demand pay Tenant forthwith the amount so paid by Tenant
together with interest thereon at the rate of 10%, but Tenant may not withhold
rental payments and other payments thereafter due to Landlord.

 

17. At the expiration or earlier termination of the Lease Term, Tenant shall
surrender the Demised Premises, together with alterations, additions and
improvements then a part of said premises, in good order and condition except
for the following: ordinary wear and tear, repairs required to be made by
Landlord, and loss or damage by fire, the elements and other casualty. All
furniture and trade fixtures installed in said building at the expense of Tenant
or other occupant shall remain the property of Tenant or such other occupant.

 

18. Tenant may hereinafter sublet all of the Demised Premises or assign this
Lease to a parent, affiliate or subsidiary of the Tenant without Landlord’s
prior written approval. Tenant may not, however, sublet all or any part of the
Demised Premises or assign this Lease under circumstances not listed above
without Landlord’s prior written approval, which consent shall not be
unreasonably withheld.

 

19. Landlord hereby agrees to and shall indemnify Tenant and his successors and
assigns, and Tenant hereby agrees to and shall indemnify Landlord and its
successors and assigns in respect of: any liability, damage, cost, expense or
deficiency resulting from any misrepresentations, breach of warranty or
nonfulfillment of any representation or agreement of the indemnifying party made
herein, and from any misrepresentation in or omission from any certificate or
other instrument furnished or to be furnished to the indemnified party hereunder
as well as against all actions, suits, process, demands, assessments, judgments,
costs and expenses, including counsel fees, incident to any of the foregoing.
This indemnity shall survive the expiration or termination of this Lease for a
term of two (2) years.

 

20. Notices required under this Lease shall be in writing and deemed to be
properly served on receipt thereof if sent by certified or registered mail to
Landlord at the last address where rent was paid or to Tenant at its principal
office in Mobile, Alabama, or to any subsequent address which Tenant shall
designate for such purpose.

 

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21. Landlord shall have the right to enter upon the Demised Premises at all
reasonable hours for the purpose of inspection and making any repairs or
restorations which it may be required to make under the terms of this Lease, but
such rights shall be exercised in such a manner as not to unreasonably interfere
with the business of Tenant.

 

22. The failure of Landlord or Tenant to insist, in any one or more instances,
upon a strict performance of any of the covenants of this Lease, or to exercise
an option herein contained shall not be construed as a waiver or a
relinquishment for the future, of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by Landlord of rent,
with knowledge of the breach of any covenant hereof, shall not be deemed a
waiver of such breach, and no waiver by Landlord or Tenant of any provision
hereof shall be deemed to have been made unless expressed in writing, and signed
by Landlord or Tenant, or their agents.

 

23. Both Landlord and Tenant waive their right of subrogation against the other
party for any reason whatsoever, and any insurance policies herein required to
be procured shall contain a waiver of any right of subrogation by the insurance
company against such other party.

 

24. The necessary grammatical changes which shall be require make the provisions
of this Lease apply (a) in the plural sense if there shall be more than one
Landlord, and (b) to any Landlord which shall be either a corporation, an
association, a partnership, or and individual, male or female, shall in all
instances be assumed as though in each case fully expressed. Unless otherwise
provided, upon the termination of this Lease under any of the sections hereof,
the parties hereto shall be relieved of any further liability hereunder except
as to acts, omissions or defaults occurring prior to such termination.

 

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25. If any term or provision of this Lease, or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of this Lease or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and enforced to the fullest extent permitted by law.

 

26. This Lease shall be interpreted and construed pursuant to and in accordance
with the laws of the State of Alabama. Time is of the essence of this Lease.

 

27. The conditions, covenants and agreements contained in this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns. All covenants and
agreements of this Lease shall run with the land.

 

IN WITNESS WHEREOF, the parties hereto have executed these presents in duplicate
and affixed their seals hereto as of the day and year first above written.

 

C P INVESTMENTS, INC.

By:

 

/s/ William E. Stillings

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Its Vice President

COMPUTER PROGRAMS AND SYSTEMS, INC.

By:

 

/s/ M. Stephen Walker

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Its Vice President of Finance and CFO

 

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