<PAGE>

    As Filed with the Securities and Exchange Commission on March 21, 2002
                                                    Registration No. 333-
================================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                               -----------------
                                   FORM S-1
                            REGISTRATION STATEMENT
                                     Under
                          THE SECURITIES ACT OF 1933
                               -----------------
                      COMPUTER PROGRAMS AND SYSTEMS, INC.
            (Exact Name of Registrant as Specified in its Charter)
                               -----------------

         Delaware                    7389                   74-3032373
      (State or Other          (Primary Standard         (I.R.S. Employer
      Jurisdiction of      Industrial Classification  Identification Number)
     Incorporation or            Code Number)
       Organization)
                               6600 Wall Street
                             Mobile, Alabama 36695
                                (251) 639-8100
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)
                                 DAVID A. DYE
                     President and Chief Executive Officer
                               6600 Wall Street
                             Mobile, Alabama 36695
                                (251) 639-8100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                             of Agent For Service)
                               -----------------
                                  Copies to:
              GREGORY S. CURRAN, ESQ.           JOHN A. GOOD, ESQ.
           Maynard, Cooper & Gale, P.C.       Bass, Berry & Sims PLC
        1901 Sixth Avenue North, Suite 2400 100 Peabody Place, Suite 900
             Birmingham, Alabama 35203           Memphis, TN 38103
             (205) 254-1000 Telephone        (901) 543-5900 Telephone
             (205) 254-1999 Facsimile        (888) 543-4644 Facsimile

   Approximate date of commencement of proposed sale to the public:  As soon as
practicable after this Registration Statement becomes effective.

   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, check the following box. [_]

   If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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, 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(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

   If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
                               -----------------

                        CALCULATION OF REGISTRATION FEE


<TABLE>
<S>                                     <C>          <C>              <C>                <C>
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
                                                     Proposed Maximum  Proposed Maximum
        Title of Each Class of          Amount to be  Offering Price  Aggregate Offering    Amount of
      Securities to be Registered        Registered     Per Share        Price(1)(2)     Registration Fee
---------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per share  3,450,000        $18.00         $62,100,000          $5,714
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes the dollar value of shares that the underwriters have the option
    to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
    registration fee pursuant to Rule 457(o) under the Securities Act.
                               -----------------
   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 that 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.

================================================================================


<PAGE>

The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.


                  Subject to Completion, Dated March   , 2002

PROSPECTUS

                               3,000,000 Shares


                                   [CPSI LOGO]


                      Computer Programs and Systems, Inc.

                                 Common Stock

                               -----------------

   This is the initial public offering of shares of our common stock. We are
selling 1,200,000 shares, and the selling stockholders identified in this
prospectus are selling 1,800,000 shares. We will not receive any proceeds from
the sale of shares by the selling stockholders. We anticipate that the initial
public offering price will be between $16.00 and $18.00 per share.

   No public market currently exists for our shares. We intend to apply to have
our shares quoted on the Nasdaq National Market under the symbol "CPSI."

                               -----------------

    This investment involves risks. See "Risk Factors" beginning on page 6.

   Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

                               -----------------


<TABLE>
<CAPTION>
                                                 Per Share Total
                                                 --------- -----
                <S>                              <C>       <C>
                Public offering price...........    $       $
                Underwriting discount...........    $       $
                Proceeds to CPSI................    $       $
                Proceeds to selling stockholders    $       $
</TABLE>


   The underwriters may also purchase up to an additional 450,000 shares of our
common stock from the selling stockholders at the public offering price, less
the underwriting discount, within 30 days from the date of this prospectus
solely to cover over-allotments.

                               -----------------

Morgan Keegan & Company, Inc.                                     Raymond James


                                         , 2002


<PAGE>

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>                                                                                   <C>
Prospectus Summary...................................................................   1
Risk Factors.........................................................................   6
Special Note Regarding Forward-Looking Statements....................................  13
Use of Proceeds......................................................................  13
Dividend Policy......................................................................  14
Capitalization.......................................................................  14
Dilution.............................................................................  15
Selected Financial Data..............................................................  16
Management's Discussion and Analysis of Financial Condition and Results of Operations  18
Business.............................................................................  25
Management...........................................................................  39
Certain Relationships and Related Party Transactions.................................  45
Principal and Selling Stockholders...................................................  45
Description of Capital Stock.........................................................  47
Shares Eligible for Future Sale......................................................  48
Underwriting.........................................................................  50
Legal Matters........................................................................  52
Experts..............................................................................  53
Change of Independent Auditors.......................................................  53
Where You Can Find More Information..................................................  53
Index to Financial Statements........................................................ F-1
</TABLE>


                               -----------------

   You should rely only on the information contained in this prospectus.
Neither we nor any underwriter has authorized any other person to provide you
with different or additional information. This prospectus is not an offer to
sell, nor is it seeking an offer to buy, these securities in any state where
the offer or sale is not permitted. The information in this prospectus is
complete and accurate as of the date on the front cover, but the information
may have changed since that date.


<PAGE>


                              PROSPECTUS SUMMARY

   This summary highlights information found in more detail later in this
prospectus. You should read the entire prospectus, including the risk factors
and the financial statements and related notes, before deciding whether or not
to invest in shares of our common stock.

Overview

   We are a healthcare information technology company that designs, develops,
markets, installs and supports computerized information technology systems to
meet the unique demands of small and midsize hospitals. Our target market
includes acute care community hospitals with 300 or fewer beds and small
specialty hospitals. We are a single-source vendor providing comprehensive
software and hardware products, complemented by data conversion, complete
installation and extensive support. Our fully integrated, enterprise-wide
system automates clinical and financial data management in each of the primary
functional areas of a hospital. Our solution improves hospital operations and
the quality of medical care delivered by our customers. In addition, we provide
services that enable our customers to outsource certain data-related business
processes which we can perform more efficiently. We believe our products and
services enhance hospital performance in the critical areas of clinical
quality, revenue cycle management, cost control and regulatory compliance. From
our initial hospital installation in 1981, we have grown to serve more than 400
hospital customers across 45 states and the District of Columbia. In 2001, we
generated revenues of $59.7 million from the sale of our products and services.

Industry Dynamics

   Healthcare is the largest industry in the United States. Notwithstanding its
size and importance, this industry has historically underinvested in medical
information technology. Consequently, hospitals often operate with
non-integrated, complex, inefficient systems. These systems can adversely
impact patient care and financial management. As a result, hospitals have an
enhanced need for management tools that allow them to operate more efficiently,
capture more reimbursement dollars and provide improved care to patients. We
believe these dynamics are more pronounced among hospitals having 300 or fewer
acute care beds.

   We believe healthcare providers, including hospitals having 300 or fewer
acute care beds, are embracing information technology as a management tool. The
current market for healthcare information technology and related services is
estimated to be $22.7 billion annually and is expected to grow to more than
$27.0 billion by 2003. We believe we offer a solution that positions us to take
advantage of increased spending on healthcare information technology and
sustain our revenue growth.

Our Solution

   We have tailored an information technology solution that effectively
addresses the unique needs of small and midsize hospitals. Due to their smaller
operating budgets, community hospitals have limited financial and human
resources to operate manual or inefficient information systems. At the same
time, they are expected to provide high quality healthcare on a cost effective
basis.

   Our solution has been developed entirely by our people to meet the
challenges of our community hospital customers. The CPSI system collects,
processes, retains and reports data in the primary functional areas of a
hospital, from patient care to clinical processing to administration and
accounting. As a key element of our complete solution, we provide ongoing
customer service through regular interaction with customers, customer user
groups and extensive customer support. We also offer outsourcing services that
allow customers to avoid some of the fixed costs of a business office. By
remaining sensitive and responsive to the ever-changing needs of our customers
and regularly updating our products to meet these needs, we believe we provide
the best solution available to community hospitals at a price they can afford.

                                      1


<PAGE>

Strategy

   Our objective is to continue to grow as a leading provider of healthcare
information technology systems and services to small and midsize hospitals. We
intend to follow the same strategy that we have successfully pursued for over
twenty years, the key elements of which are as follows:

   Deliver a Single-Source Solution.  When a customer purchases the CPSI
system, we provide everything necessary for the customer to implement and use
that system. We deliver the application software, computer hardware,
peripherals, forms and supplies used in the comprehensive information network.
We also offer customers additional services such as business office
outsourcing, electronic billing outsourcing and ISP services.

   Provide Enterprise-Wide, Fully Integrated Software Applications.  We have
developed all of our software products internally as part of our fully
integrated system architecture. Our experience has taught us that using a fully
integrated system across the primary functional areas of a hospital ensures
compatibility among applications and avoids the pitfalls associated with
interfacing disparate systems.

   Maintain Commitment to Customer Oriented Operating Philosophy.  A key factor
in our success has been our focus on customer service and support. We make
available to our customers experienced support teams that can assist with any
question or problem. We currently have a one to one support staff to customer
ratio.

   Expand Presence in Target Market.  We will continue to target small and
midsize domestic hospitals with 300 or fewer acute care beds. We believe this
market of approximately 4,200 acute care hospitals nationwide, plus the market
of small specialty hospitals, has been traditionally overlooked and underserved
by other healthcare technology companies. We will also continue to market
additional software products to our existing customers who have not purchased
our complete package of software applications.

   Emphasize Recurring Revenue Opportunities.  In addition to revenues from new
system installations, we are developing sources of recurring revenues.
Currently, our principal source of recurring revenues is our support fees paid
by existing customers. We also generate recurring revenues from outsourcing,
ASP and ISP services.

Company Information

   We were incorporated in Alabama in 1979. We intend to reincorporate in
Delaware prior to the completion of this offering. Unless otherwise noted, all
information in this prospectus assumes that the reincorporation has been
completed.

   Our principal offices are located at 6600 Wall Street, Mobile, Alabama
36695, and our telephone number is (251) 639-8100. We maintain a website at
www.cpsinet.com. Note, however, that our website and the information contained
therein is not a part of, nor otherwise incorporated into, this prospectus.

                                      2


<PAGE>

The Offering

Common stock offered by CPSI..........  1,200,000 shares

Common stock offered by the selling
  stockholders........................  1,800,000 shares

Common stock outstanding after the
  offering(1).........................  10,488,000 shares

Offering price........................  $       per share

Proposed Nasdaq National Market
  trading symbol......................  CPSI

Use of proceeds.......................  We will not receive any proceeds from
                                        the sale of shares by the selling
                                        stockholders. We will use the net
                                        proceeds we receive from our sale of
                                        shares to pay a distribution of
                                        previously-taxed S corporation earnings
                                        to our current stockholders, to repay
                                        existing debt and for general corporate
                                        purposes. See "Use of Proceeds."
--------

(1) The number of shares of common stock to be outstanding after the offering
    is based on 9,288,000 shares outstanding as of       , 2002, after giving
    effect to the conversion of each share of our common stock into 430 shares
    of common stock in connection with our reincorporation in Delaware, which
    will occur prior to the completion of this offering, and it excludes
    approximately 1,165,333 shares of our common stock reserved for issuance
    under our 2002 Stock Option Plan.

                                      3


<PAGE>

Summary Financial Data

   The tables below set forth summary financial data for the years ended
December 31, 1997, 1998, 1999, 2000 and 2001 and as of December 31, 2001. The
data presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with our financial statements and related notes included elsewhere in this
prospectus.

   For all periods presented, we operated as an S corporation and were not
subject to federal and certain state income taxes. Upon completion of this
offering, we will become subject to federal and certain state income taxes
applicable to C corporations.

   Pro forma net income reflects the provision for income taxes that would have
been recorded had we been a C corporation during the periods presented. Pro
forma net income per share is based on the weighted average number of shares of
common stock outstanding during the years 1997 through 2000, or 9,288,000
shares, plus an additional 397,135 shares for 2001, which is the estimated
portion of the shares being offered that would be necessary to fund the
distribution of accumulated S corporation earnings in excess of 2001 net
income, through the date we become a C corporation. This number of shares has
been computed assuming an initial public offering price of $17.00 per share.
See Note 3 to our financial statements included elsewhere in this prospectus.

   Our pro forma balance sheet reflects the accrual of the S corporation
distribution, estimated to be approximately $12.2 million as of December 31,
2001. It also reflects the deferred income tax assets that would have been
recorded at that date had we elected to be taxed as a C corporation.

   Our pro forma as adjusted balance sheet reflects our sale of 1,200,000
shares of common stock in this offering at an assumed initial public offering
price of $17.00 per share, after deducting the underwriting discount and our
estimated offering expenses, and reflects the repayment of the note payable and
the payment of the S corporation distribution.


<TABLE>
<CAPTION>
                                                            Year ended December 31,
                                           --------------------------------------------------------
                                              1997       1998       1999        2000        2001
                                           ---------- ---------- ----------  ----------  ----------
                                              (in thousands except for share and per share data)
<S>                                        <C>        <C>        <C>         <C>         <C>
INCOME STATEMENT DATA:
Total sales revenues...................... $   24,121 $   32,150 $   50,530  $   49,222  $   59,666
Total costs of sales......................     13,841     19,311     29,895      31,487      36,242
                                           ---------- ---------- ----------  ----------  ----------
Gross profit..............................     10,280     12,839     20,635      17,735      23,424
Sales and marketing.......................      1,612      2,872      4,650       4,477       5,105
General and administrative................      4,306      4,819      7,244       8,603       9,843
                                           ---------- ---------- ----------  ----------  ----------
Operating income..........................      4,362      5,148      8,741       4,655       8,476
Other income..............................        117        161        228         305         280
Interest expense..........................         --         --        (32)        (69)        (76)
                                           ---------- ---------- ----------  ----------  ----------
Net income................................ $    4,479 $    5,309 $    8,937  $    4,891  $    8,680
                                           ========== ========== ==========  ==========  ==========
Net income per share--basic and diluted... $     0.48 $     0.57 $     0.96  $     0.53  $     0.93
                                           ========== ========== ==========  ==========  ==========
Weighted average shares outstanding--basic
  and diluted.............................  9,288,000  9,288,000  9,288,000   9,288,000   9,288,000
                                           ========== ========== ==========  ==========  ==========
</TABLE>


                                      4


<PAGE>


<TABLE>
<CAPTION>
                                                                         Year ended December 31,
                                                            --------------------------------------------------
                                                               1997      1998       1999       2000       2001
                                                             -------    ------     ------     ------     ------
                                                            (in thousands except for share and per share data)
<S>                                                         <C>        <C>        <C>        <C>        <C>
Pro forma information:
 Net income as reported.................................... $ 4,479    $5,309     $8,937     $4,891     $8,680
 Pro forma income taxes....................................   1,677     1,982      3,324      1,826      3,231
                                                            -------    ------     ------     ------     ------
 Pro forma net income...................................... $ 2,802    $3,327     $5,613     $3,065     $5,449
                                                            -------    ------     ------     ------     ------
 Pro forma net income per share--basic and diluted
   (based on 9,288,000 weighted average shares)............ $  0.30    $ 0.36     $ 0.60     $ 0.33     $ 0.59
                                                            =======    ======     ======     ======     ======
 Pro forma net income per share--basic and diluted
   (based on 9,685,135 weighted average shares and
   reflecting the S corporation distribution--see Note 3 to
   financial statements)...................................                                             $ 0.56
                                                                                                         ======
</TABLE>



<TABLE>
<CAPTION>
                                                                                            As of December 31, 2001
                                                                                         -----------------------------
                                                                                                            Pro forma
                                                                                         Actual  Pro forma as adjusted
                                                                                         ------- --------- -----------
                                                                                                (in thousands)
<S>                                                                                      <C>     <C>       <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................... $ 2,019  $ 2,019    $ 4,974
Total assets............................................................................  17,251   18,264     21,220
Total current liabilities...............................................................   6,551   18,751      6,465
Note payable............................................................................     664      664         --
Total stockholders' equity (deficit)....................................................  10,036   (1,151)    14,754
</TABLE>


                                      5


<PAGE>


                                 RISK FACTORS

   You should carefully consider the following risk factors before you decide
to buy our common stock. You should also consider all of the other information
in this prospectus. We are subject to other risks and uncertainties not
presently known to us. If any of the risks described below or any unknown risk
actually occurs, our business, financial condition, operating results and cash
flows could be materially adversely affected. This could cause the trading
price of our common stock to decline, and you may lose part or all of your
investment.

                  Risks Related to Our Business and Industry

A decline in spending for information technology and services by our current
and prospective customers may result in less demand for our products, lower
prices and a lower revenue growth rate.

   The purchase of our information system involves a significant financial
commitment by our customers. At the same time, the healthcare industry faces
significant financial pressures which could adversely affect overall spending
on healthcare information technology and services. For example, the Balanced
Budget Act of 1997 has significantly reduced Medicare reimbursements to
hospitals, leaving them less money to invest in infrastructure. Moreover, a
general economic decline could cause hospitals to reduce or eliminate
information technology related spending. To the extent spending for healthcare
information technology and services declines or increases slower than we
anticipate, demand for our products and services, as well as the prices we
charge, could be adversely affected. Accordingly, we cannot assure you that we
will be able to increase or maintain our revenues or our growth rate.

There is a limited number of hospitals in our target market. Continued
consolidation in the healthcare industry could result in the loss of existing
customers, a reduction in our potential customer base and downward pressure on
our products' prices.

   There is a finite number of small and midsize hospitals with 300 or fewer
acute care beds. Saturation of this market with our products or our
competitors' products could eventually limit our revenues and growth.
Furthermore, many healthcare providers have consolidated to create larger
healthcare delivery enterprises with greater market power. If this
consolidation continues, we could lose existing customers and could experience
a decrease in the number of potential purchasers of our products and services.
The loss of existing and potential customers due to industry consolidation
could cause our revenue growth rate to decline. In addition, larger,
consolidated enterprises could have greater bargaining power, which may lead to
downward pressure on the prices for our products and services.

We may experience fluctuations in quarterly financial performance that could
adversely impact our operating results and stock price.

   There is no assurance that consistent quarterly growth in our business will
continue. Our quarterly revenue may fluctuate and may be difficult to forecast
for a variety of reasons. For example, prospective customers often take
significant time evaluating our system and related services before making a
purchase decision. Moreover, a prospective customer who has placed an order for
our system could decide to cancel that order or postpone installation of the
ordered system. If a prospective customer delays or cancels a scheduled system
installation during any quarter, we may not be able to schedule a substitute
system installation during that quarter. The amount of revenue that would have
been generated from that installation will be postponed or lost. The
possibility of delays or cancellations of scheduled system installations could
cause our quarterly revenues to fluctuate.

   The following factors may also affect demand for our products and services
and cause our quarterly financial performance to fluctuate:

  .  changes in customer budgets and purchasing priorities;

                                      6


<PAGE>

  .  overall demand for healthcare information technology;

  .  market acceptance of new products, product enhancements and services from
     us and our competitors;

  .  product and price competition;

  .  delay of revenue recognition to future quarters due to an increase in the
     sale of our remote access ASP services; and

  .  fluctuations in general, political, economic and financial market
     conditions.

   Variations in our quarterly revenues may adversely affect our operating
results. In each fiscal quarter, our expense levels, operating costs and hiring
plans are based on projections of future revenues and are relatively fixed. If
our actual revenues fall below expectations, our earnings will also likely fail
to meet expectations. If we fail to meet the revenue or earnings expectations
of securities analysts and investors, the price of our common stock will likely
decrease.

We operate in an intensely competitive market that includes companies that have
greater financial, technical and marketing resources than we have.

   Our principal competitors are Medical Information Technology, Inc., or
"Meditech," and Healthcare Management Systems, Inc., or "HMS." Meditech and HMS
compete with us directly in our target market of small and midsize hospitals.
These companies offer products and services that are comparable to our system
and are designed to address the needs of community hospitals.

   Our secondary competitors include McKesson Corporation, Quadramed Corp.,
Cerner Corporation and Siemens Corporation. These companies are significantly
larger than we are, and typically sell their products and services to larger
hospitals outside of our target market. However, they sometimes compete
directly with us. We also face competition from providers of practice
management systems, general decision support and database systems and other
segment-specific applications, as well as from healthcare technology
consultants. Any of these companies as well as other technology or healthcare
companies could decide at any time to specifically target hospitals within our
target market.

   A number of existing and potential competitors are more established than we
are and have greater name recognition and financial, technical and marketing
resources. Products of our competitors may have better performance, lower
prices and broader market acceptance than our products. We expect increased
competition that could cause us to lose customers, lower our prices to remain
competitive and experience lower revenues and profit margins.

Our failure to develop new products or enhance current products in response to
market demands could adversely impact our competitive position and require
substantial capital resources to correct.

   The needs of hospitals in our target market are subject to rapid change due
to government regulation, trends in clinical care practices and technological
advancements. As a result of these changes, our products may quickly become
obsolete or less competitive. New product introductions and enhancements by our
competitors that more effectively or timely respond to changing industry needs
may weaken our competitive position.

   We continually redesign and enhance our products to incorporate new
technologies and adapt our products to ever-changing hardware and software
platforms. Often we face difficult choices regarding which new technologies to
adopt. If we fail to anticipate or respond adequately to technological
advancements, or experience significant delays in product development or
introduction, our competitive position could be negatively affected. Moreover,
our failure to offer products acceptable to our target market could require us
to make significant capital investments and incur higher operating costs to
redesign our products, which could negatively affect our financial condition
and operating results.

                                      7


<PAGE>

Potential regulation of our products as medical devices by the U.S. Food and
Drug Administration could increase our costs, delay the introduction of new
products and slow our revenue growth.

   The U.S. Food and Drug Administration, or the "FDA," is likely to become
more active in regulating the use of computer software for clinical purposes.
The FDA has increasingly regulated computer products and computer-assisted
products as medical devices under the federal Food, Drug and Cosmetic Act. If
the FDA regulates any of our products as medical devices, we would likely be
required to, among other things:

  .  seek FDA clearance by demonstrating that our product is substantially
     equivalent to a device already legally marketed, or obtain FDA approval by
     establishing the safety and effectiveness of our product;

  .  comply with rigorous regulations governing pre-clinical and clinical
     testing, manufacture, distribution, labeling and promotion of medical
     devices; and

  .  comply with the Food, Drug and Cosmetic Act's general controls, including
     establishment registration, device listing, compliance with good
     manufacturing practices and reporting of specified device malfunctions and
     other adverse device events.

   We anticipate that some of our products currently in development will be
subject to FDA regulation. If any of our products fail to comply with FDA
requirements, we could face FDA refusal to grant pre-market clearance or
approval of products; withdrawal of existing clearances and approvals; fines,
injunctions or civil penalties; recalls or product corrections; production
suspensions; and criminal prosecution. FDA regulation of our products could
increase our operating costs, delay or prevent the marketing of new or existing
products and adversely affect our revenue growth.

Governmental regulations relating to patient confidentiality and other matters
could increase our costs.

   State and federal laws regulate the confidentiality of patient records and
the circumstances under which those records may be released. These regulations
may require the users of such information to implement security measures.
Regulations governing electronic health data transmissions are also evolving
rapidly, and they are often unclear and difficult to apply.

   The Health Insurance Portability and Accountability Act of 1996, or "HIPAA,"
requires, among other things, the Secretary of Health and Human Services, or
HHS, to adopt national standards to ensure the integrity and confidentiality of
health information. In December 2000, HHS published its final health data
privacy regulations. Our customers must fully comply with these regulations by
April 2003. These regulations restrict the use and disclosure of personally
identifiable health information without the prior informed consent of the
patient. In addition, HHS has also issued final regulations establishing
national standards for some healthcare-related electronic transactions and
uniform code sets to be used in those transactions. Our customers must comply
with these regulations by October 2002, but may obtain a one-year extension for
compliance by filing a plan with HHS that explains the steps the organization
will take to comply by the extended deadline. Final rules have not yet been
issued with respect to other aspects of HIPAA. For example, HHS has issued
proposed rules with respect to information security that would require
healthcare providers to implement organizational practices to protect the
security of electronically maintained or transmitted health-related
information, such as the use of electronic signatures and single sign-on access
to information. Furthermore, HHS has not yet issued proposed rules on the topic
of unique health identifiers. We cannot predict the potential impact of
proposed rules and rules that have not yet been proposed. In addition to HIPAA,
other federal and/or state privacy legislation may be enacted at any time.

   In our support agreements with our customers, we agree to update our
software applications to comply with applicable federal and state laws. While
we believe we have developed products that will comply with current HIPAA and
other regulatory requirements, new laws, regulations and interpretations could
force us to further redesign our products. Any such product redesign could
consume significant capital, research and development and other resources,
which could significantly increase our operating costs.

                                      8


<PAGE>

Our products assist clinical decision-making and related care by capturing,
maintaining and reporting relevant patient data. If our products fail to
provide accurate and timely information, our customers could assert claims
against us that could result in substantial cost to us, harm our reputation in
the industry and cause demand for our products to decline.

   We provide products that assist clinical decision-making and related care by
capturing, maintaining and reporting relevant patient data. Our products could
fail or produce inaccurate results due to a variety of reasons, including
mechanical error, product flaws, faulty installation and/or human error during
the initial data conversion. If our products fail to provide accurate and
timely information, customers and/or patients could sue us to hold us
responsible for losses they incur from these errors. These lawsuits, regardless
of merit or outcome, could result in substantial cost to us, divert
management's attention from operations and decrease market acceptance of our
products. We attempt to limit by contract our liability for damages arising
from negligence, errors or mistakes. Despite this precaution, such contract
provisions may not be enforceable or may not otherwise protect us from
liability for damages. We maintain general liability insurance coverage,
including coverage for errors or omissions. However, this coverage may not be
sufficient to cover one or more large claims against us or otherwise continue
to be available on terms acceptable to us. In addition, the insurer could
disclaim coverage as to any future claim.

Breaches of security in our system could result in customer claims against us
and harm to our reputation causing us to incur expenses and/or lose customers.

   We have included security features in our system that are intended to
protect the privacy and integrity of patient data. Despite the existence of
these security features, our system may experience break-ins and similar
disruptive problems that could jeopardize the security of information stored in
and transmitted through the computer networks of our customers. Because of the
sensitivity of medical information, customers could sue us for breaches of
security involving our system. Also, actual or perceived security breaches in
our system could harm the market perception of our products which could cause
us to lose existing and prospective customers.

New products that we introduce or enhancements to our existing products may
contain undetected errors or problems which could affect customer satisfaction
and cause a decrease in revenues.

   Highly complex software products such as ours sometimes contain undetected
errors or failures when first introduced or when updates and new versions are
released. Tests of our products may not detect bugs or errors because it is
difficult to simulate our customers' wide variety of computing environments.
Despite extensive testing, from time to time we have discovered defects or
errors in our products. Defects or errors discovered in our products could
cause delays in product introductions and shipments, result in increased costs
and diversion of development resources, require design modifications, decrease
market acceptance or customer satisfaction with our products, cause a loss of
revenue, result in legal actions by our customers and cause increased insurance
costs.

Our facilities are located in an area vulnerable to hurricanes and tropical
storms, and the occurrence of a severe hurricane, similar storm or other
natural disaster could cause damage to our facilities and equipment, which
could require us to cease or limit our operations.

   All of our facilities and virtually all of our employees are situated on one
campus in Mobile, Alabama, which is located on the coast of the Gulf of Mexico.
Our facilities are vulnerable to significant damage or destruction from
hurricanes and tropical storms. We are also vulnerable to damage from other
types of disasters, including tornadoes, fires, floods and similar events. If
any disaster were to occur, our ability to conduct business at our facilities
could be seriously impaired or completely destroyed. This would have adverse
consequences for our customers who depend on us for system support or
outsourcing services. Also, the servers of customers who use our remote access
services could be damaged or destroyed in any such disaster. This would have
potentially devastating consequences to those customers. Although we have an
emergency recovery plan, there can be no

                                      9


<PAGE>

assurance that this plan will effectively prevent the interruption of our
business due to a natural disaster. Furthermore, the insurance we maintain may
not be adequate to cover our losses resulting from any natural disaster or
other business interruption.

Interruptions in our power supply and/or telecommunications capabilities could
disrupt our operations, cause us to lose revenues and/or increase our expenses.

   We currently have backup generators to be used as alternative sources of
power in the event of a loss of power to our facilities. If these generators
were to fail during any power outage, we would be temporarily unable to
continue operations at our facilities. This would have adverse consequences for
our customers who depend on us for system support and outsourcing services. Any
such interruption in operations at our facilities could damage our reputation,
harm our ability to retain existing customers and obtain new customers, and
could result in lost revenue and increased insurance and other operating costs.

   We also have customers for whom we store and maintain computer servers
containing critical patient and administrative data. Those customers access
this data remotely through telecommunications lines. If our power generators
fail during any power outage or if our telecommunications lines are severed or
impaired for any reason, those customers would be unable to access their
mission critical data causing an interruption in their operations. In such
event our remote access customers and/or their patients could seek to hold us
responsible for any losses. We would also potentially lose those customers and
our reputation could be harmed.

If we are unable to attract and retain qualified customer service and support
personnel our business and operating results will suffer.

   Our customer service and support is a key component of our business. Future
difficulty in attracting, training and retaining capable customer service and
support personnel could cause a decrease in the overall quality of our customer
service and support. That decrease would have a negative effect on customer
satisfaction which could cause us to lose existing customers and could have an
adverse effect on our new customer sales. The loss of customers due to
inadequate customer service and support would negatively impact our ability to
continue to grow our business.

We do not have employment or non-competition agreements with our key personnel,
and their departure could harm our future success.

   Our future success depends to a significant extent on the leadership and
performance of our chief executive officer, chief operating officer and other
executive officers. We do not have employment or non-competition agreements
with any of our executive officers. Therefore, they may terminate their
employment with us at any time and may compete against us. The loss of the
services of any of our executive officers could have a material adverse effect
on our business, financial condition and results of operations.

We have limited protection of our intellectual property and, if we fail to
adequately protect our intellectual property, we may not be able to effectively
compete.

   We consider some aspects of our internal operations, products and
documentation to be proprietary. Because we consider our customer service and
support to be a key component of our products, in the past we have not been
concerned about infringement on our software applications. To some extent,
however, we have relied on a combination of confidentiality provisions in our
customer agreements, copyright, trademark and trade secret laws and other
measures to protect our intellectual property. To date we have not filed any
patent applications to protect our proprietary software products. In addition,
existing copyright laws afford only limited protection. Although we attempt to
control access to our intellectual property, unauthorized persons may attempt
to copy or otherwise use our intellectual property. Monitoring unauthorized use
of our intellectual property is difficult, and the steps we have taken may not
prevent unauthorized use. If our competitors gain access to our intellectual
property, our competitive position in the industry could be damaged.

                                      10


<PAGE>

In the event our products infringe on the intellectual property rights of
third-parties, our business may suffer if we are sued for infringement or if we
cannot obtain licenses to these rights on commercially acceptable terms.

   Others may sue us alleging infringement of their intellectual property
rights. Many participants in the technology industry have an increasing number
of patents and patent applications and have frequently demonstrated a readiness
to take legal action based on allegations of patent and other intellectual
property infringement. Further, as the number and functionality of our products
increase, we believe we may become increasingly subject to the risk of
infringement claims. If infringement claims are brought against us, these
assertions could distract management. We may have to spend a significant amount
of money and time to defend or settle those claims. If we were found to
infringe on the intellectual property rights of others, we could be forced to
pay significant license fees or damages for infringement. If we were unable to
obtain licenses to these rights on commercially acceptable terms, we would be
required to discontinue the sale of our products that contain the infringing
technology. Our customers would also be required to discontinue the use of
those products. We are unable to insure against this risk on an economically
feasible basis. Even if we were to prevail in an infringement lawsuit, the
accompanying publicity could adversely impact the demand for our system. Under
some circumstances, we agree to indemnify our customers for some types of
infringement claims that may arise from the use of our products.

                        Risks Related to this Offering

We will receive limited proceeds from this offering, and management may spend
or invest these proceeds in ways with which you may not agree.

   Over 60% of the net proceeds of this offering will be received by the
existing stockholders who have elected to sell some of their shares of our
common stock. We will not receive any net proceeds from the sale of those
shares by the selling stockholders. Furthermore, we will use approximately
$       of the net proceeds we receive in the offering to fund a distribution
of previously taxed S corporation income to our current stockholders in
connection with the termination of our S corporation election. We will also use
approximately $         to repay debt. Accordingly, only a limited amount of
proceeds will be available for use in our operations. We have broad discretion
to determine the allocation of our proceeds from this offering that will be
used for general corporate purposes. You will not have an opportunity to
evaluate the economic, financial or other information on which we base our
decisions on how to use these proceeds. The failure of management to use those
funds effectively could have a material adverse effect on our financial
condition and operating results.

As a new investor, you will experience immediate dilution of $     , or  % in
the book value of your common stock, and may experience additional dilution if
options are granted and exercised.

   The pro forma net tangible book value per share of common stock you purchase
in this offering will be less than the initial public offering price that you
pay. Accordingly, if you purchase common stock in this offering at an assumed
initial public offering price of $17.00 per share, you will incur immediate and
substantial dilution of $       per share, which equals the difference between
your purchase price per share and the net tangible book value per share
following the completion of this offering. Simultaneously with the completion
of this offering and in the future, we intend to issue to our employees options
to purchase our common stock. To the extent these options are exercised, there
will be further dilution to investors in this offering.

A large number of shares may be sold in the market following this offering
which may depress our stock price.

   Sales of a substantial number of shares of our common stock in the public
market after this offering, or the perception that such sales are likely to
occur, could depress the market price of our common stock. Based on shares
outstanding as of       , 2002, upon completion of this offering we will have
outstanding 10,488,000 shares of common stock. Of these shares, the 3,000,000
shares of common stock sold in this offering will be

                                      11


<PAGE>

freely tradable in the public market. After the lockup agreements signed by
current stockholders expire 180 days from the date of this prospectus, an
additional 2,548,568 shares will be eligible for immediate sale in the public
market and an additional 4,939,432 shares will be available for sale subject to
compliance with various requirements of Rule 144 under the Securities Act. See
"Shares Eligible for Future Sale."

An active public market for our common stock may not develop, which could
impede your ability to sell your shares and could depress our stock price.

   The price of our common stock to be sold in this offering will be determined
through negotiations between us and the underwriters. The public offering price
may not be indicative of prices that will prevail in the trading market. Before
this offering, no public market existed for our common stock. An active public
market for our common stock may not develop or be sustained after the offering,
which could affect your ability to sell your shares and depress the market
price of your shares. The market price of your shares may fall below the
initial public offering price.

   There has been significant volatility in the market price and trading volume
of securities of healthcare and technology-related companies that are unrelated
to the performance of those companies. These broad market fluctuations may
negatively affect the market price of our common stock. As a consequence, you
may not be able to sell the shares of common stock you purchase at or above the
initial public offering price.

   In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market prices of their
securities. We may become the target of similar litigation. Securities
litigation may result in substantial costs and divert management's attention
and resources, which may harm our business, financial condition and results of
operations, as well as the market price of our common stock.

Our executive officers, directors and other current stockholders will own
approximately 71.4% of our outstanding common stock after this offering
allowing them to control all matters involving stockholder approval.

   Upon the completion of this offering, our executive officers, directors and
other current stockholders will, in the aggregate, beneficially own
approximately 71.4% of our outstanding common stock. As a result, these
stockholders will be able to effectively control all matters requiring approval
of our stockholders, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may also
delay, deter or prevent a change in control and may make some transactions more
difficult or impossible to complete without the support of these stockholders,
even if the transactions are favorable to you. In addition, because of their
ownership of our common stock, these stockholders will be in a position to
significantly affect our corporate actions in a manner that could conflict with
the interests of our public stockholders.

Certain provisions of our Certificate of Incorporation or our Bylaws could
delay or prevent a change in control that may be favorable to our stockholders.

   Our Certificate of Incorporation and Bylaws, which will be effective upon
our reincorporation in Delaware, contain provisions that may deter or impede
takeovers or changes of control or management. These provisions include:

  .  our board of directors is classified into three classes of directors with
     staggered three-year terms;

  .  the board of directors fixes the size of the board of directors, may
     create new directorships and may elect new directors to serve for the full
     term in which the new directorship was created;

  .  all stockholder actions must be effected at a duly called meeting of
     stockholders and not by written consent;

  .  there is no cumulative voting for directors; and


                                      12


<PAGE>

  .  advance notice procedures are required with respect to stockholder
     proposals and the nominations of candidates for election as directors.

   These provisions may have the effect of delaying or preventing a change of
control that may be desired by or favorable to our public stockholders.

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

   This prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. We have attempted to
identify forward-looking statements by terminology including, but not limited
to, "anticipates," "believes," "can," "continue," "could," "estimates,"
"expects," "intends," "may," "plans," "potential," "predicts," "should" or
"will" or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks outlined under "Risk
Factors," that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

   Although we believe our expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are not under any duty to update any
of the forward-looking statements after the date of this prospectus to conform
these statements to actual results, unless required by law.


                                USE OF PROCEEDS

   We estimate that our net proceeds from the sale of the 1,200,000 shares of
common stock we are offering, assuming an initial public offering price of
$17.00 per share, will be approximately $      , after deducting the estimated
underwriting discount and estimated offering expenses of approximately $
payable by us. We will not receive any of the net proceeds from the sale of
shares by the selling stockholders. See "Principal and Selling Stockholders."

   We have been an S corporation since 1986. Generally speaking, as an S
corporation we have not paid income tax. Instead, our earnings have been passed
through directly to our stockholders, who report the earnings on their
individual tax returns. Our stockholders have been required to include in their
taxable income their proportionate share of our earnings even if we did not
distribute the earnings to them. Upon consummation of this offering, our S
corporation election will terminate, and we will then become subject to federal
and state income taxes. In connection with the termination of our S corporation
election, we will pay approximately $       of the net proceeds of this
offering to our current stockholders to fund a distribution of previously taxed
S corporation income. Purchasers of shares of common stock in this offering
will not be entitled to any portion of that distribution.

   We will also use approximately $        of the net proceeds to repay debt on
land we purchased in 1999 adjacent to our corporate headquarters. The loan is
payable in monthly installments of $11,805, including interest at an annual
rate of 7.72%. The loan matures on July 29, 2009.

   We currently intend to use the balance of the net proceeds for working
capital and other general corporate purposes. However, we will retain broad
discretion in the allocation of the net proceeds of this offering. Pending use
of the net proceeds of this offering, we intend to invest the net proceeds in
interest bearing, investment-grade securities.


                                      13


<PAGE>


                                DIVIDEND POLICY

   To the extent that we generate cash in excess of our operating needs, the
board of directors from time to time will consider paying cash dividends to
holders of our common stock. Any decision to pay dividends will depend upon
many factors, including our financial condition and earnings, cash needed to
fund future growth and legal requirements. Accordingly, there is no assurance
that dividends will be declared or paid in the future.


                                CAPITALIZATION

   The following table sets forth our capitalization as of December 31, 2001 on
an actual basis and on a pro forma as adjusted basis to give effect to the sale
of 1,200,000 shares of common stock by us in this offering, after deducting the
underwriting discount and estimated offering expenses payable by us, and the
application of the net proceeds as described in "Use of Proceeds."

   You should read this table in conjunction with the audited financial
statements and related footnotes, and the other financial information included
in this prospectus.


<TABLE>
<CAPTION>
                                                                                 As of December 31,
                                                                                        2001
                                                                                 -------------------
                                                                                   (in thousands)
                                                                                         Pro forma,
                                                                                 Actual  as adjusted
                                                                                 ------- -----------
<S>                                                                              <C>     <C>
Cash and cash equivalents....................................................... $ 2,019
                                                                                 =======
Note payable.................................................................... $   750
Stockholders' equity
 Common stock, $0.001 par value; 30,000,000 shares authorized, 9,288,000 issued
   and outstanding actual; 10,488,000 shares issued and outstanding pro forma as
   adjusted.....................................................................       9
 Additional paid-in capital.....................................................     110
 Retained earnings..............................................................   9,917
                                                                                 -------
Total stockholders' equity......................................................  10,036
                                                                                 -------
Total capitalization............................................................ $10,786
                                                                                 =======
</TABLE>


                                      14


<PAGE>

                                   DILUTION

   Our net tangible book value as of December 31, 2001, was approximately
$10,036,000, or $1.08 per share. Net tangible book value per share represents
the amount of our stockholders' equity divided by the number of shares of
common stock outstanding as of December 31, 2001. Dilution per share represents
the difference between the amount per share paid by purchasers of shares of
common stock in this offering and the net tangible book value per share of
common stock, on a pro forma basis, immediately after completion of this
offering.

   After giving effect to the sale of 1,200,000 shares of common stock offered
by us at an assumed initial public offering price of $17.00 per share, after
deducting the underwriting discount of approximately $1,428,000 and estimated
offering expenses of approximately $       payable by us, and the application
of the net proceeds as described in "Use of Proceeds," our net tangible book
value as of December 31, 2001, on a pro forma basis, would have been
approximately $_____ million, or approximately $     per share. This represents
an immediate increase in pro forma net tangible book value of $     per share
to existing stockholders and an immediate dilution in pro forma net tangible
book value of $     per share to investors purchasing our common stock in this
offering, as illustrated in the following table:


<TABLE>
<S>                                                                                    <C>   <C>
Assumed initial public offering price per share.......................................       $17.00
 Net tangible book value per share before this offering............................... $1.08
 Increase in pro forma net tangible book value per share attributable to new investors $
                                                                                       -----
Pro forma net tangible book value per share after this offering.......................       $
                                                                                             ------
Dilution per share to new investors...................................................       $
                                                                                             ======
</TABLE>


   The table below summarizes as of December 31, 2001, on a pro forma basis,
the differences between our existing stockholders and the new investors
purchasing our common stock in this offering with respect to the total number
of shares purchased, the total consideration paid and the average price per
share paid, based upon an assumed public offering price of $17.00 per share.


<TABLE>
<CAPTION>
                            Shares Purchased  Total Consideration  Average
                           -----------------  ------------------    Price
                             Number   Percent   Amount    Percent per Share
                           ---------- ------- ----------- ------- ---------
     <S>                   <C>        <C>     <C>         <C>     <C>
     Existing stockholders  7,488,000   71.4% $   119,099    0.2%  $ 0.02
     New investors........  3,000,000   28.6   51,000,000   99.8    17.00
                           ----------  -----  -----------  -----
     Total................ 10,488,000  100.0% $51,119,099  100.0%
                           ==========  =====  ===========  =====
</TABLE>


   The foregoing table assumes no exercise by the underwriters of the
over-allotment option. If the underwriters exercise their over-allotment option
in full, the following will occur:

  .  the number of shares of common stock held by existing stockholders will
     decrease to 7,038,000, or approximately 67.1% of the total number of
     shares of our common stock outstanding after this offering; and

  .  the number of shares held by new investors will increase to 3,450,000
     shares, or approximately 32.9% of the total number of shares of common
     stock outstanding after this offering.

                                      15


<PAGE>

                            SELECTED FINANCIAL DATA

   To assist you in your investment decision, we are providing the following
selected financial data. We derived the selected income data for the years
ended December 31, 1999, 2000 and 2001 and the selected balance sheet data as
of December 31, 2000 and 2001 from our financial statements included elsewhere
in this prospectus. The selected income data for the years ended December 31,
1997 and 1998 and the selected balance sheet data as of December 31, 1997, 1998
and 1999 are derived from financial statements not included in this prospectus.
The data presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with our financial statements and related notes included elsewhere in this
prospectus. Historical results are not necessarily indicative of future results.

   For all periods presented, we operated as an S corporation and were not
subject to federal and certain state income taxes. Upon completion of this
offering, we will become subject to federal and certain state income taxes
applicable to C corporations.

   Pro forma net income reflects the provision for income taxes that would have
been recorded had we been a C corporation during the periods presented. Pro
forma net income per share is based on the weighted average number of shares of
common stock outstanding during the years 1997 through 2000, or 9,288,000
shares, plus an additional 397,135 shares for 2001, which is the estimated
portion of the shares being offered that would be necessary to fund the
distribution of accumulated S corporation earnings in excess of 2001 net
income, through the date we become a C corporation. This number of shares has
been calculated assuming an initial public offering price of $17.00 per share.
See Note 3 to our financial statements included elsewhere in this registration
statement.



<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                       --------------------------------------------------------
                                                          1997       1998       1999        2000        2001
                                                       ---------- ---------- ----------  ----------  ----------
                                                          (in thousands except for share and per share data)
<S>                                                    <C>        <C>        <C>         <C>         <C>
INCOME DATA:
Sales revenues:.......................................
  Systems and services................................ $   24,121 $   32,150 $   49,626  $   46,860  $   56,173
  Outsourcing.........................................         --         --        904       2,362       3,493
                                                       ---------- ---------- ----------  ----------  ----------
Total sales revenues..................................     24,121     32,150     50,530      49,222      59,666
Costs of sales:
  Systems and services................................     13,841     19,311     29,254      29,979      34,133
  Outsourcing.........................................         --         --        641       1,508       2,109
                                                       ---------- ---------- ----------  ----------  ----------
Total costs of sales..................................     13,841     19,311     29,895      31,487      36,242
                                                       ---------- ---------- ----------  ----------  ----------
Gross profit..........................................     10,280     12,839     20,635      17,735      23,424
Operating expenses:
  Sales and marketing.................................      1,612      2,872      4,650       4,477       5,105
  General and administrative..........................      4,306      4,819      7,244       8,603       9,843
                                                       ---------- ---------- ----------  ----------  ----------
Total operating expenses..............................      5,918      7,691     11,894      13,080      14,948
                                                       ---------- ---------- ----------  ----------  ----------
Operating income......................................      4,362      5,148      8,741       4,655       8,476
Other income (expense):
  Interest income.....................................         98        100         82          91         126
  Miscellaneous income................................         19         61        146         214         154
  Interest expense....................................         --         --        (32)        (69)        (76)
                                                       ---------- ---------- ----------  ----------  ----------
Total other income....................................        117        161        196         236         204
                                                       ---------- ---------- ----------  ----------  ----------
Net income............................................ $    4,479 $    5,309 $    8,937  $    4,891  $    8,680
                                                       ========== ========== ==========  ==========  ==========
Net income per share--basic and diluted............... $     0.48 $     0.57 $     0.96  $     0.53  $     0.93
                                                       ========== ========== ==========  ==========  ==========
Weighted average shares outstanding--basic and diluted  9,288,000  9,288,000  9,288,000   9,288,000   9,288,000
                                                       ========== ========== ==========  ==========  ==========
Cash dividends declared per share..................... $     0.38 $     0.51 $     0.66  $     0.65  $     0.71
                                                       ========== ========== ==========  ==========  ==========
</TABLE>


                                      16


<PAGE>


<TABLE>
<CAPTION>
                                                                                         Year ended December 31,
                                                                            --------------------------------------------------
                                                                              1997      1998       1999      2000      2001
                                                                             ------    ------    -------    -------   -------
                                                                            (in thousands except for share and per share data)
<S>                                                                         <C>       <C>       <C>        <C>       <C>
Pro forma information:
  Net income as reported................................................... $4,479    $5,309    $ 8,937    $ 4,891   $ 8,680
  Pro forma income taxes...................................................  1,677     1,982      3,324      1,826     3,231
                                                                             ------    ------    -------    -------   -------
  Pro forma net income..................................................... $2,802    $3,327    $ 5,613    $ 3,065   $ 5,449
                                                                             ======    ======    =======    =======   =======
  Pro forma net income per share--basic and diluted (based on 9,288,000
   weighted average shares)................................................ $ 0.30    $ 0.36    $  0.60    $  0.33   $  0.59
                                                                             ======    ======    =======    =======   =======
  Pro forma net income per share basic and diluted (based on 9,685,135
   weighted average shares and reflecting the S corporation distribution--
   see Note 3 to financial statements).....................................                                           $ 0.56
                                                                                                                      =======
BALANCE SHEET DATA:
Cash and cash equivalents.................................................. $1,467    $  715    $   980    $ 1,033   $ 2,019
Total assets...............................................................  6,406     9,231     14,374     14,515    17,251
Total current liabilities..................................................    718     2,992      4,421      5,810     6,551
Note payable...............................................................     --        --        889        749       664
Total stockholders' equity.................................................  5,688     6,239      9,065      7,956    10,036
</TABLE>


                                      17


<PAGE>


                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   You should read the following discussion of our financial condition and
results of operations in conjunction with "Selected Financial Data" and our
financial statements and the related notes included elsewhere in this
prospectus. This discussion and analysis contains forward-looking statements
that involve risks, uncertainties and assumptions. Our actual results may
differ materially from those anticipated in these forward-looking statements as
a result of many factors, including but not limited to those set forth under
"Risk Factors" and elsewhere in this prospectus.

Overview

   CPSI was founded in 1979 and specializes in delivering comprehensive
healthcare information systems and related services to community hospitals. Our
systems and services are designed to support the primary functional areas of a
hospital and to enhance access to needed financial and clinical information.
Our comprehensive system enables healthcare providers to improve clinical,
financial and administrative outcomes. Our products and services provide
solutions in key areas, including patient management, financial management,
patient care and clinical, enterprise and office automation.

   We sell a fully integrated, enterprise-wide financial and clinical hospital
information system comprised of all necessary software, hardware, peripherals,
forms and office supplies, together with comprehensive customer service and
support. We also offer outsourcing services, including electronic billing
submissions, patient statement processing and business office functions, as
part of our overall information system solution.

   We have achieved a compounded annual growth rate in revenues of
approximately 22% over the past five years. Our system currently is installed
and operating in over 400 hospitals in 45 states and the District of Columbia.
Our core market consists of community hospitals with 100 or fewer acute care
beds. We also serve and are targeting for growth hospitals with 100 to 300
acute care beds.

Revenues

   Systems and Services Revenues.  Systems revenues are derived from the sale
of information systems (including software, conversion and installation
services, hardware, peripherals, forms and office supplies) to new customers
and from the sale of new or additional products to existing customers. We do
not record revenue upon execution of a sales contract. Upon signing a contract
to purchase a system from us, each customer pays a non-refundable 10% deposit
that is recorded as deferred revenue. The customer then pays 40% of the
purchase price for the software and the related installation, training and
conversion when we install the system and commence training on-site at the
customer's facility. When the system begins operating in a live environment, we
bill the remaining 50% of the system purchase price and recognize revenue for
the total amount of the purchase price for software and related services.
Revenues derived from installation of additional software applications are
generally recognized upon installation. Revenues from the sale of hardware,
forms and supplies are recognized upon the shipment of the product to the
customer.

   We also derive revenues from the provision of system support services,
including software application support, hardware maintenance, continuing
education and related services. Support services are provided pursuant to a
support agreement under which we provide comprehensive system support and
related services in exchange for a monthly fee based on the services provided.
The initial term of these contracts ranges from one to seven years, with a
typical duration of five years. Upon expiration of the initial term, these
contracts renew automatically from year-to-year thereafter until terminated.
Revenues from support services are recognized in the month when these services
are performed.

   We provide our products to some customers as an application service
provider, or "ASP." We provide ASP services on a remote access basis by storing
and maintaining servers at our headquarters which contain customers' patient
and administrative data. These customers then access this data remotely in
exchange for a monthly fee. In addition, as part of our total information
solution, we also serve as an Internet service provider,

                                      18


<PAGE>

or "ISP," for some of our customers for a monthly fee. We also provide web-site
design and hosting services if needed. Revenues from our ASP and ISP services
are recognized in the month when these services are delivered.

   Outsourcing Revenues.  We began offering outsourcing services in January
1999. Revenues from outsourcing services have increased rapidly since that
time. We expect outsourcing revenues to continue to grow at a faster rate than
our systems and services revenues. Our outsourcing services include electronic
billing, statement processing and business office outsourcing (primarily
accounts receivable management). All of these outsourcing services are sold
pursuant to one year customer agreements, with automatic one year renewals
until terminated. Revenues from outsourcing services are recognized when these
services are performed.

Costs of Sales

   Systems and Services.  The principal cost associated with the design,
development, sale and installation of our systems and the related support
services are employee salaries, benefits, travel expenses and certain other
overhead expenses. For the sale of equipment, forms and office supplies, we
incur costs to acquire these products from the respective distributors or
manufacturers, as the case may be. Costs are expensed as incurred and are not
deferred.

   Outsourcing.  The principal cost related to our statement outsourcing is
postage. The principal cost related to our electronic billing outsourcing is
long distance telecommunication fees. Employee salaries, benefits, supplies and
forms are additional significant costs associated with our outsourcing
services. Costs are expensed as incurred and are not deferred.

Results of Operations

   The following table sets forth certain items included in our results of
operations for each of the three years in the period ended December 31, 2001,
expressed as a percentage of our total revenues for these periods:


<TABLE>
<CAPTION>
                                           Year ended December 31
                             -------------------------------------------------
                                   1999             2000             2001
                             ---------------  ---------------  ---------------
                             Amount   % Sales Amount   % Sales Amount   % Sales
                             -------  ------- -------  ------- -------  -------
                                               (in thousands)
 <S>                         <C>      <C>     <C>      <C>     <C>      <C>
 Sales revenues:
  Systems and services...... $49,626    98.2% $46,860    95.2% $56,173    94.1%
  Outsourcing...............     904     1.8    2,362     4.8    3,493     5.9
                             -------   -----  -------   -----  -------   -----
 Total sales revenues.......  50,530   100.0   49,222   100.0   59,666   100.0

 Costs of sales:
  Systems and services......  29,254    57.9   29,979    60.9   34,133    57.2
  Outsourcing...............     641     1.3    1,508     3.1    2,109     3.5
                             -------   -----  -------   -----  -------   -----
 Total costs of sales.......  29,895    59.2   31,487    64.0   36,242    60.7
                             -------   -----  -------   -----  -------   -----

 Gross profit...............  20,635    40.8   17,735    36.0   23,424    39.3

 Operating expenses:
  Sales and marketing.......   4,650     9.2    4,477     9.1    5,105     8.6
  General and administrative   7,244    14.3    8,603    17.5    9,843    16.5
                             -------   -----  -------   -----  -------   -----
 Total operating expenses...  11,894    23.5   13,080    26.6   14,948    25.1
                             -------   -----  -------   -----  -------   -----

 Operating income...........   8,741    17.3    4,655     9.4    8,476    14.2

 Other income (expense):
  Interest income...........      82     0.2       91     0.2      126     0.2
  Miscellaneous income......     146     0.3      214     0.4      154     0.2
  Interest expense..........     (32)   (0.1)     (69)   (0.1)     (76)   (0.1)
                             -------   -----  -------   -----  -------   -----
  Total other income........     196     0.4      236     0.5      204     0.3
                             -------   -----  -------   -----  -------   -----
  Net income................ $ 8,937    17.7% $ 4,891     9.9% $ 8,680    14.5%
                             =======   =====  =======   =====  =======   =====
</TABLE>


                                      19


<PAGE>

2000 Compared to 2001

   Revenues.  Total revenues increased by 21.2% or $10.5 million from $49.2
million in 2000 to $59.7 million in 2001.

   Systems and services revenues increased by 19.9% or $9.3 million from $46.9
million in 2000 to $56.2 million in 2001. The increase in these revenues was
attributable primarily to an increase in new customer installations and a
corresponding increase in related support and maintenance agreements.

   Outsourcing revenues increased by 47.9% or $1.1 million from $2.4 million in
2000 to $3.5 million in 2001. We experienced an increase in outsourcing
revenues as a result of continued growth in customer demand for billing and
administrative support services. We expect outsourcing revenues to continue to
grow at a faster rate than systems and services revenues.

   Costs of Sales.  Total costs of sales increased by 15.1% or $4.7 million
from $31.5 million in 2000 to $36.2 million in 2001. As a percentage of
revenues, costs of sales changed from 64.0% in 2000 to 60.7% in 2001.

   The increase in costs of sales of systems and services was caused primarily
by increased salary expense due to increased headcount needed to adequately
support our increasing customer base and enhance our product offerings. We also
experienced an increase in travel expense as a result of the increase in the
number of system installations in 2001 over 2000, and a related increase in
customer training requirements.

   Our costs associated with outsourcing services increased significantly due
to an increase in postage and long distance telecommunications costs resulting
from an increase in the transaction volumes of our statement processing and
electronic billing. Salary costs also increased due to the hiring of new
employees in this area.

   Sales and Marketing Expenses.  Sales and marketing expenses increased by
14.0% or $0.6 million from $4.5 million in 2000 to $5.1 million in 2001. As a
percentage of total revenues, sales and marketing expenses changed from 9.1% in
2000 to 8.6% in 2001. The increase in expenses was due primarily to increased
travel expenses, the addition of sales and marketing personnel and increased
sales commissions. We expect sales and marketing expense to continue to
increase on an absolute basis as our business continues to grow. We expect much
of the increase to come from increases in the number of employees.

   General and Administrative Expenses.  General and administrative expenses
increased by 14.4% or $1.2 million from $8.6 million in 2000 to $9.8 million in
2001. As a percentage of total revenues, general and administrative expenses
changed from 17.5% in 2000 to 16.5% in 2001. The increase in expenses was due
primarily to pay raises for existing employees, the hiring of additional
employees to support the growth in our business and increases in our insurance
related costs. We expect general and administrative expenses to increase as a
result of our becoming a public company.

   As a result of the foregoing factors, net income increased by 77.5% or $3.8
million from $4.9 million in 2000 to $8.7 million in 2001. Pro forma net
income, which reflects a pro forma tax provision as if we had been a C
corporation, increased by 77.8% or $2.3 million from $3.1 million in 2000 to
$5.4 million in 2001.

1999 Compared to 2000

   Revenues.  Total revenues decreased by 2.6% or $1.3 million from $50.5
million in 1999 to $49.2 million in 2000.

   Systems and services revenues decreased by 5.6% or $2.7 million from $49.6
million in 1999 to $46.9 million in 2000. This decrease was due primarily to
hospitals curtailing technology spending related to the Year 2000 issue
following the completion of the 1999 calendar year, after which no Year 2000
issue existed. Contributing to the decrease were decisions by some hospitals to
delay or cancel orders in the face of a substantial decrease in Medicare
reimbursement following the passage of the Balanced Budget Act of 1997.

                                      20


<PAGE>

Despite the overall decrease in systems and services revenues for the year, we
experienced an increase in our recurring revenues attributable to our ongoing
customer support services and the commencement of ASP services.

   Outsourcing revenues increased by 161.5% or $1.5 million from $0.9 million
in 1999 to $2.4 million in 2000. Much of the increase in outsourcing revenues
was attributable to the addition of electronic billing services.

   Costs of Sales.  Total costs of sales increased by 5.3% or $1.6 million from
$29.9 million in 1999 to $31.5 million in 2000. As a percentage of total
revenues, costs of sales changed from 59.2% in 1999 to 64.0% in 2000.

   The increase in costs of sales of systems and services was due primarily to
an increase in salary expense as a result of the addition of employees to keep
up with additional customer support requirements arising from the significant
increase in system sales in 1999. We also experienced an increase in travel
costs.

   Our costs associated with outsourcing services increased significantly due
to initial costs related to the addition of electronic billing to our
outsourcing services. These costs included equipment purchases and additional
salaries resulting from the hiring of new employees in this area.

   Sales and Marketing Expenses.  Sales and marketing expenses decreased by
3.7% or $0.2 million from $4.7 million in 1999 to $4.5 million in 2000. As a
percentage of total revenues, sales and marketing expenses changed from 9.2% in
1999 to 9.1% in 2000. The decrease in expenses was primarily attributable to a
decrease in commission expenses. This decrease in expense was partially offset
by an increase in advertising expenditures as we sought to improve our
visibility and name recognition in the industry. We also experienced increased
salary costs due to the hiring of new employees and increased travel costs due
to more frequent employee travel.

   General and Administrative.  General and administrative expenses increased
by 18.8% or $1.4 million from $7.2 million in 1999 to $8.6 million in 2000. As
a percentage of total revenues, general and administrative expenses changed
from 14.3% in 1999 to 17.5% in 2000. The increase in expenses was due primarily
to an increase in health insurance costs, an increase in legal fees incurred in
connection with employment related litigation, additional audit and accounting
fees and an increase in our contributions to our 401(k) plan due to the hiring
of additional employees.

   As a result of the foregoing factors, net income decreased 45.3% or $4.0
million from $8.9 million in 1999 to $4.9 million in 2000. Pro forma net
income, which reflects a pro forma tax provision as if we had been a C
corporation, decreased by 45.4% or $2.5 million from $5.6 million in 1999 to
$3.1 million in 2000.

Quarterly Results of Operations

   The following table presents a summary of our results of operations for our
four most recent quarters ended December 31, 2001. The information for each of
these quarters is unaudited and has been prepared on a basis consistent with
our audited financial statements appearing elsewhere in this prospectus. This
information includes all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for fair presentation of this
information when read in conjunction with our audited financial statements and
related notes appearing elsewhere in this prospectus. Statement of operations
data included in this table has been adjusted to include pro forma corporate
income tax provisions as if we had been a C corporation during all of the
quarterly periods. Our operating results have varied on a quarterly basis and
may fluctuate significantly in the future. Results of operations for any
quarter are not necessarily indicative of results for any future quarter or for
a full fiscal year.


<TABLE>
<CAPTION>
                           March 31     June 30   September 30 December 31
                          ----------- ----------- ------------ -----------
     <S>                  <C>         <C>         <C>          <C>
     Sales revenues...... $13,529,256 $14,133,002 $14,849,410  $17,154,737
     Gross profit........   5,357,915   5,399,023   5,663,910    7,003,770
     Operating income....   1,726,784   1,909,478   2,093,542    2,746,365
     Net income..........   1,743,978   1,930,610   2,186,106    2,819,506
     Pro forma net income   1,094,722   1,211,874   1,372,253    1,769,850
</TABLE>


                                      21


<PAGE>

Liquidity and Capital Resources

   As of December 31, 2001, we had $2.0 million in cash and cash equivalents.
After completion of the offering and application of the net proceeds, we expect
to have approximately $5.0 million in cash, which we consider adequate to fund
our business for the foreseeable future. Our principal source of liquidity has
been cash provided by operating activities. Cash provided by operating
activities has been used primarily to fund the growth in our business and to
pay distributions to our stockholders. We paid cash distributions to our
stockholders of $6.1 million, $6.0 million and $6.6 million in the years ended
December 31, 1999, 2000 and 2001, respectively. Upon the completion of this
offering, we will convert from an S corporation to a C corporation for tax
purposes. As a result, some of our cash provided by our operating activities
will be required to pay taxes on our income.

   Net cash provided by operating activities totaled $7.7 million, $7.6 million
and $9.0 million for the years ended December 31, 1999, 2000 and 2001,
respectively. The increase in cash provided by operating activities from 2000
to 2001 was the result of the increase in net income and working capital.

   Net cash used in investing activities totaled $2.3 million, $1.4 million and
$1.3 million for the years ended December 31, 1999, 2000 and 2001,
respectively. We used cash for the purchase of property and equipment.

   Net cash used in financing activities totaled $5.2 million, $6.1 million and
$6.7 million for the years ended December 31, 1999, 2000 and 2001,
respectively, which was primarily due to the payment of cash distributions. In
1999, we purchased approximately 11.5 acres of undeveloped land, and we
borrowed approximately $1.0 million to fund this purchase. We used cash to make
payments on this debt and to pay distributions to our stockholders.

   Our days sales outstanding for the years ended December 31, 2000 and 2001
were 52.5 and 41.7, respectively.

   We currently do not have a bank line of credit or other credit facility in
place. Because we will have no debt after the offering, we will not be subject
to contractual restrictions or other influences on our operations, such as
payment demands and restrictions on the use of operating funds, that are
typically associated with debt. If we borrow money in the future, we will
likely be subject to operating and financial covenants that could limit our
ability to operate as profitably as we have in the past. Defaults under
applicable loan agreements could result in the demand by lenders for immediate
payment of substantial funds and substantial restrictions on expenditures,
among other things.


Related Party Transactions

   We lease the majority of our corporate headquarters campus from CP
Investments, Inc., an Alabama corporation, the stockholders of which are also
some of the stockholders of CPSI. In 2001, we paid total lease payments in the
amount of $958,000 to CP Investments, Inc. On     , 2002, we entered into a new
lease with CP Investments, Inc., which expires in April 2012. For 2002, we will
make lease payments in the amount of $988,200 with respect to this lease. The
annual rent payable under this lease has been determined by an independent,
third party appraisal firm. The parties may agree, from time to time, to make
adjustments in the annual rent payable under this lease based on subsequent
third party appraisals.

   We lease the remainder of our headquarters facilities, which is comprised of
one building that houses our dedicated research and development staff, from
DJK, LLC, a limited liability company owned by Dennis Wilkins. On       , 2002,
we entered into a lease for this facility that expires in April 2012. Prior to
that time we paid only the expenses associated with the building. For 2002, we
will make lease payments in the amount of $29,250 with respect to this lease.
The annual rent payable under this lease has been determined by an independent,
third party appraisal firm.


                                      22


<PAGE>

Contractual Commitments

   Our related party real estate leases are our principal contractual
commitments requiring recurring payments in the future. We also have some
equipment leases that will expire in July 2002. Our payments under these
operating leases subsequent to December 31, 2001 will be as follows:


<TABLE>
<CAPTION>
                 Year                                 Amount
                 ----                               ----------
                 <S>                                <C>
                 2002.............................. $1,038,126
                 2003..............................  1,027,200
                 2004..............................  1,027,200
                 2005..............................  1,027,200
                 2006..............................  1,027,200
                 Thereafter........................  3,792,600
                                                    ----------
                 Total............................. $8,939,526
                                                    ==========
</TABLE>


Critical Accounting Policies

   General.  Our discussion and analysis of our financial condition and results
of operations are based on our financial statements, which have been prepared
in accordance with generally accepted accounting principles. We are required to
make some estimates and judgments that affect the preparation of these
financial statements. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances, but actual results may differ from these estimates under
different assumptions or conditions.

   Revenue Recognition.  We recognize revenue in accordance with SEC Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements, as amended by SAB 101A and 101B and the American Institute of
Certified Public Accountants Statement of Position (SOP) 97-2, Software Revenue
Recognition. SAB 101 and SOP 97-2 require that four basic criteria must be met
before revenues can be recognized: (1) persuasive evidence that an arrangement
exists; (2) delivery has occurred or services have been rendered; (3) the fee
is fixed and determinable; and (4) collectibility is reasonably assured.
Determination of criteria (3) and (4) are based on our judgment regarding the
fixed nature of the fee charged for services rendered and products delivered
and the collectibility of those fees. Should changes in conditions cause us to
determine these criteria are not met for certain future transactions, revenues
recognized for any reporting period could be adversely affected.

Backlog

   Backlog consists of revenues we reasonably expect to recognize over the next
twelve months under existing contracts. The revenues to be recognized may
relate to a combination of one-time fees for system sales, and recurring fees
for support, outsourcing, ASP and ISP services. As of December 31, 2001, we had
a backlog of approximately $12.0 million in connection with non-recurring
system purchases and approximately $32.0 million in connection with recurring
payments under support, outsourcing, ASP and ISP contracts.

Qualitative and Quantitative Disclosures About Market and Interest Rate Risk

   We reduce the sensitivity of our results of operations to market risks
related to changes in interest rates by maintaining an investment portfolio
comprised solely of highly rated, short-term investments. We do not hold or
issue derivative, derivative commodity instruments or other financial
instruments for trading purposes. We are not exposed to currency exchange
fluctuations, as we do not sell our products internationally, and we currently
have no exposure to equity price risks. After this offering, we will have no
outstanding debt.

                                      23


<PAGE>

Recent Accounting Pronouncements

   In June 2001, the Financial Accounting Standards Board approved Statements
of Financial Accounting Standards (SFAS) No. 141, Business Combinations and
SFAS No. 142, Goodwill and Other Intangible Assets. The statements eliminate
the pooling-of-interests method of accounting for business combinations and
require that goodwill and intangible assets with indefinite useful lives not be
amortized. Instead, these assets will be reviewed for impairment annually with
any related losses recognized when incurred. SFAS No. 141 is generally
effective for business combinations completed after June 30, 2001. SFAS No. 142
is effective for fiscal years beginning after December 15, 2001, with early
application permitted in certain circumstances. Adoption of SFAS No. 141 and
SFAS No. 142 is not expected to have an effect on our financial position or
results of operations.

   In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. It
applies to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and/or the
normal operation of a long-lived asset, except for certain obligations of
lessees. SFAS No. 143 is effective for financial statements issued for fiscal
years beginning after June 15, 2002. We believe the adoption of SFAS No. 143
will not have a material effect on our financial position or results of
operations.

   In October 2001, the Financial Accounting Standards Board approved SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets. This
statement addresses financial accounting and reporting for the impairment of
long-lived assets and for long-lived assets to be disposed of and supersedes
SFAS No. 121 and APB Opinion No. 30, Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years, with early application encouraged.
We believe the adoption of SFAS No. 144 will not have a material effect on our
financial position or results of operations.

                                      24


<PAGE>


 
                                  BUSINESS

Overview

   We are a healthcare information technology company that designs, develops,
markets, installs and supports computerized information technology systems to
meet the unique demands of small and midsize hospitals. Our target market
includes acute care community hospitals with 300 or fewer beds and small
specialty hospitals. We are a single-source vendor providing comprehensive
software and hardware products, complemented by data conversion, complete
installation and extensive support. Our fully integrated, enterprise-wide
system automates the management of clinical and financial data across the
primary functional areas of a hospital. We believe our solution improves
hospital operations and the quality of medical care delivered by our customers.
In addition, we provide services that enable our customers to outsource certain
data-related business processes which we can perform more efficiently. We
believe our products and services enhance hospital performance in the critical
areas of clinical care, revenue cycle management, cost control and regulatory
compliance. From our initial hospital installation in 1981, we have grown to
serve more than 400 hospital customers across 45 states and the District of
Columbia. In 2001, we generated revenues of $59.7 million from the sale of our
products and services.

Industry Dynamics

   The healthcare industry is the largest industry in the United States
economy. The Centers for Medicare and Medicaid Services, or "CMS," has
calculated that fiscal 2000 total healthcare expenditures in the United States
were approximately $1.3 trillion, or approximately 13.2% of the U.S. gross
domestic product. CMS estimates that by fiscal 2011 total U.S. healthcare
spending will reach $2.8 trillion, or 17.0% of the estimated U.S. gross
domestic product.

   Hospital services represents one of the largest categories of total
healthcare expenditures. According to CMS, in fiscal 2000 spending on hospital
services amounted to $412.1 billion, or 31.7% of total healthcare expenditures.
According to the American Hospital Association, there are approximately 5,000
acute care hospitals in the United States, with approximately 4,200 in our
target market of hospitals with 300 or fewer acute care beds. In addition,
there is a significant market of small specialty hospitals that focus on
discrete medical areas such as surgery, rehabilitation and psychiatry.

   Notwithstanding the size and importance of the healthcare industry within
the United States economy, the industry is constantly challenged by changing
economic dynamics, increased regulation, and pressure to improve the quality of
healthcare. These challenges are particularly significant for the hospitals in
our target market due to their more limited financial and human resources.
However, we believe healthcare providers can successfully address these issues
with the help of advanced medical information systems. Specific examples of the
challenges facing healthcare providers include the following.

   Changing Economic Dynamics.  The federal Balanced Budget Act of 1997, or
"BBA," significantly lowered Medicare reimbursements for hospital services.
These reductions were projected to total over $250 billion over five years.
While the Budget Refinement Act of 1999 and the Benefits Improvement Act of
2000 lessened the impact of the BBA, aggregate federal reimbursement for
hospital services is still significantly below pre-1997 levels. Lower
reimbursement from federal programs, administrative and clinical inefficiencies
and increased patient loads due to an aging population have placed significant
financial pressure on hospitals in general. This pressure is even greater on
community hospitals, as they operate on tighter budgets with lower margins.

   Health Insurance Portability and Accountability Act.  The federal Health
Insurance Portability and Accountability Act of 1996, or "HIPAA," requires the
implementation of national guidelines for information management by healthcare
organizations. Among other things, HIPAA mandates uniform electronic
transactions and code sets, improved data security and increased patient
privacy. As of February 2002, final regulations for

                                      25


<PAGE>

privacy and electronic transaction/code set standards were adopted. Healthcare
organizations have until October 2002, subject to a one year extension, to
establish compliance with the electronic transaction rules and until April 2003
to establish compliance with the privacy rules. The influence of HIPAA is
illustrated by the results of the 13/th/ Annual HIMSS Leadership Survey
sponsored by Superior Consultant Company. Survey respondents cited HIPAA
compliance more than any other matter as a top business issue that will affect
healthcare in the next two years. Approximately 60% of respondents identified
upgrading information technology systems to meet HIPAA requirements as the
number one information technology priority for their organizations. In
addition, according to the Winter 2001-2002 Healthcare Industry HIPAA
Compliance Survey conducted by HIMSS and Phoenix Health Systems, approximately
88% of respondent hospitals with 400 or fewer beds have developed an
organizational approach for HIPAA compliance. Vendors that offer information
solutions utilizing a common architecture and database structure are expected
to be well positioned to provide healthcare participants with effective
solutions to the HIPAA requirements.

   Activism for Improved Clinical Care.  In November 1999, the Institute of
Medicine published a report entitled "To Err is Human: Building a Safer
Healthcare System." The report indicated that avoidable medical error is one of
the top ten leading causes of death in the United States. The report also
estimates that medical error may add as much as $14.5 billion of preventable
cost to the healthcare industry. As a result of this study, automated medical
information systems have been increasingly identified as a key to improving
patient care and reducing medical errors. For example, the Leapfrog Group, a
consortium of more than 100 public and private organizations including General
Motors, General Electric, AT&T and IBM, recommends that its members utilize
hospitals with certain automated medical information systems that are designed
to limit medical errors. Moreover, California has adopted legislation requiring
hospitals to use automated medical information systems. We believe hospitals
utilizing fully integrated enterprise-wide medical information systems that
allow professionals real-time access to information such as electronic charts,
treatment protocols and pathways, pharmaceutical records and treatment
schedules will be favored by large employers and government payors.

   While economic, regulatory and consumer pressures such as those described
above have increased rapidly over the last several years, healthcare
organizations have historically underinvested in information technology and
services compared to other industries. Gartner Research, a technology research
firm, reported that in 1999 healthcare organizations invested approximately
three percent of aggregate healthcare revenue in information systems, compared
to approximately five percent to seven percent invested by other information
intensive industries. We believe this underinvestment has caused healthcare
providers to rely on non-integrated, complex and inefficient information
systems. A hospital's failure to adequately invest in modern medical
information systems could result in fewer patient referrals, cost
inefficiencies, lower than expected reimbursement, increased malpractice risk
and possible regulatory infractions.

   In the face of decreasing revenue and increasing pressure to improve patient
care, healthcare providers are in need of management tools that (1) increase
efficiency in the delivery of healthcare services, (2) reduce medical errors,
(3) effectively track the cost of delivering services so those costs can be
properly managed and (4) increase the speed and rate of reimbursement. We
believe the industry has begun to embrace information technology as a
management tool, evidenced by the fact that two-thirds of the respondents to
the 13/th/ Annual HIMSS Leadership Survey referenced above predicted an
increase in their organizations' information technology operating budgets
during the next twelve months. We believe these dynamics will allow for our
sustained revenue growth.

Our Solution

   We have tailored an information technology solution that effectively
addresses the specific needs of small and midsize hospitals. Due to their
smaller operating budgets, community hospitals have limited financial and human
resources to operate manual or inefficient information systems. However, these
hospitals are expected to achieve the same quality of care and regulatory
compliance as larger hospitals, placing them in a particularly

                                      26


<PAGE>

difficult operating environment. Despite this pressing need of community
hospitals for state-of-the-art medical information systems, we believe that
most information technology providers fail to address the unique needs of
community hospitals.

   We believe that the CPSI solution meets this challenge. We provide fully
integrated, enterprise-wide medical information systems and services that
collect, process, retain and report data in the primary functional areas of a
hospital, from patient care to clinical processing to administration and
accounting. As a key element of our complete solution, we provide ongoing
customer service through regular interaction with customers, customer user
groups and extensive customer support. Further, we offer outsourcing services
that allow customers to avoid some of the fixed costs of a business office. We
are capable of providing a single-source solution for small and midsize
hospitals, making us a partner in their initiatives to improve operations and
medical care.

   Our customers continuously communicate with us through our support teams and
through organized user groups, allowing us to continue to provide a
state-of-the-art solution that meets their specific needs. By remaining
sensitive and responsive to the ever-changing needs of our customers and
regularly updating our products to meet these needs, we believe we provide the
best solution available to community hospitals at a price they can afford. Our
business has continued to grow because we have successfully addressed the needs
of community hospitals for fully integrated enterprise-wide information systems
that allow them to improve operating effectiveness, reduce costs and improve
the quality of patient care.

Strategy

   Our objective is to continue to grow as a leading provider of healthcare
information technology systems and services to small and midsize hospitals by
following the same strategy that we have successfully pursued for over twenty
years, the key elements of which are described below.

   Deliver a Single-Source Solution.  When a customer purchases the CPSI
system, we provide everything necessary for the customer to implement and use
our system. We deliver the application software, computer hardware,
peripherals, forms and supplies used in the comprehensive information network.
Our installation teams work extensively with each customer to convert existing
data to the new system, to install all of the necessary equipment and to train
hospital personnel to use our system. After installation, our support teams
answer and address customer questions and issues related to any aspect of the
system. We also offer customers additional services such as business office
outsourcing, electronic billing outsourcing and ISP services. We believe our
single-source approach to delivering a complete information system makes our
system easier and more convenient for customers to understand and manage, which
results in greater customer satisfaction and retention.

   Provide Enterprise-Wide, Fully Integrated Software Applications.  We have
developed all of our software products internally as part of our fully
integrated system architecture. Our experience has taught us that using a fully
integrated system in the primary functional areas of a hospital ensures
compatibility among applications and avoids pitfalls associated with
interfacing disparate systems. Our system utilizes one central database where
information is stored and used by all of our software applications. With our
single database model, our systems provide secure, real-time access to all
information across multiple applications for all those needing such access,
including physicians, nurses, laboratory technicians, pharmacists, clinicians
and other users. The enterprise-wide, fully integrated nature of our system
also allows customers to monitor user access to information for purposes of
compliance with new federal and state privacy regulations.

   Maintain Commitment to Customer Oriented Operating Philosophy.  A key factor
in our success has been our focus on customer service and support. We make
available to our customers experienced support teams that can assist with any
question or problem. We currently have a one to one support staff to customer
ratio. Our support teams are extensively trained, and our employees are
generally promoted from within so that they have a thorough knowledge of our
system and a commitment to our culture. Because all of our customers use the
same version of our system, our support teams can be more effective by
maintaining a complete understanding of a single system. As part of our
commitment to system support, we actively solicit customer feedback regarding

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<PAGE>

ways in which we can improve the effectiveness and efficiency of our systems.
To further this goal, we have organized our customers into a national user
group to promote the exchange of information regarding our system and to
identify product enhancements based on our customers' operational experiences.
We believe our user group concept is a key component of our success by
positively impacting customer satisfaction and retention and by enhancing
product development and system functionality. We will continue to focus on our
national user group as a key component to our goal of maintaining and growing
our customer base and market share.

   Expand Presence in Target Market.  We will continue to target small to
midsize domestic hospitals of 300 or fewer acute care beds. We believe this
market of approximately 4,200 acute care hospitals nationwide has been
traditionally overlooked and underserved by other healthcare technology
companies. In addition, a number of our customers are small specialty hospitals
that focus on discrete medical areas such as surgery, rehabilitation and
psychiatry. We intend to continue gaining customers from this significant
market segment. Our system can help these smaller hospitals reduce costs and
increase their operating efficiencies. We believe our personalized marketing
approach and emphasis on customer relationships are attractive to the
management of these hospitals. We also believe our system is well-suited to
hospitals of this size because they typically demonstrate a greater commitment
than larger hospitals to the concept of an enterprise-wide, fully integrated
system. Currently, 92% of our customers are hospitals of 100 acute care beds or
less. We believe there is a substantial opportunity in the future to increase
our market share among hospitals with 100 to 300 acute care beds. In addition,
we will continue to sell additional services and software products to our
existing customers who have not purchased our complete package of services and
software applications.

   Emphasize Recurring Revenue Opportunities.  In addition to revenues from new
system installations, we are developing sources of recurring revenues. Our
current principal source of recurring revenues is our support fees paid by
existing customers. As our customer base grows, our recurring revenues from
support fees should also grow. We believe growth in recurring revenues will
also come from our outsourcing services, which we market to our existing
customers as well as new customers. These services include electronic billing,
patient statement processing, business office outsourcing, ISP services and web
site hosting. We also provide our software products on an ASP basis. When we
provide ASP services, we maintain a customer's computer server in our facility
and provide our system to the customer through remote access. Instead of the
one-time system purchase price, these customers pay a monthly fee for the term
of the ASP customer agreement, generating recurring revenues.

Products

   We offer a full array of software applications designed to streamline the
flow of information to the primary functional areas of community hospitals in
one fully integrated system. We intend to continue to enhance our existing
software products and develop new products as required by evolving industry
standards and the changing needs of our customers. Pursuant to our customer
support agreements, we provide all of our customers with software enhancements
and upgrades typically twice each year. These enhancements enable each
customer, regardless of its original installation date, to have the benefit of
the most advanced CPSI products available. Our products:

   .   provide automated processes that improve clinical workflow and support
       clinical decision-making;

   .   allow healthcare providers to efficiently input and easily access the
       most current patient medical data in order to improve the quality of
       care and patient safety;

   .   integrate clinical, financial and patient information to promote
       efficient use of time and resources, while eliminating dependence on
       paper medical records;

   .   provide tools that permit healthcare organizations to analyze past
       performance, model new plans for the future and measure and monitor the
       effectiveness of those plans;

   .   provide for rapid and cost-effective implementation, whether through the
       installation of an in-house system or through our ASP services; and

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<PAGE>

   .   increase the flow of information by replacing centralized and limited
       control over information with broad-based, secure access by clinical and
       administrative personnel to data relevant to their functional areas.

   Our integrated software products are designed to process information
throughout the primary functional areas of a hospital. Our products include
patient management, financial accounting, clinical, patient care and enterprise
applications. New customers must purchase from us and install the core
applications of patient management and financial accounting and all hardware
necessary to run these applications. In addition to the core applications,
customers may also acquire one or more of our clinical, patient care and
enterprise applications. Approximately one-half of our customers have purchased
our clinical products in addition to the core applications, and of these
customers, approximately one-half have purchased complete, enterprise-wide
systems. We believe the current customer trend is to purchase and install the
complete system.

   Our software applications are described in detail below:

   Patient Management.  Our patient management software enables a hospital to
identify a patient at any point in the healthcare delivery system and to
collect and maintain patient information throughout the entire process of
patient care on an enterprise-wide basis. The single database structure of our
software permits authorized hospital personnel to simultaneously access
appropriate portions of a patient's record from any point on the system. The
patient management software performs the following functions:

   Registration           .   records patient admissions, discharges and
                              transfers
                          .   manages patient status, room assignments and
                              recurring charges
                          .   keeps information available to all hospital
                              personnel in formats designed for their
                              particular requirements

   Patient Accounting     .   records patient charges and maintains accounts
                              receivable information including aging, service
                              charges, and cash receipts
                          .   generates and processes insurance claims

   Health Information
   Management             .   supports the operational needs of the modern
                              medical records
                              department including transcription, case
                              indexing/abstracting, and statistical reporting
                          .   tracks deficiencies in a patient's chart and
                              provides chart location information

   Patient Index          .   maintains a master index of hospital patients and
                              provides immediate online access to patient
                              financial and medical data associated with a
                              patient stay

   Electronic Claims
   Processing             .   provides a computer-to-computer link with
                              intermediaries for
                              Medicare and other payors for the submission of
                              claims

   We also offer the following optional products that may be purchased as part
of our core patient management suite:

   Scheduling             .   maintains all patient scheduling information

   Managed Care           .   tracks patients enrolled in managed care plans
                              and conforms billing functions to such plans

   Quality Improvement    .   automates hospital-wide total quality management
                              and reporting requirements for utilization
                              activity, risk management, infection surveillance
                              and all accreditation review functions

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<PAGE>

   Financial Accounting.  Our financial accounting software provides a variety
of business office applications designed to efficiently track and coordinate
information needed for managerial decision-making. The financial accounting
software:

   Executive Information
   System                 .   summarizes daily financial transactions regarding
                              patient revenues,
                              receipts, census statistics and billing
                              information for ready access by hospital
                              administrators

   General Ledger         .   provides timely, accurate, financial information
                              generated from daily hospital operations
                          .   formats financial statements to the
                              specifications of each user and is able to
                              generate up to 999 different user-defined reports

   Accounts Payable       .   processes vendor invoices and payments and their
                              related general ledger entries

   Payroll/Personnel      .   calculates all employee wages and benefits for an
                              unlimited number of salaried and hourly employees
                          .   allocates employee time to user-defined cost
                              centers

   Time and Attendance    .   uses touch screen time clocks to eliminate manual
                              time entry
                          .   reduces effort of gathering employee time data
                              and increases access of managers to such data
                          .   makes time records more accurate by identifying
                              employees through bar-coding and optional
                              biometric fingerprint technology

   Electronic Direct
   Deposits               .   provides for computerized bank deposits to meet
                              payroll and accounts
                              payable needs

   Human Resources        .   provides for computerized employee files through
                              document/image scanning and data entry
                          .   allows for complete tracking of benefits and
                              other employee data through a variety of
                              user-defined reports
                          .   tracks job applicant information to assist in the
                              employee recruiting and hiring process

   Budgeting              .   allows for complete on-line budget preparation
                              through computerized access to historical data

   Fixed Assets           .   allows access to information regarding hospital
                              assets including locations and depreciation
                              scheduling

   Materials Management   .   tracks the flow of materials throughout the
                              hospital
                          .   automates the process of inventory control,
                              materials purchasing, stock requisitions and
                              patient charging

   Clinical.  Our clinical software automates record keeping and reporting for
many clinical functions including laboratory, radiology, physical therapy,
respiratory care, and pharmacy. These products eliminate tedious paperwork,
calculations and written documentation while allowing for easy retrieval of
patient data and statistics. Our clinical software:

   Laboratory Information
   Systems                .   provides an interface to laboratory analytical
                              instruments in order to
                              transfer results to nurse stations, mobile
                              point-of-care systems and remote physician offices

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<PAGE>
                          .   allows users to receive orders from any
                              designated location, process orders and report
                              results and maintain technical, statistical and
                              account information

   Laboratory             .   provides an automated solution for reviewing test
   Instrument Interfaces      results and completing patient orders
                          .   reduces the amount of required manual data entry
                              thereby reducing the likelihood of human error
                          .   reduces time to process laboratory specimens

   Radiology              .   includes flash card printing, patient scheduling,
   Information Systems        transcription, patient indexing by X-Ray film
                              number, film tracking and location
                          .   receives patient data, patient locations and
                              other interdepartmental communications support

   Physical Therapy       .   communicates to nursing the appropriate
   and Respiratory Care       procedures and patient preparation instructions
                              from orders entered into the CPSI system
                          .   keeps a journal of the orders received and
                              processed
                          .   handles a variety of processing tasks after a
                              patient order is reviewed
                          .   allows a department to customize its results to
                              be sent back to nursing

   Pharmacy               .   allows the hospital pharmacist to enter and fill
                              physician orders
                          .   performs all of the functions related to patient
                              charging, general ledger upgrading, re-supply
                              scheduling and inventory reduction/statistics
                              maintenance
                          .   improves patient care by monitoring drug/drug and
                              food/drug interactions, allergy
                              contraindications, dosage ranges and duplicate
                              therapy
                          .   produces drug education information for each
                              patient in an easy-to-read format

   Patient Care.  Our patient care applications allow hospitals to create
computerized "patient files" in place of the traditional paper file systems.
This software enables physicians, nurses and other hospital staff to improve
the quality of patient care through increased access to patient information,
assistance with projected care requirements and feedback regarding patient
needs. Our software also addresses current safety initiatives in the healthcare
industry such as the transition from written prescriptions and physician orders
to computerized physician order entry. Our patient care software:


   Order Entry / Results  .   automates the entry of patient charges
   Reporting              .   reduces "lost" charges and mistakes due to
                              legibility
                          .   increases efficiency of nursing stations
                          .   provides interactive, real time status reports
                              for orders

   Point-of-Care System   .   allows nurses to enter patient data into the
                              network at the patient's bedside thereby
                              eliminating the duplicate entry of information
                          .   utilizes touch-screen and wireless technology
                          .   makes patient information instantly available
                              throughout the entire hospital system

   Patient Acuity         .   categorizes patients according to an assessment
                              of the acuity of the illness, severity of the
                              symptoms, and projected nursing dependency
                          .   allows nurses to project the total character and
                              amount of care that should be provided to each
                              patient

   Chartlink(TM)          .   provides physicians with secure and interactive
                              access to patient information through a
                              hospital's website
                          .   provides for computerized physician order entry
                              including medication order entry

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<PAGE>

   Medication             .   verifies the accuracy of patient medication
   Verification               orders at a patient's bedside by comparing scans
                              of patient and medication bar codes against the
                              medication orders and history for that patient
                          .   screens medication orders for possible patient
                              allergies and/or drug interactions


   Resident Assessment    .   allow  s nursing staff to complete time consuming
   Instruments                resident reporting requirements in an expeditious
                              and efficient manner
                          .   generates nursing care plans based on
                              deficiencies in the resident reports


   Hospital/Physician     .   provides physicians and their office
   Office Link                administrators with remote access to online, real
                              time, secure patient data such as insurance and
                              billing information, diagnosis and procedure
                              coding, discharge summaries, pharmacy profiles and
                              other clinical and administrative information

   Enterprise Applications.  We provide software applications that support the
products described above and are useful to all areas of the hospital. These
applications include: ad hoc reporting, automatic batch and real-time system
backups, an integrated fax system, archival data repository, document scanning
and Microsoft Office integration.

Outsourcing Services

   Electronic Billing.  We provide electronic billing for customers at prices
competitive with other electronic billing vendors. Once a customer processes
patient insurance claims in our system, we then perform the electronic billing
function with no other participation by hospital staff. With this service,
customers need not prepare billing files or maintain interfaces with
third-party software, thereby saving the customer both time and money.

   Statement Processing.  Our customers may choose to have us prepare and
distribute all patient billing statements. We use our knowledge of a customer's
collection system to produce statements without requiring any actions on the
part of the hospital data processing personnel. Because we can connect directly
with a customer's system, the customer is not required to build and transfer
files to us. All system enhancements are incorporated into the statement
process without having to modify any third-party vendor interface. Like the
electronic billing outsourcing, this service saves the customer both time and
money.

   Business Office Outsourcing.  We offer customers the option of using us to
perform their primary business office functions, including patient billing and
accounts receivable management. Using this service allows customers to reduce
costs by employing fewer full time administrative employees.

Other Products and Services

   Application Service Provider.  In some circumstances, we offer ASP services
to customers via remote access telecommunications. As an application service
provider, we store and maintain computer servers dedicated to specific
customers which contain all of such customers' critical patient and
administrative data. These customers access this information remotely through
direct telecommunications connections with these servers. Customers who enter
into an ASP service agreement with us pay a monthly fee for the benefit of this
service.

   Internet Service Provider.  As part of our total information solution, we
can provide Internet connection services to our customers for a monthly fee. We
also can provide web-site design and hosting services.

   Forms and Supplies.  We offer our customers the forms that they need for
their patient and financial records, as well as their general office supplies.
Furnishing these forms and supplies helps us to achieve our objective of being
a one-source solution for a hospital's complete healthcare information system
requirements.

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<PAGE>

   Home Health Information System.  In addition to hospital information
systems, we also offer a comprehensive information system for use by home
health agencies. Our home health system provides an advanced solution that
includes both home care patient accounting/billing and remote home care
documentation and care tracking. The system is designed, developed and
regularly enhanced to meet the needs and regulatory requirements that challenge
home health agencies.

System Implementation and Training

   Conversion Services.  When a customer purchases our system, we convert its
existing data to the CPSI system. Our knowledge of hospital data processing, in
conjunction with extensive in-house technical expertise, allows us to
accomplish this task in a cost effective manner. When we install a new system,
the data conversion has already occurred so that the system is immediately
operational. Our goal is for each customer to be immediately productive in
order not to waste time and money on the costly and inefficient task of
maintaining the same data on parallel systems. Our services also relieve the
hospital staff of the time-consuming burden of data conversion.

   Training.  In order to integrate the new system and to ensure its success,
we spend approximately three weeks providing individualized training on-site at
each customer's facility at the time of installation. We directly train all
hospital users, including staff members and healthcare providers, during all
hospital shifts in the use of hardware and software applications. In contrast,
some of our competitors train only a hospital's training staff at an off-site
location. We employ nurses and medical technicians in addition to our technical
training staff in order to help us communicate more effectively with our
customers during the training process.

Support Services

   Total System Support.  We believe the quality of continuing customer support
is one of the most critical considerations in the selection of an information
system provider. We provide hardware, technical and software support for all
aspects of our system which gives us the flexibility to take the necessary
course of action to resolve any issue. Unlike our competitors who use
third-party services for hardware and software support, we provide a single,
convenient and efficient resource for all of our customers' system support
needs. In order to minimize the impact of a system problem, we train our
customer service personnel to be technically proficient, courteous and prompt.
Because a properly functioning information system is crucial to a hospital's
operations, our support teams are available 24 hours a day to assist customers
with any problem that may arise. Customers can also use the Internet to
directly access our support system. This allows customers to communicate
electronically with our support teams at any time. With approximately 433
employees who provide customer service and support, we currently have a one to
one support staff to customer ratio.

   User Group.  All of our customers are members of our user group from which
we solicit feedback regarding our products. We host a national user group
meeting annually. We have also organized several active regional user groups
which meet on a semi-annual basis. These groups meet to discuss and recommend
product modifications and improvements which they then evaluate and prioritize.
Upon confirming that the desired improvements are technically feasible, we
agree to allocate a significant amount of programming time each year to
undertake the requested modification or improvement. The majority of our
product enhancements originate from suggestions from our customers through the
user group structure.

   Software Releases.  We are committed to providing our customers with
software and technology solutions that will continue to meet their information
system needs. To accomplish this purpose, we continually work to enhance and
improve our application programs. As part of this effort, we typically release
two major software updates each year at no additional cost to our customers. We
design these enhancements to be seamlessly integrated into each customer's
existing CPSI system. The benefit of these enhancements is that each customer,
regardless of its original installation date, uses the most advanced CPSI
software available. Through this process, we can keep our customers up-to-date
with the latest operational innovations in the healthcare industry as well as
changing governmental regulatory requirements. Another benefit of this "one
system" concept is that our customer service teams can be more effective in
responding to customer needs because they maintain a complete understanding of
and familiarity with the one system that all customers use.

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<PAGE>

   Purchasing a new information technology system requires the expenditure of a
substantial amount of capital and other resources, and many customers are
concerned that these systems will become obsolete as technology changes. Our
periodic product updates eliminate our customers' concerns about system
obsolescence. We believe providing this benefit is a strong incentive for
potential customers to select our products over the products of our competitors.

   Hardware Replacement.  As part of our customer service effort, we are also
committed to promptly replacing (instead of repairing) malfunctioning system
hardware in order to minimize the effect of operational interruptions. By
providing all hardware used in our system, we believe we are better able to
meet and address all of the information technology needs of our customers.

Technology

   Operating Systems and Server Platform.  We utilize Intel-based servers
running industry standard "open systems," including Unix and Microsoft Windows
2000 Server operating systems.

   ClientWare(R) Networking.  Our ClientWare(R) application integrates the UNIX
and Microsoft operating systems. This integration brings together the strengths
of both operating environments. The processing power of UNIX combined with the
communication capabilities of Microsoft Windows creates an information system
that allows the use of familiar "point and click" processing. This architecture
also facilitates integration of other Microsoft software and provides expanded
opportunities for the inclusion of new technologies without sacrificing system
reliability or performance.

   Wireless Technology.  Traditional workstations were designed around access
to electrical and network outlets. We now use wireless networking technology to
connect computers to the CPSI system. This allows customers to use mobile
computers and to place stationary computers in locations for optimum
convenience and ease of use. We incorporate wireless laptop and hand held
computers into our system. Convenient to carry and use, these mobile computers
allow effective data collection and real-time access to patient information
from practically anywhere in the hospital. Information efficiently collected
will then be more quickly accessible by other caregivers throughout the
hospital.

   Point-of-Care Stations.  Since 1990, we have used "point-of-care stations"
which allow nurses to enter information into the system at a patient's bedside.
These stations consist of compact computers on individual data entry stations
that are lightweight, durable and easy to maneuver. We incorporate our wireless
networking capabilities into these stations in order to provide extended range
and mobility.

   Touch Sensitive Displays.  Data entry is made easier through the use of
touch sensitive displays. With this technology work areas are free of the
traditional keyboard and mouse associated with most personal computers. Touch
screens are also more efficient for users who are not proficient in computer
skills.

   Voice Transcription.  We offer voice transcription software capable of
learning an individual physician's speech patterns. Computerized transcription
stations can then transcribe documents dictated by physicians. The resulting
reduction in time required to input patient data and prepare patient documents
positively impacts the quality of patient care by providing caregivers with
faster access to the most up-to-date patient information.

   Biometric Recognition.  As unique as each individual, a fingerprint cannot
be duplicated, making it one of the most secure methods of verifying a person's
identity. Because of the sensitivity of healthcare information and proposed
federal security requirements, we have incorporated licensed fingerprint
identification technology as an option for our systems. When a user signs on to
the system, he or she must scan his or her fingerprint as well as enter a
traditional password. The system rapidly responds with the confirmation or
rejection of the user's identity.

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<PAGE>

Research and Development

   We are continually working to improve and enhance the CPSI system and to
develop new products and services for our system. The primary source of ideas
for improvements to our products and services comes from our customers through
our national user group. We believe our interaction with customers and their
communication with each other is the most efficient way to learn about and
respond to changes in the healthcare operating environment. This approach to
research and development allows us to quickly adapt to technology advances and
improve our products and services to better serve the needs of our customers.

   Our management and customer support and service teams play a significant
role in product development by continually monitoring the needs and desires of
our customers and our market. In addition to our customer support and service
teams, we currently have five employees whose sole function is the development
of financial and enterprise software products and 14 employees whose sole
function is the development of clinical software products. Finally, we
currently have eight full-time research and development employees whose
function is to develop new uses for and applications of technology available in
the marketplace.

Customers, Sales and Marketing

   Primary Market.  The primary market for our information system consists of
small and midsize hospitals of 300 or fewer acute care beds. In the United
States, there are approximately 4,200 hospitals in this size range. In
addition, we market our products to small specialty hospitals in the United
States that focus on discrete medical areas such as surgery, rehabilitation and
psychiatry. As of January 31, 2002, we have installed our system in over 400
facilities in 45 states and the District of Columbia. Approximately 92% of
these existing customers are hospitals consisting of 100 acute care beds or
less. Our goal is to increase sales to hospitals consisting of 100 to 300 acute
care beds. We are planning to increase our sales staff in order to better
penetrate this group of potential customers. The following table provides
information about our current customer base as of January 31, 2002:


<TABLE>
<CAPTION>
                                                  Percentage of
                                      Current         CPSI
                                   CPSI Customers   Customers
                                   -------------- -------------
                <S>                <C>            <C>
                Less than 100 beds      370             92%
                100-200 beds......       28              7
                201-300 beds......        4              1
                                        ---            ---
                 Total............      402            100%
                                        ===            ===
</TABLE>


   Sales Staff.  Most of our new customers are referrals from our existing
customers, thereby reducing the need for a large sales force. Currently, we
have 13 employees dedicated to direct sales, seven of whom concentrate on new
prospects, and six of whom are responsible for the sale of additional products
and services to existing customers. We hire our sales representatives from our
existing employees. All of our current sales representatives have at least five
years of prior experience in installation, training and customer support. While
centrally based at our headquarters in Mobile, our sales representatives have
defined geographic territories in the United States in which to target new
customers. A significant portion of the compensation for all sales personnel is
performance based.

   Marketing Strategy.  Our primary marketing strategy is to generate referrals
from our existing customers and directly solicit potential users through
presentations at industry seminars and trade shows. We also advertise in
various healthcare industry trade publications. For hospitals that we have
targeted as potential customers, most of our direct sales efforts involve site
visits and meetings with hospital management. The typical sales cycle of a
healthcare information system usually takes six to eighteen months from the
time of initial contact to the signing of a contract. Therefore, we believe it
is important for our sales staff to dedicate a substantial amount of time and
energy to building relationships with potential new customers. We do not
conduct extensive marketing activities and promotions because hospitals are
easily identified, finite in number and generally send a request for proposal
to vendors when they contemplate the purchase of a hospital information system.

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Competition

   The market for our products and services is competitive, and we expect
additional competition from established and emerging companies in the future.
Our market is characterized by rapidly changing technology, evolving user needs
and the frequent introduction of new products. We believe the principal
competitive factors that hospitals consider when choosing between us and our
competitors are:

  .  product features, functionality and performance;

  .  level of customer service and satisfaction;

  .  ease of integration and speed of implementation;

  .  product price;

  .  knowledge of the healthcare industry;

  .  sales and marketing efforts; and

  .  company reputation.

   Our principal competitors are Meditech and HMS. Meditech and HMS compete
with us directly in our target market of small and midsize hospitals. These
companies offer products and systems which are comparable to our system and
address the needs of hospitals in the markets we serve.

   Our secondary competitors include McKesson Corporation, Quadramed Corp.,
Cerner Corporation and Siemens Corporation. These companies are significantly
larger than we are, and they typically sell their products and services to
larger hospitals outside of our target market. However, they will sometimes
compete directly with us. We also face competition from providers of practice
management systems, general decision support and database systems and other
segment-specific applications, as well as from healthcare technology
consultants. Any of these companies as well as other technology or healthcare
companies could decide at any time to specifically target hospitals within our
target market.

   A number of existing and potential competitors are more established than we
are and have greater name recognition and financial, technical and marketing
resources than we have. Products of our competitors may have better
performance, lower prices and broader market acceptance than our products. We
expect that competition will continue to increase.

Internal Controls

   We have developed and maintain an automated enterprise management system
which permits us to manage not only all of our internal management, accounting
and personnel functions, but also all information relating to each customer's
information system. Our system maintains detailed records of all information
regarding each customer's system, including all system specifications, service
history and customer communications, among other things. This internal control
system helps us to more effectively respond to customer support needs through
complete and current system information and through situation-based problem
solving.

Intellectual Property

   We regard some aspects of our internal operations, software and
documentation as proprietary, and rely primarily on a combination of contract
and trade secret laws to protect our proprietary information. We believe,
because of the rapid pace of technological change in the computer software
industry, trade secret and copyright protection is less significant than
factors such as the knowledge, ability and experience of our employees,
frequent software product enhancements and the timeliness and quality of
support services. We cannot guarantee that these protections will be adequate
or that our competitors will not independently develop technologies that are
substantially equivalent or superior to our technology.

   We do not believe our software products or other CPSI proprietary rights
infringe on the property rights of third parties. However, we cannot guarantee
that third-parties will not assert infringement claims against us with respect
to current or future software products or that any such assertion may not
require us to enter into royalty arrangements or result in costly litigation.

                                      36


<PAGE>

Employees

   As of January 31, 2002, we had 559 employees, all but three of whom are
located at our offices in Mobile, Alabama. Our employees can be grouped
according to the following general categories: 338 in financial and clinical
software services and support, 95 in information technology services and
support, 54 in programming, 25 in sales and marketing and 30 in administration.
Our general practice is to recruit recent college graduates for entry-level
positions and then promote these individuals within the organization to fill
vacancies in higher positions. We also hire nurses and other medically-trained
professionals in connection with our support services.

   Since 1991, we have maintained a non-qualified profit sharing plan under
which all full-time employees with three years of uninterrupted service are
eligible to participate, other than executive officers and commissioned
salespeople. The plan is designed to provide each eligible employee with an
annual cash bonus based on our profitability. Each eligible employee receives a
pro rata share of the amount of cash distributed under the profit sharing plan
based on the amount of their base salary compared to the sum of the salaries of
all participating employees. Our profit sharing plan is not a qualified plan
for tax purposes or a guaranteed benefit. Contributions to the plan are made
periodically at the discretion of the board of directors. During 2001, we
distributed approximately $2.2 million under this profit sharing plan. We plan
to continue to make distributions under the profit sharing plan based on our
profitability.

   We are fortunate to have a high rate of employee retention, with our senior
management having an average tenure in excess of 13 years. Our performance
depends in significant part on our ability to attract, train and retain highly
qualified personnel. None of our employees are represented by a labor union,
and we believe our relations with our employees are good.


Properties

   Our corporate headquarters and executive offices are located on a 28-acre
campus in Mobile, Alabama. We occupy approximately 99,500 square feet of space
in seven buildings. Our main building consists of approximately 66,000 square
feet of space. We also have five additional buildings each consisting of
approximately 6,000 square feet. Each of these smaller buildings is designed to
accommodate a team of employees assigned to install and support a particular
software application. We also occupy a building consisting of approximately
3,500 square feet of space which houses our dedicated research and development
staff.

   We lease approximately 16.5 acres and all of our buildings (other than the
research and development building) from CP Investments, Inc., an Alabama
corporation, the stockholders of which are also some of the stockholders of
CPSI. Our lease with CP Investments, Inc. expires in April 2012. The research
and development building is leased from DJK, LLC, a limited liability company
owned by Dennis Wilkins, a principal stockholder and a director of CPSI. Our
lease with DJK, LLC also expires on in April 2012. In 1999, we purchased
approximately 11.5 acres of undeveloped real property adjacent to our primary
premises in order to accommodate future growth. That property is subject to a
mortgage securing the indebtedness we incurred to purchase the property. We
will repay that indebtedness using net proceeds from this offering.

                                      37


<PAGE>

   We are currently expanding our facilities with the addition of two new
buildings dedicated to programming and support of our software applications and
a new storage facility. Taking into consideration this expansion, we believe
our existing facilities will be sufficient to meet our needs until the end of
2002. At that time we believe we will need to construct additional facilities
on the undeveloped portion of our campus in order to accommodate our expansion
needs.

Legal Proceedings

   We have no pending litigation.

                                      38


<PAGE>


                                  MANAGEMENT

Directors and Officers

   The following table sets forth information about our executive officers and
members of our board of directors:


<TABLE>
<CAPTION>
Name                       Age Position
----                       --- --------
<S>                        <C> <C>
John Morrissey(1)......... 60  Chairman of the Board and Director
Dennis P. Wilkins(1)...... 53  Director
M. Kenny Muscat(1)........ 55  Director
Ernest F. Ladd, III(2).... 61  Director
W. Austin Mulherin, III(2) 36  Director
William R. Seifert, II(2). 53  Director
David A. Dye.............. 32  President, Chief Executive Officer and Director
J. Boyd Douglas........... 35  Executive Vice President, Chief Operating Officer
                               and Director
M. Stephen Walker......... 52  Vice President--Finance and Chief Financial Officer
Victor S. Schneider....... 43  Vice President--Sales and Marketing
Mellissa Hammons.......... 45  Vice President--Financial Software Services
Thomas W. Peterson........ 50  Vice President--Clinical Software Services
Patrick A. Immel.......... 31  Vice President--Information Technology Services
</TABLE>

--------
(1) Member of the Executive Committee
(2) Member of the Audit Committee

   John Morrissey has been a director since 1999, and he was appointed as
Chairman of the board of directors in February 2002. Mr. Morrissey served as
our Vice President, Sales and Marketing from January 1985 until his retirement
in June 1999.

   Dennis P. Wilkins is one of our founders and has served as a director since
our formation in 1979. From 1979 until his retirement in June 1999, Mr. Wilkins
served as our President.

   M. Kenny Muscat is one of our founders and has served as a director since
our formation in 1979. From 1979 until his retirement in June 1999, Mr. Muscat
served as our Executive Vice President.

   Ernest F. Ladd, III was elected as a director in February 2002. From 1979
until his retirement in 1997, Mr. Ladd was employed by Dravo Corporation, a
national producer and marketer of chemical products, serving most recently as
its Executive Vice President and Chief Financial Officer since 1988. Mr. Ladd
is currently a director of Regions Bank of Mobile, a subsidiary of Regions
Financial Corporation. In addition, Mr. Ladd serves as President of Junior
Achievement of Mobile, Inc., a non-profit, charitable organization. Mr. Ladd is
chairman of the audit committee.

   W. Austin Mulherin, III was elected as a director in February 2002. Since
1991, Mr. Mulherin has practiced law, handling a variety of litigation and
business matters for public and private companies. He has been a partner in the
law firm of Frazer, Greene, Upchurch & Baker, LLC since 1998.

   William R. Seifert, II was elected as a director in February 2002. Since
1994, Mr. Seifert has served as Executive Vice President of AmSouth Bank with
responsibility for 48 branch offices in south Alabama and south Louisiana.

   David A. Dye has served as our President and Chief Executive Officer since
July 1999. He was elected as a director in March 2002. Mr. Dye began his career
with us in May 1990 as a Financial Software Support Representative. From that
time until June 1999, he worked for us in various capacities, including as
Manager of

                                      39


<PAGE>

Financial Software Support, Director of Information Technology and most
recently as our Vice President supervising the areas of sales, marketing and
information technology.

   J. Boyd Douglas has served as our Executive Vice President and Chief
Operating Officer since July 1999. He was elected as a director in March 2002.
Mr. Douglas began his career with us in August 1988 as a Financial Software
Support Representative. From May 1990 until November 1994, Mr. Douglas served
as Manager of Electronic Billing, and from December 1994 until June 1999, he
held the position of Director of Programming Services.

   M. Stephen Walker has served as our Vice President--Finance, Chief Financial
Officer, Secretary and Treasurer since July 1999. From February 1991 until June
1999, Mr. Walker served as our controller with primary responsibility for all
of our accounting functions.

   Victor S. Schneider has served as our Vice President--Sales and Marketing
since July 1999. Mr. Schneider is responsible for overseeing all of our sales
and marketing efforts. Mr. Schneider began his career with us in June 1983 as
Sales Manager. He served in that capacity until January 1997 when he was
promoted to Sales Director.

   Mellissa Hammons has served as our Vice President--Financial Software
Services since July 1999. Ms. Hammons is responsible for overseeing all aspects
of the installation and support of our financial software products. Since
beginning her career with us in 1985 as a Financial Software Support
Representative, Ms. Hammons has worked in various positions in our Financial
Software Services Division including Manager and Director of that division.

   Thomas W. Peterson has served as our Vice President--Clinical Software
Services since July 1999. Mr. Peterson is responsible for overseeing all
aspects of the installation and support of our clinical software products.
Since beginning his career with us in 1988 as a Clinical Software Support
Representative, Mr. Peterson has worked in various positions in our Clinical
Software Services Division including Manager and Director of that division.

   Patrick A. Immel has served as our Vice President--Information Technology
Services since January 2000. Mr. Immel is responsible for overseeing technical
hardware and support and hardware research and development. Mr. Immel began his
career with us in July 1993 as a Financial Software Support Representative.
Since that time, Mr. Immel has served as a programmer, Manager of Technical
Support and most recently as Director of Information Technology Services.

Employment Agreements

   We have no employment agreements with any of our executive officers.

Board Committees

   Our board of directors has authority to appoint committees to perform
certain management and administrative functions. In February 2002, our board of
directors established the following committees:

   Executive Committee.  The executive committee consists of Messrs. Morrissey,
Muscat and Wilkins. Mr. Morrissey is the chairman. Between meetings of the
board of directors and while the board of directors is not in session, the
executive committee has all the powers and can exercise all the duties of the
entire board of directors relating to the management of the business and
affairs of CPSI. The executive committee, however, is prohibited from taking
certain actions, including, but not limited to, approving distributions and
filling vacancies on the board.

   Audit Committee.  The audit committee currently consists of Messrs. Ladd,
Seifert and Mulherin, with Mr. Ladd serving as its chairman. Our audit
committee is responsible for overseeing our financial reporting process;
reviewing the financial reports and other financial information provided by us
to any governmental or

                                      40


<PAGE>

regulatory body, the public or any other third-party; reviewing and discussing
the quality and adequacy of our systems of internal accounting and financial
controls with management and the outside auditors; reviewing the results of the
outside auditors' annual audit, including any significant adjustments,
management judgments and estimates, new accounting policies and disagreements
with management; reviewing our audited financial statements and discussing the
statements with management and the outside auditors; reviewing with the outside
auditors our interim financial results to be included in our quarterly reports;
reviewing the audit reports submitted by the outside auditors; reviewing the
performance of our outside auditors; reviewing and discussing disclosures by
outside auditors concerning relationships with us; making recommendations that
concern oversight of the independence of our outside auditors; annually
recommending outside auditors; annually assessing and reviewing the adequacy of
the audit committee's charter; and preparing such reports or statements as may
be required by Nasdaq or the securities laws.

Director Compensation

   Beginning in 2002, each of our non-employee directors will be paid an annual
fee of $10,000 for service as a director and will be paid an additional fee of
$2,000 for attendance at each regular quarterly meeting of directors. We also
reimburse directors for their expenses incurred in attending any meeting of
directors.


Executive Compensation

   The following table sets forth all compensation awarded to, earned by or
paid to our Chief Executive Officer and our four next most highly compensated
executive officers for the year ended December 31, 2001.

                          Summary Compensation Table


<TABLE>
<CAPTION>
                                                                  All Other
 Name and Principal Position                  Salary  Bonus(1) Compensation(2)
 ---------------------------                 -------- -------- ---------------
 <S>                                         <C>      <C>      <C>
 David A. Dye............................... $240,000 $260,000     $2,000
 President, CEO and Director

 J. Boyd Douglas............................  180,000  195,000      2,000
 Executive Vice President, COO and Director

 M. Stephen Walker..........................  180,000  195,000      2,000
 Vice President--Finance and CFO

 Victor S. Schneider........................  168,000  182,000      2,000
 Vice President--Sales and Marketing

 Mellissa Hammons...........................  168,000  182,000      2,000
 Vice President--Financial Software Services
</TABLE>

--------
(1) Discretionary bonuses were paid in 2001 to these employees to allow them to
    service their obligations under loans incurred to finance their respective
    purchases of shares of our common stock from other stockholders. See
    "Principal and Selling Stockholders."
(2) The amounts shown in this column represent our contributions to our 401(k)
    retirement plan for each of these employees.

Stock Option Grants in Last Fiscal Year

   We granted no stock options during 2001.

Aggregated Options Exercised in Last Fiscal Year and Fiscal Year-end Option
Values

   No stock options were exercised by any executive officer in 2001, and no
stock options were outstanding as of December 31, 2001.

                                      41


<PAGE>

2002 Stock Option Plan

   Our 2002 Stock Option Plan will become effective as of the date on which our
common stock is registered pursuant to the Securities Exchange Act of 1934. The
plan provides for the granting of incentive stock options and non-qualified
stock options. We will reserve 1,165,333 shares of common stock for issuance
under the plan. The aggregate number of shares of common stock subject to
awards granted under the plan in any fiscal year may not exceed        shares
of common stock. The plan provides for the grant of options to purchase shares
of our common stock to any of our full or part-time employees, including
officers and directors who are also employees.

   The plan will be administered by our board of directors or by a committee
comprised of two or more non-employee directors which has the authority to
select the persons to whom awards are granted, to determine the exercise price
and the number of shares of common stock covered by such awards, and to set the
other terms and conditions of such awards. The board or the committee will also
have the authority to adopt, amend and rescind rules and regulations that, in
its opinion, may be advisable in the administration of the plan.

   The exercise price of a stock option granted under the plan cannot be less
than 100% of the fair market value of our common stock on the date the option
is granted. Any incentive stock option granted to a holder of 10% or more of
our common stock must have an exercise price not less than 110% of the fair
market value of our common stock on the grant date and may not have a term
longer than five years.

   Our plan has a term of ten years. The expiration of the term of the plan
will not affect the rights under any outstanding options held by a participant
without that participant's consent. Our board of directors may amend, alter,
suspend, discontinue or terminate the plan at any time, except that the board
may not, without stockholder approval, adversely affect the rights of the
holder of such option without the consent of the holder or beneficiary.

   Each option granted under the plan will be evidenced by an option agreement
that will establish the specific terms of such option. Each option shall expire
not more than ten years from the date of the granting thereof, but shall be
subject to earlier termination as may be provided in the option agreement.

   The options and stock awards granted under the plan will vest as determined
by the board of directors or the committee.

   The plan also provides that the right of any option holder to exercise an
option granted to him or her shall not be assignable or transferable by the
option holder other than by will or the laws of descent and distribution,
except as otherwise permitted in the option agreement.

   An option granted to an employee who ceases to be an employee for any
reason, other than by death or permanent and total disability, may exercise
options in the three-month period following such cessation, unless the options
terminate or expire sooner or later by their terms. Options may be exercised
for up to twelve months after an employee's relationship with us ceases due to
death or disability, unless such options expire sooner or later by their terms.

   Under the terms of our plan, if there is a change of control (as defined in
the plan), or in the event that our board proposes that we enter into a
transaction that would result in a change of control, the board or the
committee may in its discretion, by written notice to a participant, provide
that the participant's options will be terminated unless exercised within a
specified period. The board or the committee also may in its discretion, by
written notice to a participant, provide that the participant's options shall
be fully exercisable as to all or some of the shares of common stock covered by
that participant's options or that some or all of the restrictions on any of
that participant's options may lapse in the event of a change of control.

   Initial Option Grants.  Effective on the date of the completion of the
offering, we will grant to all of our full-time employees options to acquire a
total of 466,133 shares of our common stock. The exercise price for these
options will be $       per share, the initial public offering price of our
common stock. These options cover 40% of the total number of shares reserved
for issuance under the plan.

                                      42


<PAGE>

   The options will have a term of seven years and will vest over a five year
period. For our seven executive officers, the options will vest and become
exercisable 100% on the fifth anniversary of the grant date. For all other
employees, the options will vest and become exercisable 50% on the third
anniversary of the grant date and 50% on the fifth anniversary of the grant
date.

   The number of shares covered by the initial option grant to each individual
employee has been determined based on each employee's salary, adjusted for
years of service, as a percentage of the aggregate salaries of all full-time
employees. In order to reward employees for years of service, each employee
will be credited with an additional $10,000 of salary for each full year of
service with us.

   The number of shares subject to the initial option grants to each executive
officer listed in the Summary Compensation Table is as follows:


<TABLE>
<CAPTION>
                      Name                Number of Shares
                      ----                ----------------
                      <S>                 <C>
                      David A. Dye.......      3,770
                      J. Boyd Douglas....      3,954
                      M. Stephen Walker..      3,062
                      Victor S. Schneider      3,741
                      Mellissa Hammons...      3,531
</TABLE>


401(k) Plan

   Effective January 1994, we adopted a tax-qualified employee savings plan
under Section 401(k) of the Internal Revenue Code. Pursuant to the 401(k) plan,
full time employees who have completed at least one year of service with CPSI
may elect to reduce their current compensation by up to the lesser of 15% of
their annual compensation or the statutorily prescribed annual limit and have
the amount of such reduction contributed to the 401(k) plan. The 401(k) plan is
intended to qualify under Section 401(a) of the Internal Revenue Code, so that
contributions by employees or us to the 401(k) plan, and income earned on the
401(k) plan contributions, are not taxable to employees until withdrawn from
the 401(k) plan, and so that contributions by us, if any, will be deductible by
us when made. We make matching contributions to each employee's account in an
amount equal to the first $1,000 contributed by each employee, plus a
discretionary amount that we determine each year.

Indemnification of Directors and Executive Officers and Limitation of Liability

   Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities, including
reimbursement for expenses incurred, arising under the Securities Act.

   As permitted by Delaware law, our Certificate of Incorporation, which will
become effective upon our reincorporation in Delaware, includes a provision
that eliminates the personal liability of our directors for monetary damages
for breach of fiduciary duty as a director, except for liability:

   .   for any breach of the director's duty of loyalty to us or our
       stockholders;

   .   for acts or omissions not in good faith or that involve intentional
       misconduct or a knowing violation of law;

   .   under Section 174 of the Delaware law regarding unlawful dividends,
       stock purchases or redemptions; or

   .   for any transaction from which the director derived an improper personal
       benefit.

                                      43


<PAGE>

   As permitted by Delaware law, our Certificate of Incorporation and/or our
Bylaws, which will become effective upon our reincorporation in Delaware,
provide that:

   .   we are required to indemnify our directors and officers to the fullest
       extent permitted by Delaware law, so long as such person acted in good
       faith and in a manner the person reasonably believed to be in or not
       opposed to the best interests of CPSI, and with respect to any criminal
       action or proceeding, had no reasonable cause to believe the person's
       conduct was unlawful;

   .   we are permitted to indemnify our other employees to the extent that we
       indemnify our officers and directors, unless otherwise required by law
       or agreements to which we are a party;

   .   we are required to advance expenses, as incurred, to our directors and
       officers in connection with a legal proceeding to the fullest extent
       permitted by Delaware law, subject to certain very limited exceptions;
       and

   .   the rights conferred in our Certificate of Incorporation and Bylaws are
       not exclusive.

   Prior to the closing of this offering, we intend to enter into indemnity
agreements with each of our current directors and officers to give such
directors and officers additional contractual assurances regarding the scope of
the indemnification set forth in our Certificate of Incorporation and our
Bylaws and to provide additional procedural protections. At present, there is
no pending litigation or proceeding involving any of our directors, officers or
employees regarding which indemnification is sought, nor are we aware of any
threatened litigation that may result in claims for indemnification.

                                      44


<PAGE>


                CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   We lease the majority of our corporate headquarters campus from CP
Investments, Inc., an Alabama corporation, the stockholders of which are also
some of the stockholders of CPSI. In 2001, we paid total lease payments of
approximately $958,000 to CP Investments, Inc. On     , 2002, we entered into a
new lease with CP Investments, Inc., which expires in April 2012. For 2002, we
will make lease payments in the amount of $988,200 with respect to this lease.
The annual rent payable under this lease has been determined by an independent,
third-party appraisal firm. The parties may agree, from time to time, to make
adjustments in the annual rent payable under this lease based on subsequent
third-party appraisals.

   We lease the remainder of our headquarters facilities, which is comprised of
one building that houses our dedicated research and development staff, from
DJK, LLC, a limited liability company owned by Dennis Wilkins. On       , 2002,
we entered into a lease for this facility that expires in April 2012. Prior to
that time we paid only the expenses associated with the building. For 2002, we
will make lease payments in the amount of $29,250 with respect to this lease.
The annual rent payable under this lease has been determined by an independent,
third party appraisal firm.

                      PRINCIPAL AND SELLING STOCKHOLDERS

   The following table sets forth certain information with respect to the
beneficial ownership of our outstanding common stock as of December 31, 2001,
and as adjusted to reflect the sale of the shares of common stock offered
hereby, for each of the following persons:

  .  each person or entity who is known by us to own beneficially more than 5%
     of the common stock;

  .  each of our directors;

  .  each of our executive officers listed in the Summary Compensation Table;

  .  all of our directors and executive officers as a group; and

  .  each of the selling stockholders.

   Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes generally voting power and/or
investment power with respect to securities. Except as otherwise noted, the
stockholders named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them,
subject to applicable community property laws. Unless otherwise indicated in
the table, the address of each stockholder identified in the table c/o Computer
Programs and Systems, Inc., 6600 Wall Street, Mobile, Alabama 36695.

                                      45


<PAGE>


<TABLE>
<CAPTION>
                                              Shares Beneficially             Shares Beneficially
                                            Owned Prior to Offering           Owned After Offering
                                            ----------------------  Shares to -------------------
         Name of Beneficial Owner             Number        Percent  be Sold    Number     Percent
         ------------------------            ---------      ------- ---------  ---------   -------
<S>                                         <C>             <C>     <C>       <C>          <C>
Executive Officers and Directors:
Dennis P. Wilkins..........................  3,096,000       33.3%  1,244,398 1,851,602     17.7%
M. Kenny Muscat............................  1,204,000       13.0          -- 1,204,000     11.5
John Morrissey.............................    602,000        6.5          --   602,000      5.7
Ernest F. Ladd, III........................         --         --          --        --       --
W. Austin Mulherin, III....................         --         --          --        --       --
William R. Seifert, II.....................         --         --          --        --       --
David A. Dye...............................    215,000(1)     2.3          --   215,000      2.0
J. Boyd Douglas............................    215,000(1)     2.3          --   215,000      2.0
M. Stephen Walker..........................    129,000(1)     1.4          --   129,000      1.2
Victor S. Schneider........................    107,500(1)     1.2          --   107,500      1.0
Mellissa Hammons...........................    107,500(1)     1.2          --   107,500      1.0
Directors and executive officers as a group
  (13 persons).............................  5,891,000       63.4   1,244,398 4,646,602     44.3

Other Selling Stockholders:
John Heyer.................................    619,200        6.7%    136,224   482,976      4.6%
Bob O'Donnell (2)..........................    430,000        4.6      80,410   349,590      3.3
Bill Stillings.............................    430,000        4.6      47,300   382,700      3.6
Kevin P. Wilkins...........................    344,000        3.7     138,266   205,734      2.0
Tabitha M. Wilkins Olzinski................    344,000        3.7     138,266   205,734      2.0
Heyer Family Irrevocable Trust.............     68,800        0.7      15,136    53,664      0.5
</TABLE>


   The following selling stockholders have granted the underwriters an option
to purchase up to an aggregate of 450,000 additional shares of common stock to
cover over-allotments, if any:


<TABLE>
<CAPTION>
                                                     Shares Beneficially Owned
                                      Additional      After Exercise of Over-
                                   Shares Offered in     Allotment Option
                                    Over-allotment   ------------------------
           Name                         Option          Number        Percent
           ----                    -----------------   ---------      -------
    <S>                            <C>               <C>              <C>
    Dennis P. Wilkins.............      311,099      1,540,503         14.7%
    John Heyer....................       34,056        448,920          4.3
    Bob O'Donnell (2).............       20,102        329,488          3.1
    Bill Stillings................       11,825        370,875          3.5
    Kevin P. Wilkins..............       34,567        171,167          1.6
    Tabitha M. Wilkins Olzinski...       34,567        171,167          1.6
    Heyer Family Irrevocable Trust        3,784         49,880          0.5
</TABLE>

--------
(1) These shares were purchased from other stockholders. Each of these
    employees borrowed 100% of the purchase price for these shares. As of the
    date of this prospectus, the principal amounts of these loans are as
    follows: Mr. Dye ($    ); Mr. Douglas ($    ); Mr. Walker ($    ); Mr.
    Schneider ($    ); and Ms. Hammons ($    ).
(2) The number of shares beneficially owned includes 64,500 shares owned by the
    O'Donnell Family Irrevocable Trust of 2002, of which Mr. O'Donnell is
    trustee.

                                      46


<PAGE>


                         DESCRIPTION OF CAPITAL STOCK

General

   Upon the completion of this offering, we will be authorized to issue
30,000,000 shares of common stock, $.001 par value.

Common Stock

   As of       , 2002, there were 9,288,000 shares of common stock outstanding
held of record by 23 stockholders. The issued and outstanding shares of common
stock are, and the shares of common stock being offered by us hereby will be
upon payment therefor, validly issued, fully paid and nonassessable. The
holders of outstanding shares of common stock are entitled to receive dividends
out of funds legally available therefor at the times and in the amounts as our
board of directors may from time to time determine. Shares of our common stock
are neither redeemable nor convertible, and the holders thereof have no
preemptive rights or other subscription rights to purchase any of our
securities. Upon liquidation, dissolution or winding up of CPSI, the holders of
common stock are entitled to receive pro rata our assets which are legally
available for distribution, after payment of all debts and other liabilities.
Each outstanding share of common stock is entitled to one vote on all matters
submitted to a vote of stockholders.

Provisions of our Certificate of Incorporation and Bylaws with Potential
Anti-Takeover Effects

   Our Certificate of Incorporation and Bylaws, which will become effective
upon our reincorporation in Delaware, include a number of provisions that may
have the effect of deterring or impeding hostile takeovers or changes of
control or management. These provisions include:

  .  our board of directors is divided into three classes of directors with
     staggered three-year terms;

  .  the board of directors fixes the size of the board, may create new
     directorships and may elect new directors to serve for the full term in
     which the new directorships were created;

  .  all stockholder action must be effected at a duly called meeting of
     stockholders and not by written consent;

  .  there is no cumulative voting for directors;

  .  the board of directors may adopt, amend, alter or repeal the bylaws
     without any vote or further action by the stockholders;

  .  advance notice procedures are required with respect to stockholder
     proposals and the nominations of candidates for election as directors; and

  .  indemnification of executive officers and directors against losses that
     they may incur in investigations and legal proceedings resulting from
     their services to us, which may include services in connection with
     takeover defense measures.

   These provisions may have the effect of delaying or preventing a change of
control. Note, however, that we have decided to opt-out of Section 203 of the
Delaware General Corporation Law, which regulates corporate acquisitions.

Transfer Agent And Registrar

   The transfer agent and registrar for our common stock will be First Union
National Bank.

National Market Listing

   We intend to apply for listing of our common stock on the Nasdaq National
Market under the symbol "CPSI."

                                      47


<PAGE>

                        SHARES ELIGIBLE FOR FUTURE SALE

   Prior to the completion of this offering, there has been no public market
for our common stock. Sales of substantial amounts of our common stock in the
public market after this offering could cause the market price of our common
stock to fall and could limit our ability to raise equity capital on terms
favorable to us.

   Upon the closing of this offering and based on shares outstanding as of
      , 2002, we will have an aggregate of 10,488,000 shares of common stock
outstanding. Of these shares, the 3,000,000 shares sold in this offering will
be freely tradable without restriction or further registration under the
Securities Act, except that any shares held by our "affiliates," as that term
is defined in Rule 144 under the Securities Act, may generally only be sold in
compliance with the limitations of Rule 144 described below. The remaining
7,488,000 shares of common stock held by our existing stockholders were issued
and sold by us in private transactions, are restricted securities as defined
under Rule 144, and may be sold in the public market only if registered or if
there is an exemption from registration under Rule 144 promulgated under the
Securities Act, which rule is summarized below. Subject to the lock-up
agreements described below, subject to the provisions of Rule 144, and assuming
no exercise of the underwriters' over-allotment option, additional shares will
be available for sale in the public market at the following times:

     Number of Shares Date
     ---------------- ----
        2,548,568     180 days from the date of this prospectus
        4,939,432     At various times after 180 days from the date of this
                      prospectus

Rule 144

   In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, including an affiliate, who has beneficially owned
shares of our common stock for at least one year is entitled to sell, within
any three-month period commencing 90 days after the date of this prospectus
(subject to any applicable lock-up agreement), a number of shares that does not
exceed the greater of:

  .  1% of the number of shares of common stock then outstanding, which will
     equal 104,880 shares immediately after this offering; or

  .  the average weekly trading volume in our common stock during the four
     calendar weeks preceding the date on which notice of the sale is filed on
     Form 144, subject to certain restrictions.

   Sales of shares of our common stock under Rule 144 are also subject to
manner of sale provisions, notice requirements and the availability of current
public information about us. However, a person who has not been an affiliate of
ours at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, would
be entitled to sell those shares under Rule 144(k) without regard to the manner
of sale, public information, volume limitation or notice provisions of Rule
144. To the extent that shares were acquired from an affiliate of ours other
than by gift, the person's holding period for the purpose of effecting a sale
under Rule 144 commences on the date of transfer from the affiliate. Shares
acquired from an affiliate by gift are deemed acquired for Rule 144's holding
period requirement when they were acquired by the affiliate.

Lock-up Agreements

   All of our directors, officers and existing stockholders who will hold
7,488,000 shares of common stock in the aggregate after the offering, have
agreed that they will not, without the prior written consent of the
representatives of the underwriters, offer, sell or agree to sell, directly or
indirectly, or otherwise dispose of any shares of common stock for a period of
180 days from the date of this prospectus, except in the case of the exercise
of the underwriters' over-allotment option. See "Underwriting."

                                      48


<PAGE>

   Likewise, we have agreed that we will not, without the prior written consent
of the representatives of the underwriters, sell, grant any option for the sale
of, or otherwise dispose of, any shares of our common stock during the 180-day
period following the date of the prospectus, except we may grant options to
purchase shares of common stock under our 2002 Stock Option Plan.

Stock Options and Warrants

   Except for options to be granted pursuant to our 2002 Stock Option Plan upon
the completion of this offering, there will be no options or warrants to
purchase shares of our common stock outstanding upon the completion of this
offering.

                                      49


<PAGE>


                                 UNDERWRITING

   Subject to the terms and conditions of an underwriting agreement dated
      , 2002, the underwriters named below have severally agreed to purchase
from us and the selling stockholders the number of shares indicated in the
following table. Morgan Keegan & Company, Inc. and Raymond James & Associates,
Inc. are the representatives of the underwriters.


<TABLE>
<CAPTION>
                                                     Number
                   Underwriters                     of Shares
                   ------------                     ---------
                   <S>                              <C>
                   Morgan Keegan & Company, Inc....
                   Raymond James & Associates, Inc.
</TABLE>


   The underwriters propose to offer shares of our common stock directly to the
public at the public offering price set forth on the cover page of this
prospectus. Any shares sold by the underwriters to securities dealers will be
sold at the public offering price less a selling concession not in excess of
$       per share. The underwriters may allow, and these selected dealers may
re-allow, a concession of not more than $       per share to other brokers and
dealers.

   The underwriting agreement provides that the underwriters' obligations to
purchase shares are subject to conditions contained in the underwriting
agreement. The underwriters are obligated to purchase all of the shares of
common stock that they have agreed to purchase under the underwriting
agreement, other than those covered by the over-allotment option, if they
purchase any shares.

   Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction where action for that purpose is
required. The shares of common stock included in this offering may not be
offered or sold, directly or indirectly, nor may this prospectus or any other
offering material or advertisements in connection with the offer and sales of
any shares of common stock be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable
rules and regulations of that jurisdiction. Persons who receive this prospectus
are advised to inform themselves about and to observe any restrictions relating
to this offering of our common stock and the distribution of this prospectus.
This prospectus is not an offer to sell nor a solicitation of any offer to buy
any shares of common stock included in this offering in any jurisdiction where
that would not be permitted or legal.

   The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

Underwriting Discount and Expenses

   The following table summarizes the underwriting discount to be paid to the
underwriters by us and the selling stockholders.


<TABLE>
<CAPTION>
                                                      Per  Total, without  Total, with
                                                     Share Over-allotment Over-allotment
                                                     ----- -------------- --------------
<S>                                                  <C>   <C>            <C>
Underwriting discount to be paid to the underwriters
  by us.............................................
Underwriting discount to be paid to the underwriters
  by the selling stockholders.......................
     Total..........................................
</TABLE>



                                      50


<PAGE>

   We will pay all expenses of the offering that we and the selling
stockholders incur, except for the underwriting discount to be paid by the
selling stockholders. We estimate that our total expenses of this offering,
excluding the underwriting discount, will be approximately $      .

Over-allotment Option

   The selling stockholders have granted to the underwriters an option,
exercisable not later than 30 days after the date of this prospectus, to
purchase up to 450,000 additional shares of common stock at the public offering
price, less the underwriting discount, set forth on the cover page of this
prospectus. The underwriters may exercise the option solely to cover
over-allotments, if any, made in connection with this offering. To the extent
that the underwriters exercise the option, each underwriter will become
obligated, as long as the conditions of the underwriting agreement are
satisfied, to purchase a number of additional shares approximately
proportionate to that underwriter's initial commitment as indicated in the
table above. The selling stockholders will be obligated, pursuant to the
option, to sell these additional shares of common stock to the underwriters to
the extent the option is exercised. If any additional shares of common stock
are purchased pursuant to the option, the underwriters will offer the
additional shares on the same terms as those on which the other shares are
being offered hereby.

Indemnification

   We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to make in respect
of any of these liabilities.

Lockup Agreement

   Except with respect to our grant of options pursuant to the 2002 Stock
Option Plan, we and each of our officers, directors and other stockholders have
agreed not to offer, sell, contract to sell or otherwise dispose of, or enter
into any transaction that is designed to, or could be expected to, result in
the disposition of any shares of our common stock or other securities
convertible into or exchangeable or exercisable for shares of our common stock,
or common stock issuable upon exercise of options or warrants held by these
persons, for a period of 180 days after the date of this prospectus, without
the prior written consent of the representatives of the underwriters. This
consent may be given at any time without public notice. With the exception of
the underwriters over-allotment option, there are no present agreements between
the representatives and us or any of our stockholders releasing us or them from
these lock-up agreements prior to the expiration of the 180-day period.

Stabilization, Short Positions and Penalty Bids

   The underwriters may engage in over-allotment, syndicate covering
transactions, stabilizing transactions and penalty bids or purchases for the
purpose of pegging, fixing or maintaining the price of our common stock:

   .   Over-allotment involves sales by the underwriters of shares in excess of
       the number of shares the underwriters are obligated to purchase, which
       creates a syndicate short position. The short position may be either a
       covered short position or a naked short position. In a covered short
       position, the number of shares over-allotted by the underwriters is not
       greater than the number of shares that they may purchase in the
       over-allotment option. In a naked short position, the number of shares
       involved is greater than the number of shares in the over-allotment
       option. The underwriters may close out any short position by either
       exercising their over-allotment option, in whole or in part, or
       purchasing shares in the open market.

   .   Syndicate covering transactions involve purchases of the common stock in
       the open market after the distribution has been completed in order to
       cover syndicate short positions. In determining the source of shares to
       close out the short position, the underwriters will consider, among
       other things, the price of shares available for purchase in the open
       market as compared to the price at which they may purchase shares
       through the over-allotment option. If the underwriters sell more shares
       than could be covered by

                                      51


<PAGE>

       the over-allotment option, a naked short position, the position can only
       be closed out by buying shares in the open market. A naked short
       position is more likely to be created if the underwriters are concerned
       that there could be downward pressure on the price of the shares in the
       open market after pricing that could adversely affect investors who
       purchase in the offering.

   .   Stabilizing transactions permit bids to purchase the underlying security
       so long as the stabilizing bids do not exceed a specific maximum.

   .   Penalty bids permit the representatives to reclaim a selling concession
       from a syndicate member when the common stock originally sold by the
       syndicate member is purchased in a stabilizing or syndicate covering
       transaction to cover syndicate short positions.

   These syndicate covering transactions, stabilizing transactions and penalty
bids may have the effect of raising or maintaining the market price of our
common stock or preventing or retarding a decline in the market price of our
common stock. As a result, the price of our common stock may be higher than the
price that might otherwise exist in the open market. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

   Neither we nor any of the underwriters make any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of our common stock. In addition, neither we nor
any of the underwriters make any representation that the underwriters will
engage in these stabilizing transactions or that any transaction, once
commenced, will not be discontinued without notice.

Pricing of the Offering

   Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiations among us and the representatives of the
underwriters. Among the primary factors considered in determining the initial
public offering price were:

   .   prevailing market conditions;

   .   our historical performance and capital structure;

   .   the present stage of our development;

   .   the market capitalization and stage of development of the other
       companies that we and the representatives of the underwriters believe to
       be comparable to our business; and

   .   estimates of our business potential and earnings prospects.


                                 LEGAL MATTERS

   The validity of the shares of common stock offered hereby will be passed
upon for us by Maynard, Cooper & Gale, P.C., Birmingham, Alabama. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by Bass, Berry & Sims PLC, Memphis, Tennessee.

                                      52


<PAGE>


                                    EXPERTS

   Ernst & Young LLP, independent auditors, have audited our financial
statements and schedule at December 31, 2001 and for the year then ended, as
set forth in their reports. We have included our financial statements and
schedule in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's reports, given on their authority as experts in
accounting and auditing.

   Wilkins Miller, P.C., independent auditors, have audited our financial
statements and schedule at December 31, 2000 and for each of the two years in
the period ended December 31, 2000, as set forth in their reports. We have
included our financial statements and schedule in the prospectus and elsewhere
in the registration statement in reliance on Wilkins Miller, P.C.'s reports,
given on their authority as experts in accounting and auditing.

                        CHANGE OF INDEPENDENT AUDITORS

   In December 2001, we changed our independent auditors from Wilkins Miller,
P.C. to Ernst & Young LLP in connection with our decision to pursue this
offering. In connection with the audits by Wilkins Miller, P.C. of our
financial statements and schedule for the years ended December 31, 1999 and
2000, there were no disagreements with Wilkins Miller, P.C. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, nor any reportable events. The reports of Wilkins Miller,
P.C. on the financial statements and schedule for the years ended December 31,
1999 and 2000 contained no adverse opinion or disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principle. The decision to change auditors was approved by our board of
directors. Neither we, nor someone on our behalf, consulted Ernst & Young LLP
on the application of accounting principles or on the type of audit opinion
that might be rendered on our financial statements. We have provided Wilkins
Miller, P.C. with a copy of the disclosure contained in this section of this
prospectus.

   Wilkins Miller, P.C. has furnished us with a letter addressed to the SEC
stating that it agrees with the above statements. A copy of such letter dated
March 21, 2002, is filed as Exhibit 16.1 to our registration statement on Form
S-1.

                      WHERE YOU CAN FIND MORE INFORMATION

   We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. For further information regarding us and our common stock,
please refer to the registration statement and exhibits and schedules filed as
part of the registration statement. Each statement in this prospectus referring
to a contract, agreement or other document filed as an exhibit to the
registration statement is qualified in all respects by the filed exhibit.

   You may read and copy all or any portion of the registration statement or
any other information that we file at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference room. Our SEC filings, including the registration statement,
are also available to you on the SEC's web site located at www.sec.gov.

   Upon completion of this offering, we will become subject to the information
and reporting requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC.

   We intend to provide our stockholders with annual reports containing
financial statements audited by an independent public accounting firm and to
make available to our stockholders quarterly reports containing unaudited
financial data for the first three quarters of each year.

                                      53


<PAGE>


                      COMPUTER PROGRAMS AND SYSTEMS, INC.


                             FINANCIAL STATEMENTS

                               DECEMBER 31, 2001

                                   CONTENTS


<TABLE>
                     <S>                                <C>
                     Report of Independent Auditors.... F-2


                     Audited Financial Statements

                     Balance Sheets.................... F-4
                     Statements of Income.............. F-5
                     Statements of Stockholders' Equity F-6
                     Statements of Cash Flows.......... F-7
                     Notes to Financial Statements..... F-8

</TABLE>


                                      F-1


<PAGE>


               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors
Computer Programs and Systems, Inc.

   We have audited the accompanying balance sheet of Computer Programs and
Systems, Inc. as of December 31, 2001, and the related statements of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

   We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Computer Programs and
Systems, Inc. at December 31, 2001, and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States.
                                             Ernst & Young LLP

Birmingham, Alabama
February 15, 2002,

except for Note 12, as to which the date is
         , 2002

   The foregoing report is in the form that will be signed upon the completion
of the restatement of capital accounts described in Note 12 to the financial
statements.

                                             /s/ Ernst & Young LLP
Birmingham, Alabama
March 21, 2002

                                      F-2


<PAGE>


             REPORT OF WILKINS MILLER, P.C., INDEPENDENT AUDITORS

The Board of Directors
Computer Programs and Systems, Inc.

   We have audited the accompanying balance sheet of Computer Programs and
Systems, Inc. as of December 31, 2000, and the related statements of income,
stockholders' equity and cash flows for the years ended December 31, 1999 and
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Computer Programs and
Systems, Inc. at December 31, 2000, and the results of its operations and its
cash flows for the years ended December 31, 1999 and 2000, in conformity with
accounting principles generally accepted in the United States.

                                          Wilkins Miller, P.C.

Mobile, Alabama
February 16, 2001,

except for Note 12, as to which the date is
         , 2002

   The foregoing report is in the form that will be signed upon the completion
of the restatement of capital accounts described in Note 12 to the financial
statements.

                                          /s/  Wilkins Miller, P.C.

Mobile, Alabama
March 21, 2002

                                      F-3


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                                BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                             December 31
                                                                -------------------------------------
                                                                                           Pro Forma
                                                                   2000         2001         2001
                                                                -----------  -----------  -----------
                                                                                          (Unaudited)
<S>                                                             <C>          <C>          <C>
Assets
Current assets:
 Cash and cash equivalents..................................... $ 1,033,148  $ 2,018,643  $ 2,018,643
 Accounts receivable, net of allowance for doubtful accounts of
   $479,000 and $532,000 for 2000 and 2001, respectively.......   7,752,356    8,107,467    8,107,467
 Financing receivables, current portion........................     259,293      769,423      769,423
 Inventories...................................................   1,130,192    1,126,353    1,126,353
 Deferred tax assets...........................................          --           --    1,012,999
 Prepaid expenses..............................................     292,917      196,276      196,276
                                                                -----------  -----------  -----------
Total current assets...........................................  10,467,906   12,218,162   13,231,161
Property and equipment:
 Land..........................................................     936,026      936,026      936,026
 Maintenance equipment.........................................   2,108,543    2,114,224    2,114,224
 Computer equipment............................................   2,469,743    2,906,476    2,906,476
 Office furniture and equipment................................     604,080      793,576      793,576
 Automobiles...................................................      52,811       89,934       89,934
                                                                -----------  -----------  -----------
                                                                  6,171,203    6,840,236    6,840,236
 Less accumulated depreciation.................................  (2,504,081)  (2,805,709)  (2,805,709)
                                                                -----------  -----------  -----------
Net property and equipment.....................................   3,667,122    4,034,527    4,034,527
Financing receivables..........................................     379,740      998,797      998,797
                                                                -----------  -----------  -----------
Total assets................................................... $14,514,768  $17,251,486  $18,264,485
                                                                ===========  ===========  ===========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
 Current portion of note payable............................... $    80,432  $    86,185  $    86,185
 Accounts payable..............................................   1,240,398    1,033,349    1,033,349
 Deferred revenue..............................................   1,414,204    1,601,130    1,601,130
 Sales, income and use taxes payable...........................   1,393,604    1,879,939    1,879,939
 Accrued vacation..............................................   1,002,243    1,075,450    1,075,450
 Health insurance reserves.....................................     179,600      288,153      288,153
 Accrued retirement benefits...................................     333,473      375,412      375,412
 Accrued stockholders' distributions...........................          --           --   12,200,000
 Other accrued liabilities.....................................     165,608      211,774      211,774
                                                                -----------  -----------  -----------
Total current liabilities......................................   5,809,562    6,551,392   18,751,392
Note payable...................................................     749,024      663,712      663,712
Stockholders' equity:
 Common stock, par value $0.001 per share; 30,000,000 shares
   authorized, 9,288,000 shares issued and outstanding.........       9,288        9,288        9,288
 Additional paid-in capital....................................     109,811      109,811      109,811
 Retained earnings (deficit)...................................   7,837,083    9,917,283   (1,269,718)
                                                                -----------  -----------  -----------
Total stockholders' equity (deficit)...........................   7,956,182   10,036,382   (1,150,619)
                                                                -----------  -----------  -----------
Total liabilities and stockholders' equity..................... $14,514,768  $17,251,486  $18,264,485
                                                                ===========  ===========  ===========
</TABLE>


See accompanying notes.

                                      F-4


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                             STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                                     Year ended December 31
                                                             -------------------------------------
                                                                1999         2000         2001
                                                             -----------  -----------  -----------
<S>                                                          <C>          <C>          <C>
Sales revenues:
 Systems and services....................................... $49,626,173  $46,859,725  $56,172,776
 Outsourcing................................................     903,467    2,362,172    3,493,629
                                                             -----------  -----------  -----------
Total sales revenues........................................  50,529,640   49,221,897   59,666,405

Costs of sales:
 Systems and services.......................................  29,253,768   29,979,117   34,133,115
 Outsourcing................................................     641,643    1,507,717    2,108,672
                                                             -----------  -----------  -----------
Total costs of sales........................................  29,895,411   31,486,834   36,241,787
                                                             -----------  -----------  -----------
Gross profit................................................  20,634,229   17,735,063   23,424,618

Operating expenses:
 Sales and marketing........................................   4,649,805    4,477,144    5,104,906
 General and administrative.................................   7,243,851    8,602,745    9,843,543
                                                             -----------  -----------  -----------
Total operating expenses....................................  11,893,656   13,079,889   14,948,449
                                                             -----------  -----------  -----------
Operating income............................................   8,740,573    4,655,174    8,476,169

Other income (expense):
 Interest income............................................      82,082       91,315      125,881
 Miscellaneous income.......................................     146,003      214,360      153,892
 Interest expense...........................................     (31,959)     (69,313)     (75,742)
                                                             -----------  -----------  -----------
Total other income..........................................     196,126      236,362      204,031
                                                             -----------  -----------  -----------
Net income.................................................. $ 8,936,699  $ 4,891,536  $ 8,680,200
                                                             ===========  ===========  ===========

Weighted average shares outstanding--basic and diluted......   9,288,000    9,288,000    9,288,000
                                                             ===========  ===========  ===========
Net income per share--basic and diluted..................... $      0.96  $      0.53  $      0.93
                                                             ===========  ===========  ===========
Unaudited pro forma income data:
 Net income as reported..................................... $ 8,936,699  $ 4,891,536  $ 8,680,200
 Pro forma income taxes.....................................   3,323,719    1,826,436    3,231,501
                                                             -----------  -----------  -----------
 Pro forma net income....................................... $ 5,612,980  $ 3,065,100  $ 5,448,699
                                                             ===========  ===========  ===========
 Pro forma net income per share--basic and diluted (based on
   9,288,000 weighted average shares)....................... $      0.60  $      0.33  $      0.59
                                                             ===========  ===========  ===========
 Pro forma net income per share--basic and diluted (based on
   9,685,135 weighted average shares and reflecting the
   S corporation distribution--see Note 3)..................                           $      0.56
                                                                                       ===========
</TABLE>



See accompanying notes.

                                      F-5


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                      STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                              Additional                  Total
                                       Common  Paid-In    Retained    Stockholders'
                              Shares   Stock   Capital    Earnings       Equity
                             --------- ------ ---------- -----------  -------------
<S>                          <C>       <C>    <C>        <C>          <C>
Balance at December 31, 1998 9,288,000 $9,288  $109,811  $ 6,119,708   $ 6,238,807
 Net income.................        --     --        --    8,936,699     8,936,699
 Dividends..................        --     --        --   (6,110,860)   (6,110,860)
                             --------- ------  --------  -----------   -----------
Balance at December 31, 1999 9,288,000  9,288   109,811    8,945,547     9,064,646
 Net income.................        --     --        --    4,891,536     4,891,536
 Dividends..................        --     --        --   (6,000,000)   (6,000,000)
                             --------- ------  --------  -----------   -----------
Balance at December 31, 2000 9,288,000  9,288   109,811    7,837,083     7,956,182
 Net income.................        --     --        --    8,680,200     8,680,200
 Dividends..................        --     --        --   (6,600,000)   (6,600,000)
                             --------- ------  --------  -----------   -----------
Balance at December 31, 2001 9,288,000 $9,288  $109,811  $ 9,917,283   $10,036,382
                             ========= ======  ========  ===========   ===========
</TABLE>





See accompanying notes.

                                      F-6


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                           STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                    Year ended December 31
                                                            -------------------------------------
                                                               1999         2000         2001
                                                            -----------  -----------  -----------
<S>                                                         <C>          <C>          <C>
Operating activities
Net income................................................. $ 8,936,699  $ 4,891,536  $ 8,680,200
Adjustments to reconcile net income to net cash provided by
  operating activities:
   Depreciation............................................     598,841      771,250      954,543
   Loss on disposal of equipment...........................       5,969           --           --
   Provision for bad debt..................................     249,329      203,896      225,236
   Changes in operating assets and liabilities:
     Accounts receivable...................................  (3,279,456)     852,602     (580,347)
     Inventories...........................................    (157,626)     (11,612)       3,839
     Prepaid expenses......................................     (33,184)     (87,438)      96,641
     Financing receivables.................................      24,290     (431,447)  (1,129,187)
     Accounts payable......................................     635,823      (39,942)    (207,049)
     Deferred revenue......................................    (486,909)     533,619      186,926
     Taxes payable.........................................     559,203      589,521      486,335
     Accrued vacation......................................     339,060      165,218       73,207
     Other liabilities.....................................     312,267      128,815      196,658
                                                            -----------  -----------  -----------
Net cash provided by operating activities..................   7,704,306    7,566,018    8,987,002

Investing activities
Purchases of property and equipment........................  (2,286,275)  (1,440,539)  (1,321,948)
Proceeds from sale of property and equipment...............          --       56,250           --
                                                            -----------  -----------  -----------
Net cash used in investing activities......................  (2,286,275)  (1,384,289)  (1,321,948)

Financing activities
Borrowing on note payable..................................     984,674           --           --
Repayments of note payable.................................     (27,066)    (128,152)     (79,559)
Dividends paid.............................................  (6,110,860)  (6,000,000)  (6,600,000)
                                                            -----------  -----------  -----------
Net cash used in financing activities......................  (5,153,252)  (6,128,152)  (6,679,559)
                                                            -----------  -----------  -----------
Increase in cash and cash equivalents......................     264,779       53,577      985,495
Cash and cash equivalents at beginning of year.............     714,792      979,571    1,033,148
                                                            -----------  -----------  -----------
Cash and cash equivalents at end of year................... $   979,571  $ 1,033,148  $ 2,018,643
                                                            ===========  ===========  ===========
Supplemental disclosures of cash flow information
Cash paid for interest..................................... $    31,959  $    69,313  $    75,742
                                                            ===========  ===========  ===========
</TABLE>





See accompanying notes.

                                      F-7


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                         NOTES TO FINANCIAL STATEMENTS

                               DECEMBER 31, 2001

1.  NATURE OF OPERATIONS

   Computer Programs and Systems, Inc. (CPSI or the Company) is a healthcare
information technology solutions provider which was formed and commenced
operations in 1979. The Company provides, on an integrated basis,
enterprise-wide clinical management, access management, patient financial
management, health information management, strategic decision support, resource
planning management and enterprise application integration solutions to
healthcare organizations throughout the United States. Additionally, CPSI
provides other information technology solutions including outsourcing, remote
hosting, networking technologies and other related services.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

   Cash and cash equivalents consists of highly liquid financial instruments,
primarily cash and money market funds, purchased with an original maturity of
three months or less.

Inventories

   Inventories are stated at cost using the average cost method. The Company's
inventories are composed of computer equipment, forms and supplies.

Property and Equipment

   Property and equipment is recorded at cost, less accumulated depreciation.
Additions and improvements to property and equipment that materially increase
productive capacity or extend the life of an asset are capitalized.
Maintenance, repairs and minor renewals are expensed as incurred. Upon
retirement or other disposition of such assets, the related costs and
accumulated depreciation are removed from the respective accounts and any
resulting gain or loss is included in the results of operations.

   Depreciation expense is computed using the straight-line method over the
asset's useful life, generally 5 years. The Company reviews for the possible
impairment of long-lived assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.

Deferred Revenue

   Deferred revenue represents amounts received from customers under licensing
agreements and implementation fees for which the revenue earnings process has
not been completed.

Revenue Recognition

   Systems and services revenues are derived from the sale of information
systems (including software, conversion and installation services, hardware,
peripherals, forms and office supplies) to new customers and from the sale of
new or additional products to existing customers. The Company recognizes
revenue from the sales of products and services as products are delivered to
the customer and as services are provided. The Company does not record revenue
upon execution of a sales contract. Each customer initially remits a
non-refundable 10% deposit that is recorded as deferred revenue. The customer
then pays 40% of the purchase price when the Company commences training on-site
at the customer's facility. When the system becomes operational, the Company
bills the remaining 50% of the system purchase price and recognizes revenue for
the total amount of the purchase price. Revenues derived from installation of
additional software applications are generally recognized upon installation.
Revenues from the sale of hardware are recognized upon the shipment of the
product to the customer.

                                      F-8


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                   NOTES TO FINANCIAL STATEMENTS (Continued)


   The Company also derives revenues from the provision of system support
services, including software application support, hardware maintenance,
continuing education and related services. Support services are provided
pursuant to a General Support Agreement under which the Company provides
comprehensive system support and related services in exchange for a monthly fee
based on the services provided. These contracts range in duration from 1 to 7
years, with an average duration of 5 years, and renew automatically unless
terminated by the customer. Revenues from support services are recognized in
the month when these services are performed.

   As part of system sales, the Company also provides products to some
customers as an application service provider (ASP) for a monthly fee. In
addition, the Company offers Internet services (ISP) to customers for a monthly
fee. Revenues from ASP and ISP services are recognized in the month when these
services are provided.

   Outsourcing services are sold pursuant to one year customer agreements, with
automatic one year renewals. Revenues from outsourcing services are recognized
when services are performed.

Software Development Costs

   According to Statement of Financial Accounting Standards No. 86 (SFAS No.
86), Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed, all costs incurred to establish the technological
feasibility of a computer software product to be sold, leased or otherwise
marketed are research and development costs and are charged to expense when
incurred. Costs incurred subsequent to establishing technological feasibility
are capitalized. Capitalization of computer software costs ceases when the
product is available for general release to customers. The Company has
determined that costs to be capitalized based on SFAS No. 86 are not material.

Income Taxes

   The Company, with the consent of its stockholders, has elected to be treated
as an S corporation under the Internal Revenue Code. In lieu of corporate
federal and state income taxes, the stockholders of an S corporation are taxed
individually on their share of the Company's taxable income. For the purpose of
these financial statements, pro forma income taxes were provided as if the
Company was a C corporation (to which it will convert concurrent with the
initial public offering) for the entire period of these financial statements
(see Note 3).

Advertising

   Advertising costs are expensed as incurred. Advertising expense was
approximately $189,000, $460,000 and $377,000 for the years ended December 31,
1999, 2000 and 2001, respectively.

Earnings Per Share

   Basic earnings per share is based on the weighted effect of all shares of
common stock issued and outstanding and is calculated by dividing net income by
the weighted average shares outstanding during the period. For all of the years
presented in these financial statements, there were no potentially dilutive
shares of common stock and, therefore, basic earnings per share and diluted
earnings per share are the same.

Use of Estimates

   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires that management
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities at the date
of the financial statements and the reported revenue and expenses during the
reporting periods. Actual results could differ from those estimates.

                                      F-9


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                   NOTES TO FINANCIAL STATEMENTS (Continued)


Impact of Recently Issued Accounting Standards

   In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, Business Combinations, to improve the transparency of the accounting
and reporting for business combinations by requiring that all business
combinations be accounted for under a single method, the purchase method. SFAS
No. 141 is effective for all business combinations initiated after June 30,
2001. The adoption of this standard is not expected to have any effect on the
Company's financial position, results of operations or cash flows.

   In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon
their acquisition. SFAS No. 142 also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements. SFAS No. 142 is effective starting with
fiscal years beginning after December 15, 2001. The adoption of this standard
is not expected to have any effect on the Company's financial position, results
of operations or cash flows.

   In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. It applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The adoption of this standard is not expected to have any effect on
the Company's financial position, results of operations or cash flows.

   In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. SFAS No. 144
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, and the accounting and reporting
provisions of Accounting Principles Board Opinion No. 30, Reporting the Results
of Operations. SFAS No. 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001, and interim periods within
those fiscal years. The adoption of this standard is not expected to have any
effect on the Company's financial position, results of operations or cash flows.

3.  PRO FORMA INFORMATION (UNAUDITED)

   The Company intends to file a registration statement on Form S-1 for an
initial public offering (IPO) with the Securities and Exchange Commission (see
Note 12). Prior to completion of the IPO, the Company's S corporation status
will terminate and it will become subject to federal and state income taxes
applicable to a C corporation. Additionally, upon completion of the IPO, the
Company will distribute the earned, but undistributed, accumulated S
corporation earnings (the S Corporation Distribution) through the date the
Company becomes a C corporation. Undistributed S corporation earnings through
December 31, 2001 were approximately $12,200,000. The difference between the S
Corporation Distribution and historical retained earnings consists primarily of
temporary timing differences between book and tax income.

Pro forma unaudited balance sheet

   The pro forma unaudited consolidated balance sheet as of December 31, 2001
reflects the termination of the Company's S corporation status and recording of
a liability to the stockholders in the amount of the S Corporation
Distribution. Payment of the accrued liability will be satisfied through the
use of a portion of the

                                     F-10


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                   NOTES TO FINANCIAL STATEMENTS (Continued)

proceeds from the IPO. It also reflects the deferred income tax assets that
would have been recorded as of that date. A reduction in stockholders' equity
is reflected as a result of recording the accrued liability for the
S Corporation Distribution.

Pro forma unaudited statements of income data

   The unaudited pro forma results of operations information includes a pro
forma income tax provision for each of the three years ended December 31, 1999,
2000 and 2001, assuming effective tax rates of 37.2%, 37.3% and 37.2%,
respectively, comparable to what would have been reported had the Company
operated as a C corporation.

Pro forma unaudited consolidated net earnings per common share

   The Company has adopted the provisions of SFAS No. 128, Earnings Per Share,
for purposes of presenting pro forma basic and diluted net income per common
share. The following table reconciles the historical weighted average shares
outstanding (9,288,000) to the pro forma weighted average shares outstanding
for 2001:


<TABLE>
<S>                                                                                              <C>
Historical weighted average shares outstanding.................................................. 9,288,000
Number of shares required to pay the S Corporation Distribution (estimated to total $12,200,000,
  less 2001 net income of $5,448,699, at an estimated offering price of $17.00 per share).......   397,135
                                                                                                 ---------
Pro forma weighted average shares outstanding................................................... 9,685,135
                                                                                                 =========
</TABLE>


Pro Forma Income Taxes

   For the periods presented in the accompanying financial statements, CPSI
operated as an S corporation and, therefore, the individual stockholders were
liable for federal and state income taxes and not the Company. Cash
distributions were regularly made by CPSI in part to help fund the
stockholders' tax liabilities. Accordingly, net income as presented in the
accompanying financial statements does not include a provision for federal or
state income taxes.

   Assuming completion of the proposed initial public offering (see Note 12),
CPSI will revoke the S corporation status with the stockholders' consent and
will become subject to corporate federal and state income taxes as a C
corporation. For informational purposes, the pro forma balance sheet as of
December 31, 2001 and the statements of operations include pro forma
adjustments for income taxes that would have been recorded if CPSI had been a C
corporation during the periods presented. Pro forma income taxes were
calculated in accordance with SFAS No. 109, Accounting for Income Taxes.

   Deferred income taxes arise from temporary differences in the recognition of
income and expense for tax purposes. Pro forma deferred income taxes were
computed using the liability method and reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial statement purposes and the amounts used for income tax purposes
as if the Company was a C corporation for all periods presented based on the
statutory rates in effect for those periods. Components of the Company's pro
forma deferred tax assets and liabilities are as follows:

                                     F-11


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                   NOTES TO FINANCIAL STATEMENTS (Continued)



<TABLE>
<CAPTION>
                                                             December 31
                                                    -----------------------------
                                                      1999      2000      2001
                                                    --------  -------- ----------
<S>                                                 <C>       <C>      <C>
Deferred tax assets:
  Accounts receivable.............................. $127,877  $127,877 $  127,877
  Sales, income and use taxes accounts receivable..   28,890    54,043     74,229
  Sales, income and use taxes interest.............  112,953   169,281    213,986
  Accrued liabilities..............................  460,391   499,133    596,907
                                                    --------  -------- ----------
Total deferred tax assets..........................  730,111   850,334  1,012,999
Deferred tax liabilities:
  Revenue recognition..............................  (80,478)       --         --
                                                    --------  -------- ----------
Total deferred tax liabilities.....................  (80,478)       --         --
                                                    --------  -------- ----------
Net deferred tax asset............................. $649,633  $850,334 $1,012,999
                                                    ========  ======== ==========
</TABLE>


   Deferred taxes have not been reflected in the accompanying financial
statements because CPSI is not responsible for these income taxes until the
revocation of the S corporation status. Upon such revocation, a net deferred
income tax benefit will be reflected in the balance sheet with a corresponding
credit to the deferred income tax provision. The amount of this net deferred
benefit is approximately $1,013,000 at December 31, 2001.

   Significant components of the pro forma income taxes provision are as
follows:


<TABLE>
<CAPTION>
                                                December 31
                                    ----------------------------------
                                       1999        2000        2001
                                    ----------  ----------  ----------
         <S>                        <C>         <C>         <C>
         Current provision:
           Federal................. $3,150,760  $1,773,440  $2,969,385
           State...................    450,728     253,697     424,781
         Deferred provision:
           Federal.................   (248,530)   (179,575)   (145,542)
           State...................    (29,239)    (21,126)    (17,123)
                                    ----------  ----------  ----------
         Total income tax provision $3,323,719  $1,826,436  $3,231,501
                                    ==========  ==========  ==========
</TABLE>


   The differences between pro forma income taxes at the U.S. federal statutory
income tax rate of 34% and those reported in the statements of income are as
follows:


<TABLE>
<CAPTION>
                                                          December 31
                                                --------------------------------
                                                   1999       2000       2001
                                                ---------- ---------- ----------
<S>                                             <C>        <C>        <C>
Income tax at U.S. federal statutory rate...... $3,038,478 $1,663,122 $2,951,268
  State income tax, net of federal tax effect..    278,183    153,497    269,054
  Non-deductible expenses......................      7,058      9,817     11,179
                                                ---------- ---------- ----------
Effective tax rate............................. $3,323,719 $1,826,436 $3,231,501
                                                ========== ========== ==========
</TABLE>


                                     F-12


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                   NOTES TO FINANCIAL STATEMENTS (Continued)


Undistributed Earnings of Stockholders

   The Company intends to distribute to its current stockholders substantially
all of its undistributed S corporation earnings for tax purposes through the
date of revocation of S corporation status. As of December 31, 2001, the amount
of these undistributed S corporation earnings was approximately $12,200,000.
The actual amount of the final S corporation distributions will include the
undistributed earnings of the Company through the date of revocation of S
corporation status, which is anticipated to occur immediately prior to
completion of the initial public offering (see Note 12). To the extent that
undistributed earnings exceed the final S corporation distribution, the excess
amount will be reflected as additional paid-in capital at the date of
revocation of S corporation status.

4.  CONCENTRATION OF CREDIT RISK

   Financial instruments, which potentially subject the Company to a
concentration of credit risk, consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments with
credit-worthy, high-quality financial institutions.

   The Company's customer base is concentrated in the healthcare industry.
Customers are located throughout the United States. The Company requires no
collateral or other security to support customer receivables. An allowance for
doubtful accounts has been established for potential credit losses.

5.  FAIR VALUES OF FINANCIAL INSTRUMENTS

   Cash, cash equivalents, accounts receivable, accounts payable and accrued
liabilities are reflected in the accompanying financial statements at cost,
which approximates fair value because of the short-term maturity of these
instruments. Based on the borrowing rates currently available to the Company
for bank loans with similar terms and average maturities, at December 31, 2001
the fair values of the note payable and financing receivables approximate book
value.

6.  FINANCING RECEIVABLES

   The Company leases its information and patient care systems to certain
healthcare providers under sales-type leases expiring in various years through
2006. These receivables typically have terms from 2 to 5 years, bear interest
at 10% and are usually collateralized by a security interest in the underlying
assets. The components of these lease receivables were as follows as of
December 31:


<TABLE>
<CAPTION>
                                                   2000        2001
                                                 ---------  ----------
         <S>                                     <C>        <C>
         Total minimum lease payments receivable $ 589,543  $1,649,416
         Less unearned income...................  (104,344)   (300,099)
                                                 ---------  ----------
         Lease receivables......................   485,199   1,349,317
         Less current portion...................  (105,459)   (350,520)
                                                 ---------  ----------
         Amounts due after one year............. $ 379,740  $  998,797
                                                 =========  ==========
</TABLE>


                                     F-13


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                   NOTES TO FINANCIAL STATEMENTS (Continued)


   Future minimum lease payments to be received as of December 31, 2001 are as
follows:


<TABLE>
            <S>                                         <C>
            2002....................................... $  469,976
            2003.......................................    430,058
            2004.......................................    351,402
            2005.......................................    247,130
            2006.......................................    150,850
                                                        ----------
            Total minimum lease payments to be received  1,649,416
            Less unearned income.......................   (300,099)
                                                        ----------
            Net leases receivable...................... $1,349,317
                                                        ==========
</TABLE>


   The Company has also sold information and patient care systems to certain
healthcare providers under extended payment terms. These receivables, included
in current portion of financing receivables, typically have terms from 3 to 12
months and are collateralized by a security interest in the underlying assets.
Total amounts receivable under these arrangements at December 31, 2000 and 2001
were $153,834 and $418,903, respectively.

7.  NOTES PAYABLE

   In July 1999, the Company entered into a note agreement with a bank for
$984,674. The note is payable in monthly installments of $11,805 including
interest at 7.72% until the maturity date of July 29, 2009. The note is
collateralized by certain real estate of the Company with a net book value of
$936,026 at December 31, 2001.

8.  COMMON STOCK

   The Company's common stock at December 31, 2001 and 2000 consists of
4,644,000 shares of voting and 4,644,000 shares of non-voting common stock. In
conjunction with the Company's reincorporation in Delaware (see Note 12), all
of the Company's stock will become voting stock.

   In accordance with a stock restriction agreement dated September 1, 1998,
the stockholders of the Company cannot sell their stock without first offering
to sell the stock back to the Company, and secondly, offering to sell the stock
to the other stockholders. This stock restriction agreement will be terminated
at or prior to the completion of the offering.

Dividends

   Dividends totaling $6,110,860 ($0.66 per share), $6,000,000 ($0.65 per
share) and $6,600,000 ($0.71 per share) were paid to the Company's stockholders
in 1999, 2000 and 2001, respectively.

9.  BENEFIT PLANS

   In January 1994, the Company adopted the Computer Programs and Systems Inc.
401(k) Retirement Plan that covers all eligible employees of the Company who
have completed one year of service. The plan allows eligible employees to
contribute up to 15% of their pre-tax earnings up to the statutory limit
prescribed by the Internal Revenue Service. The Company matches the first
$1,000 contribution per participant plus a discretionary amount determined by
the Company. The Company contributed approximately $370,000, $650,000 and
$739,000 to the Plan for the years ended December 31, 1999, 2000 and 2001,
respectively.

   The Company provides certain health and medical benefits to eligible
employees, their spouses and dependents pursuant to a benefit plan funded by
the Company. Each participating employee contributes to the Company's costs
associated with such benefit plan. The Company's obligation to fund this
benefit plan and pay for these benefits is limited through the Company's
purchase of an insurance policy from a third-party insurer. The amount
established as a reserve is intended to recognize the Company's estimated
obligations with respect to its payment of claims, and claims incurred but not
yet reported, under the benefit plan. Management believes that

                                     F-14


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                   NOTES TO FINANCIAL STATEMENTS (Continued)

the recorded liability for medical self-insurance at December 31, 2001 is
adequate to cover the losses and claims incurred, but these reserves are
necessarily based on estimates and the amount ultimately paid may be more or
less than such estimates.

10.  OPERATING LEASES

Related Party

   The Company leases certain real property, all of which is owned by entities
that are owned by one or more stockholders of the Company. The lease agreements
have terms of ten years and expire on or before April 2011. For the second five
years of the leases, the rental may be adjusted with consent of the landlord
and the Company. If mutual consent cannot be obtained, the rental for the
second five years will remain the same as the first five years. For the years
ended December 31, 1999, 2000 and 2001, total rent expense paid to the related
party was approximately $806,000, $890,000 and $958,000, respectively.

Other

   The Company leases certain equipment under a noncancelable operating lease
which expires in July 2002. For each of the years ended December 31, 1999, 2000
and 2001, rent expense totaled approximately $41,000.

   The future minimum lease payments, including related party and other, under
operating leases subsequent to December 31, 2001 are as follows:


<TABLE>
<CAPTION>
                    <S>                           <C>
                    2002......................... $1,008,876
                    2003.........................    988,200
                    2004.........................    988,200
                    2005.........................    988,200
                    2006.........................    988,200
                    Thereafter...................  3,587,850
                                                  ----------
                                                  $8,549,526
                                                  ==========
</TABLE>


11.  COMMITMENT

   The Company has entered into an agreement with a supplier obligating the
Company to purchase certain forms and supplies. The forms and supplies were
manufactured to the Company's specifications and must be purchased within one
year of manufacture. The outstanding purchase commitment at December 31, 2001
was approximately $143,000.

   The Company is a guarantor of promissory notes of certain officers of the
Company totaling $6,947,000 as of December 31, 2001. Shares of common stock of
the Company are pledged by the officers as security for the promissory notes.
The guaranty agreement contains covenants requiring the Company to maintain
minimum equity balances, not to incur additional liabilities outside those
customary in its normal operations and to satisfy financial ratios on an annual
basis as defined in the agreement.

12.  SUBSEQUENT EVENTS (UNAUDITED)

   On January 16, 2002, the board of directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
3,000,000 shares of its common stock in connection with a proposed Initial
Public Offering (the offering).

   The board of directors has approved the 2002 Stock Option Plan under which
the Company has authorized the issuance of equity based awards for up to
1,165,333 shares of common stock. This plan will become effective upon the
consummation of the offering.


                                     F-15


<PAGE>

                      COMPUTER PROGRAMS AND SYSTEMS, INC.

                   NOTES TO FINANCIAL STATEMENTS (Continued)


   Effective immediately prior to the completion of the offering, the Company
will reincorporate in Delaware. As a Delaware corporation, the Company will
have 30,000,000 shares of authorized common stock and the par value per share
will be $0.001.

   Effective immediately prior to the completion of the offering, each share of
the Company's common stock automatically will convert into 430 shares of common
stock in connection with the reincorporation of the Company in Delaware. All
common share and per common share amounts for all periods presented in the
accompanying financial statements have been restated to reflect the effect of
this common stock conversion.

                                     F-16


<PAGE>

         , 2002

                               3,000,000 Shares


                                   [CPSI LOGO]


                      Computer Programs and Systems, Inc.

                                 Common Stock

                               -----------------
                                  PROSPECTUS
                               -----------------


                         Morgan Keegan & Company, Inc.

                                 Raymond James

Until           , 2002, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.



<PAGE>


 
                                   PART II

                    INFORMATION NOT REQUIRED IN PROSPECTUS


Item 13.  Other Expenses of Issuance and Distribution.

   The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by us in connection with the sale of the
common stock being registered. All the amounts shown are estimates except for
the SEC registration fee, the NASD filing fee and the Nasdaq listing fee.


<TABLE>
                   <S>                                <C>
                   SEC registration fee.............. $5,714
                   Nasdaq National Market listing fee
                   NASD filing fee...................
                   Printing and engraving expenses...
                   Legal fees and expenses...........
                   Accounting fees and expenses......
                   Transfer agent and registrar fees.
                   Miscellaneous.....................
                                                      ------
                   Total............................. $
                                                      ======
</TABLE>


   We intend to pay all expenses of registration, issuance and distribution.


Item 14.  Indemnification of Directors and Officers.

   Subsection (a) of Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") empowers a corporation to indemnify any person who by
reason of the fact that he is or was a director, officer, employee or agent 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, was or is a party or is threatened to be
made a party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation), 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
proceeding, had no reasonable cause to believe his conduct was unlawful.

   Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any action or suit
by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he acted in any of the capacities set forth in
subsection (a) of Section 145, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit 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, except that no indemnification may be made in respect of any
claim, issue or matter as to which such person has been adjudged to be liable
to the corporation unless and only to the extent that the Delaware Court of
Chancery or the court in which such action or suit was brought determines upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
deems proper.

   Section 145 further provides that to the extent that a director or officer
of a corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145, or in the defense of any claim, issue or matter therein, he is
entitled to indemnification against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith. Section 145
also states that any indemnification and advancement of expenses provided by,
or granted pursuant to, Section 145 are not exclusive of any other rights to
which those seeking indemnification may be entitled, and the section empowers
the corporation to purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a

                                     II-1


<PAGE>

director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.

   As permitted by the DGCL, our Certificate of Incorporation and/or our
Bylaws, which will become effective upon our reincorporation in Delaware,
provide that (1) we are required to indemnify our directors and officers to the
fullest extent permitted by the DGCL, subject to certain very limited
exceptions; (2) we are permitted to indemnify our other employees to the extent
that we indemnify our officers and directors, unless otherwise required by law
or agreements to which we are a party; (3) we are required to advance expenses,
as incurred, to our directors and officers in connection with a legal
proceeding to the fullest extent permitted by the DGCL, subject to certain very
limited exceptions; and (4) the rights conferred in our Certificate of
Incorporation and Bylaws are not exclusive.

   Prior to the closing of this offering, we intend to enter into indemnity
agreements with each of our current directors and officers to give such
directors and officers additional contractual assurances regarding the scope of
the indemnification set forth in our Certificate of Incorporation and our
Bylaws and to provide additional procedural protections. At present, there is
no pending litigation or proceeding involving any of our directors, officers or
employees regarding which indemnification is sought, nor are we aware of any
threatened litigation that may result in claims for indemnification.

   As permitted by the DGCL, our Certificate of Incorporation, which will
become effective upon our reincorporation in Delaware, includes a provision
that eliminates the personal liability of our directors for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to us or our stockholders; (2) for
acts or omissions not in good faith or that involve intentional misconduct or
knowing violation of law; (3) under Section 174 of the DGCL regarding unlawful
dividends, stock purchases and redemptions; or (4) for any transaction from
which the director derived an improper personal benefit.

   With approval by the board of directors, we expect to obtain directors' and
officers' liability insurance. Reference is made to the underwriting agreement
contained in Exhibit 1.1 hereto, which contains provisions indemnifying our
officers and directors against certain liabilities.


Item 15.  Recent Sales of Unregistered Securities.

   We have not issued or sold any securities within the past three years.


Item 16.  Exhibits and Financial Statement Schedules.

(a) Exhibits.


<TABLE>
<CAPTION>
Exhibit
Number  Description of Document
------- -----------------------
<C>     <S>

  1.1*  Form of Underwriting Agreement
  2.1*  Form of Agreement and Plan of Merger to effect the reincorporation
  3.1   Certificate of Incorporation of the registrant
  3.2   Articles of Amendment to the Articles of Incorporation of the registrant
  3.3   Articles of Amendment to the Certificate of Incorporation of the registrant
  3.4   Certificate of Incorporation of the registrant, to be effective upon the reincorporation
  3.5   Bylaws of the registrant
  3.6*  Bylaws of the registrant, to be effective upon the reincorporation
  5.1*  Opinion of Maynard Cooper & Gale, P.C., counsel to the registrant
</TABLE>


                                     II-2


<PAGE>


<TABLE>
<CAPTION>
Exhibit
Number  Description of Document
------- -----------------------
<C>     <S>
 10.1*  Real Property Lease, dated         , 2002, between the registrant and CP Investments, Inc.
 10.2*  Real Property Lease dated         , 2002, between the registrant and DJK, LLC
 10.3*  2002 Stock Option Plan
 10.4*  Form of Non-Qualified Stock Option Agreement
 10.5*  Form of Directors' and Officers' Indemnification Agreement
 16.1   Predecessor auditor letter to the Securities and Exchange Commission
 23.1   Consent of Ernst & Young LLP, Independent Auditors
 23.2   Consent of Wilkins Miller, P.C., Independent Auditors
 23.3*  Consent of Maynard, Cooper & Gale, P.C. (to be included in Exhibit 5.1 to this registration
        statement)
 24.1   Powers of Attorney
</TABLE>

* To be filed by amendment.

   (b) Financial Statement Schedules.

                Schedule II--Valuation and Qualifying Accounts

   All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.


Item 17.  Undertakings.

   The undersigned registrant hereby undertakes to provide the underwriters at
the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

   Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the provisions described in Item 14 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 hereunder, 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 Act and
will be governed by the final adjudication of such issue.

   The registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
    information omitted from the form of prospectus filed as part of this
    registration statement in reliance upon Rule 430A and contained in a form
    of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
    497(h) under the Securities Act shall be deemed to be a part of this
    registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each
    post-effective amendment that contains a form of prospectus 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.

                                     II-3


<PAGE>


                                  SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mobile, State of
Alabama, on the 21st day of March, 2002.

                                          COMPUTER PROGRAMS AND SYSTEMS, INC.


                                          By:  /s/  DAVID A. DYE
                                             -----------------------------
                                             David A. Dye
                                             President and Chief Executive
                                              Officer

   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.

          Signature                       Title                  Date
          ---------                       -----                  ----

/s/  JOHN MORRISSEY           Chairman of the Board         March 21, 2002
-----------------------------   and Director
John Morrissey

/s/  DAVID A. DYE             President, Chief              March 21, 2002
-----------------------------   Executive Officer and
David A. Dye                    Director

/s/  J. BOYD DOUGLAS          Executive Vice President,     March 21, 2002
-----------------------------   Chief Operating Officer and
J. Boyd Douglas                 Director

/s/  M. STEPHEN WALKER        Vice President--Finance and   March 21, 2002
-----------------------------   Chief Financial Officer
M. Stephen Walker

/s/  DARRELL G. WEST          Controller (principal         March 21, 2002
-----------------------------   accounting officer)
Darrell G. West

/s/  DENNIS P. WILKINS        Director                      March 21, 2002
-----------------------------
Dennis P. Wilkins

/s/  M. KENNY MUSCAT          Director                      March 21, 2002
-----------------------------
M. Kenny Muscat

/s/  ERNEST F. LADD, III      Director                      March 21, 2002
-----------------------------
Ernest F. Ladd, III

/s/  W. AUSTIN MULHERIN, III  Director                      March 21, 2002
-----------------------------
W. Austin Mulherin, III

/s/  WILLIAM R. SEIFERT, II   Director                      March 21, 2002
-----------------------------
William R. Seifert, II


                                     II-4


<PAGE>


               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors
Computer Programs and Systems, Inc.

   We have audited the financial statements of Computer Programs and Systems,
Inc. as of December 31, 2001, and for the year then ended, and have issued our
report thereon dated February 15, 2002, except for Note 12, as to which the
date is            2002 (included elsewhere in the registration statement). Our
audit also included information for 2001 in the financial statement schedule
listed in Item 16(b) of this registration statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit.

   In our opinion, the information for 2001 in the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

                                          ERNST & YOUNG LLP

Birmingham, Alabama
February 15, 2002


   The foregoing report is in the form that will be signed upon completion of
the restatement of capital accounts described in Note 12 to the financial
statements.

                                          /s/ ERNST & YOUNG LLP

Birmingham, Alabama
March 21, 2002

                                     II-5


<PAGE>


             REPORT OF WILKINS MILLER, P.C., INDEPENDENT AUDITORS

The Board of Directors
Computer Programs and Systems, Inc.

   We have audited the financial statements of Computer Programs and Systems,
Inc. as of December 31, 2000, and for each of the two years in the period ended
December 31, 2000, and have issued our report thereon dated February 16, 2001,
except for Note 12, as to which the date is           , 2002 (included
elsewhere in the registration statement). Our audit also included information
for 1999 and 2000 in the financial statement schedule listed in Item 16(b) of
this registration statement. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.

   In our opinion, the information for 1999 and 2000 included in the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

                                          WILKINS MILLER, P.C.

Mobile, Alabama
February 16, 2001


   The foregoing report is in the form that will be signed upon completion of
the restatement of capital accounts described in Note 12 to the financial
statements.

                                          /s/ WILKINS MILLER, P.C.

Mobile, Alabama
March 21, 2002

                                     II-6


<PAGE>

                                  SCHEDULE II
                      COMPUTER PROGRAMS AND SYSTEMS, INC.
                VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


<TABLE>
<CAPTION>
                                                                 (1)
                                                              Additions
                                                   Balance at charged to
                                                   beginning   cost and     (2)      Balance at
                 Description                       of period   expenses  Deductions end of period
                 -----------                       ---------- ---------- ---------- -------------
<S>                                           <C>  <C>        <C>        <C>        <C>
Allowance for doubtful accounts deducted from
  accounts receivable in the balance sheets.. 1999  $163,000   $250,000   $     --    $413,000
                                              2000   413,000    204,000    138,000     479,000
                                              2001   479,000    225,000    172,000     532,000
</TABLE>

--------
(1) Adjustments to allowance for change in estimates.
(2) Uncollectible accounts written off, net of recoveries.

                                     II-7


<PAGE>


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit Number Description of Document
-------------- -----------------------
<C>            <S>

     1.1*      Form of Underwriting Agreement

     2.1*      Form of Agreement and Plan of Merger to effect the reincorporation

     3.1       Certificate of Incorporation of the registrant

     3.2       Articles of Amendment to the Articles of Incorporation of the registrant

     3.3       Articles of Amendment to the Certificate of Incorporation of the registrant

     3.4       Certificate of Incorporation of the registrant, to be effective upon the reincorporation

     3.5       Bylaws of the registrant

     3.6*      Bylaws of the registrant, to be effective upon the reincorporation

     5.1*      Opinion of Maynard Cooper & Gale, P.C., counsel to the registrant

    10.1*      Real Property Lease, dated         , 2002, between the registrant and CP Investments, Inc.

    10.2*      Real Property Lease dated         , 2002, between the registrant and DJK, LLC

    10.3*      2002 Stock Option Plan

    10.4*      Form of Non-Qualified Stock Option Agreement

    10.5*      Form of Directors' and Officers' Indemnification Agreement

    16.1       Predecessor auditor letter to the Securities and Exchange Commission

    23.1       Consent of Ernst & Young LLP, Independent Auditors

    23.2       Consent of Wilkins Miller, P.C., Independent Auditors

    23.3*      Consent of Maynard, Cooper & Gale, P.C. (to be included in Exhibit 5.1 to this registration
               statement)

    24.1       Powers of Attorney
</TABLE>

--------
* To be filed by amendment.





<PAGE>
                                                                     EXHIBIT 3.1


                          CERTIFICATE OF INCORPORATION
                          ----------------------------

                                       OF
                                       --

                       COMPUTER PROGRAMS AND SYSTEMS, INC.
                       -----------------------------------

         We, the undersigned, in order to form a corporation for the purpose
hereinafter stated, do hereby declare ourselves to be the incorporators, and
certify as follows, viz:

                                      FIRST
                                      -----

         The name of said corporation shall be:

         COMPUTER PROGRAMS AND SYSTEMS, INC.

                                     SECOND
                                     ------
         The nature of the business to be transacted, promoted or carried on by
said corporation and the objects and purposes for which it is formed, are to be
any and all of the things herein set forth, and to exercise any and all of the
rights, powers and privileges conferred by the laws of the State of Alabama on
corporation, or which are herein enumerated, to the same extent as natural
persons might or could do, viz:

         To design, program and implement computer data processing systems and
conduct a consulting service in connection therewith; to supply the software
used in computer systems; to sell computer systems; to install software in
computers; to do all things necessary to program computer systems; to serve as
subcontractors in the computer industry; to do computer systems analysis work;
to design and analyze computer needs for businesses; to develop and install
computer systems;
 to engage in the sale of computer systems; to analyze the
needs of computer users and develop the software for installation in computers;
to engage generally in the business of computer consultants; to do all analysis
work to determine the most efficient use for computers and to program the same
to accomplish this purpose, including the installation of software; to provide
data processing services.


<PAGE>

         To buy, sell, lease, hold, encumber by mortgage, liens or otherwise, or
in any other manner to trade or deal in lands or real property wherever located;

         To organize, establish, operate and maintain financial institutions of
all and every kind, class and description for the purpose of lending to the
stockholders and others, the money from time to time accumulated; to make such a
loan on such security, real or personal, and under such terms and conditions as
the Board of Directors may determine upon; to charge and collect interest or
premiums in advance on loans, awards or other disposition of its funds; and to
provide for the retirement and withdrawal of any borrowing stockholders as may
be deemed advisable by the corporation, and permitted by law;

         To organize, operate and maintain corporations or business enterprises
for any and all purposes, whatsoever, consistent with the laws of the State of
Alabama; to do a general investment, security and financial business of any and
all kinds; to borrow money, either with or without security, and to execute any
receipt, note, bond, mortgage, deed of trust or other security or securities for
the payment of the same; to subscribe for, purchase, or otherwise acquire, hold,
own, use, hypothecate, trade and deal in and with stock, bonds, debentures,
script, notes, coupons, or other negotiable or transferable securities of any
and every kind;

         To purchase, take on, lease, buy, exchange or otherwise acquire, real
and personal property of every kind, class and description, including buildings,
factories, plants, stores, theatres, concessions, patents, contracts, easements,
franchises, rights of way, business concerns, business opportunities and
undertakings of all and every kind, and to sell, mortgage, pledge, lease,
improve, manage, operate, turn to account and otherwise trade and deal in the
same;

         To undertake or guarantee the payment of either or both of the
principal, interest or dividends, of any stock, bonds, debentures, or other
securities issued by any corporation; to guarantee the payment of money for the
performance of any obligations or undertaking whatsoever; to act as Trustee,
Executor, Administrator, Receiver, or other fiduciary, to execute trusts of all
kinds; to act as broker for sale

                                       2


<PAGE>

of stocks, bonds, or other securities, lands, buildings, factories, plants,
bridges, ferries, business concerns, concessions and undertakings of any and
every kind;

         To purchase, or otherwise acquire, hold, own, use, operate, conduct,
mortgage, sell, convey, or otherwise dispose of, real and personal property of
every class and description, without limits, in any and all of the districts,
states and territories of the United States, and in any or all foreign
countries, and to build, acquire and equip manufacturing plants, stores,
warehouses, lighting plants, water works, and systems, amusement parks, hotels,
bridges, ferries, steamboats, and to run, operate and conduct same;

         To draw, make, accept, endorse, discount, execute and issue promissory
notes, bills of exchange, warrants, bonds and other negotiable and transferable
instruments; to issue bonds, mortgages, debentures, or obligations of this
corporation from time to time, for any of the objects and purposes of the
corporation, and to secure the same by mortgage, pledge, deed of trust, or
otherwise to retire, hold and re-issue, the shares of its capital stock, its
bonds and securities;

         To remunerate any person or corporation for services rendered, or to be
rendered, in, and, or about the formation, organization or promotion of this
corporation, or in placing, guaranteeing, or underwriting any shares of its
stock, bonds, or other securities of the corporation, or in the conduct of its
business;

         In general, to carry on any other business in connection with the
foregoing, whether manufacturing, financial, commercial, industrial, mining or
otherwise, with all the powers conferred by the laws of the State of Alabama,
upon corporations formed under said act or are herein specified.

                                      THIRD
                                      -----

         The location of the principal office and place of business shall be at
Mobile, Alabama, U.S.A. and it may have offices in any other State or City.

                                     FOURTH
                                     ------

         The officers of the said corporation shall consist of President,
Secretary and Treasurer, and such other officers, agents, agents, or employees
as the Board

                                       3


<PAGE>

of Directors may appoint, with such powers as may be conferred upon them by said
Board of Directors.

                                      FIFTH
                                      -----

         Said corporation shall have all the powers conferred upon it by these
articles of incorporation and such other powers as are, or may be hereafter,
conferred on business corporations, by virtue of the Constitution and Laws of
Alabama, now in force, or that may hereafter be enacted, including the power to
have and hold meetings of the Board of Directors or Stockholders within or
without the State of Alabama.

                                      SIXTH
                                      -----

         The duration of this charter of incorporation shall be perpetual.


                                     SEVENTH
                                     -------

         The total number of shares that may be issued is 50,000 shares which
shall be Common Stock with a par value of ONE AND NO/100 ($1.00) DOLLAR. The
amount of capital stock with which the corporation shall begin business shall be
$1,000.00, represented by the issuance of 1,000 shares Common capital stock.


                                    EIGHTH
                                    ------

         The name and post office address of the person designated by the
incorporators to receive subscriptions of the capital stock is:

         JOHN C. WILKINS
         P. O. BOX 6062
         MOBILE, AL  36606

                                      NINTH
                                      -----

         The incorporators and their respective post office addresses and number
of shares subscribed for by each are as follows:

         (1)      John C. Wilkins
                  P.O. Box 6062
                  Mobile, AL  36606         500 shares                 $500.00

         (2)      R. B. Wilkins
                  P.O. Box 154
                  Mobile, AL  36601         480 shares                 $480.00

         (3)      J. M. Druhan
                  P.O. Box 154
                  Mobile, AL  36601         10 shares                  $ 10.00

                                       4


<PAGE>

         (4)      M. A. Wermuth
                  P.O. Box 154
                  Mobile, AL  36601         10 shares                 $  10.00


                                      TENTH
                                      -----

         The business of said corporation shall be under the general management
and control of a Board of Directors consisting of not less than three (3) nor
more than seven (7) persons, and shall be elected by the stockholders at the
meeting for authorization of said corporation. Said directors shall hold office
for one (1) year or until their successors are elected, in accordance with the
By-Laws of said corporation.

     The incorporators have this day elected John C. Wilkins, R. B. Wilkins and
J. M. Druhan as directors of said corporation and said directors have this day
elected the following officers of said corporation, viz:

     Dennis P. Wilkins  -  President
     John C. Wilkins    -  Secretary and Treasurer

     IN WITNESS WHEREOF, the undersigned incorporators have hereunto set their
hands and seals on the 14th day of February, 1979.


                                                     /s/ John C. Wilkins
                                                     --------------------
                                                     JOHN C. WILKINS


                                                     /s/ R. B. Wilkins
                                                     --------------------
                                                     R. B. WILKINS


                                                     /s/ J. M. Druhan
                                                     --------------------
                                                     J. M. DRUHAN


                                                     /s/ M. A. Wermuth
                                                     --------------------
                                                     M. A. WERMUTH





This Instrument Prepared By:

ROBERT D. WILKINS
157 N. Conception St.
Mobile, AL  36603

                                       5


<PAGE>

                                SUBSCRIPTION LIST

         We, the undersigned, have and do hereby subscribe to and for the number
of shares of capital stock of COMPUTER PROGRAMS AND SYSTEMS, INC., set opposite
our signatures below. The subscription of each of the undersigned incorporators
has been fully paid for in cash.

/s/ John C. Wilkins                       500 shares
-------------------
JOHN C. WILKINS


/s/ R. B. Wilkins                         480 shares
-------------------
R. B. WILKINS


/s/ J. M. Druhan                          10 shares
------------------
J. M. DRUHAN


/s/ M. A. Wermuth                         10 shares
------------------
M. A. WERMUTH




STATE OF ALABAMA  )

COUNTY OF MOBILE  )

         Personally appeared before me, the undersigned Notary Public in and for
said County and State, JOHN C. WILKINS, who being by me first duly sworn,
deposes and states under oath as follows:

         That he is the person authorized by the incorporators of COMPUTER
PROGRAMS AND SYSTEMS, INC. to receive subscriptions to the capital stock of said
corporation and that the foregoing is the subscription list which truly sets
forth therein the names of the persons subscribing for shares of capital stock
of said corporation, the number of shares subscribed for by each and the amount
so paid; that all of said shares of capital stock of said corporation have been
fully paid for in cash and that he has received in cash the sum of ONE THOUSAND
AND NO/100 ($1,000.00) DOLLARS.

                                                     /s/ John C. Wilkins
                                                     -------------------
                                                     JOHN C. WILKINS



Subscribed and Sworn to
Before Me on this the 14th of February, 1979


/s/ Allie B. Baker
------------------
NOTARY PUBLIC

                                       6


<PAGE>
                                                                     EXHIBIT 3.2


                              ARTICLES OF AMENDMENT

                                     TO THE
                            ARTICLES OF INCORPORATION
                                       OF
                       COMPUTER PROGRAMS AND SYSTEMS, INC.

                       -----------------------------------

         Pursuant to the provisions of Section 10-2A-113 of the Code of Alabama,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:

         FIRST:   The name of the corporation is COMPUTER PROGRAMS AND SYSTEMS,
INC.

         SECOND: The following amendments of the Articles of Incorporation were
adopted by the shareholders of the corporation on January 2, 1981, in the manner
prescribed by The Alabama Business Corporation Act:

         "RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by deleting the first sentence of paragraph "SEVENTH" thereof, and
substituting therefore the following:

                  `The total number of shares that may be issued is 100,000
          shares, which shall be Common Stock with a par value of ONE AND NO/100
          ($1.00) DOLLAR per share."

         THIRD:   The number of shares of the  corporation  outstanding  at the
time of such  adoption  was  10,000;  and the number of shares entitled to vote
thereon was 10,000.

         FOURTH:  The number of shares that voted for such  amendment  was
10,000;  and the number of shares  that voted  against  such amendment was none.

         FIFTH: Such amendment does not
 in itself effect a change in the amount
of stated capital, although the stated capital has been increased subsequent to
the date of incorporation from $1,000 represented by 1,000 shares issued and
outstanding with a par value of $1.00 per share, to $10,000 represented by
10,000 shares issued and outstanding with a par value of $1.00 per share.

         Dated this the 9th day of February, 1984.

                                           COMPUTER PROGRAMS AND SYSTEMS, INC.


                                           By: /s/ Dennis P. Wilkins
                                               ---------------------
                                               Its President

                                           and /s/ J. Carleton Wilkins
                                               -----------------------
                                               Its Secretary



<PAGE>
STATE OF ALABALA)
COUNTY OF MOBILE)

         I, /s/ Charlotte T. Ruffer, a notary public, do hereby certify that on
            -----------------------
this 9th day of February, 1984, personally appeared before me Dennis P. Wilkins
and L. Carleton Wilkins, who, being by me first duly sworn, declared that they
are the President and Secretary of COMPUTER PROGRAMS AND SYSTEMS, INC., that
they signed the foregoing document as President and Secretary of the
corporation, and that the statements therein contained are true.

                                                 /s/ Charlotte T. Ruffer 3/8/86
                                                 ------------------------------
                                                 NOTARY PUBLIC

(NOTARIAL SEAL)



<PAGE>
                                                                     EXHIBIT 3.3

                          ARTICLES OF AMENDMENT TO THE

                          CERTIFICATE OF INCORPORATION
                                       OF
                       COMPUTER PROGRAMS AND SYSTEMS, INC.


         Pursuant to the provisions of Section 10-2B-10.01, et seq., of the Code
of Alabama 1975, the undersigned corporation adopts the following Articles of
Amendment to the Certificate of Incorporation.

         FIRST:   The name of the corporation is COMPUTER PROGRAMS AND SYSTEMS,
INC.

         SECOND: The following amendment of the Certificate of Incorporation was
adopted by the shareholders of the corporation on September 1, 1998, in the
manner prescribed by the Alabama Business Corporation Act.

         The Certificate of Incorporation of the corporation, as contained in
the Certificate of Incorporation, dated February 14, 1979, and recorded in Real
Property Book 1957, Page 550, in the office of the Judge of Probate of Mobile
County, Alabama, as amended by that certain Articles of Amendment, dated
February 9, 1984, and recorded in Real Property Book 2575, Page 774, in the
office of the Judge of Probate of Mobile County, Alabama, shall be amended by
the deletion of Article Seventh and substituting therefor a new Article
Seventh, which shall provide as follows:

                                     SEVENTH

         The aggregate number of shares which the corporation shall have
 the
authority to issue shall be 200,000, divided into 100,000 shares of Voting
Common of the par value of fifty cents


<PAGE>

($.50) per share and 100,000 shares of Non-Voting Common of the par value of
fifty cents ($.50) per share, constituting a total authorized capital of
$100,000.00. The designations and powers, preferences and rights, and the
qualifications, limitations or restrictions thereof are as follows:

         (a) Voting Rights. The holders of the Voting Common shares of the
             -------------
corporation issued and outstanding, except as otherwise provided by law, shall
have and possess the exclusive right to notice of shareholders' meetings and
exclusive voting rights and powers, and the holders of all other shares which
shall include, but not limited to, the holders of the Non-Voting Common shares,
shall not be entitled to any notice of the shareholders' meetings or to vote
upon the election of Directors or upon any questions affecting the management or
affairs of the corporation, except where such notice or vote is required by law.

         (b) Dividends. The Voting Common Shares and Non-Voting Common shares
             ----------
shall be entitled to such dividends as the Board of Directors may declare,
payable at such times as the Board of Directors may determine, without
preference or priority of one class of shares over the other, in proportion to
their respective holdings of such shares.

         (c) Liquidation. In the event of any liquidation, any dissolution or
             ------------
winding up of the affairs of the corporation, whether voluntarily or
involuntarily, the assets and funds of the corporation shall be divided among
and paid to the holders of the Voting Common shares and Non-Voting Common
shares, without preference or priority of one class of shares over the other, in
proportion to their respective holdings of such shares.

         (d) Other. Except for the differences in voting rights set forth in
             ------
paragraph (a) of this Article Seventh, the Voting Common shares and the
Non-Voting Common shares shall possess and enjoy all of the same rights and
privileges, and be subject to all of the same qualifications, limitations or
restrictions.

         The foregoing Certificate of Incorporation of the corporation shall be
further amended by the addition of Article Eleventh which shall provide as
follows:

                                    ELEVENTH

Section 1.  Authority to Indemnify.
            ----------------------
         A.     Except as provided in subsection D, the corporation may
indemnify an individual made a party to a proceeding  because he or she is or
was a director or officer against liability incurred in the proceeding if:

         (1)    The individual conducted himself or herself in good faith; and

         (2)    The individual reasonably believed:


<PAGE>

                (i)  In the case of conduct in his or her official capacity
                     with the corporation, that the conduct was in its best
                     interests; and

                (ii) In all other cases, that the conduct was at least not
                     opposed to its best interests; and

         (3)    In the case of any criminal proceeding, the individual had no
                reasonable cause to believe his or her conduct was unlawful.

         B.     The conduct of a director or officer with respect to an employee
benefit plan for a purpose he or she reasonably believed to be in the interests
of the participants in, and beneficiaries, of the plan is conduct that satisfies
the requirements of subsection A(2)(ii).

         C.     The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director or officer did not meet the standard of
conduct described in this section.

         D.     The corporation may not indemnify a director or officer under
this section:

         (1)    In connection  with a proceeding by or in the right of the
                corporation in which the director or officer was adjudged
                liable to the corporation; or

         (2)    In connection with any other proceeding charging improper
                personal benefit to the director or officer, whether or not
                involving action in his or her official capacity, in which the
                director or officer was adjudged liable on the basis that
                personal benefit was improperly received by him or her.

         E.     Indemnification  permitted  under this  section in  connection
with a  proceeding  by or in the right of the  corporation  is limited to
reasonable expenses incurred in connection with the proceeding.

         Section 2. Mandatory Indemnification. The corporation shall indemnify a
                    -------------------------
director or officer who was successful, on the merits or otherwise, in the
defense of any proceeding, or of any claim, issue or matter in such proceeding,
where he or she was a party because he or she is or was a director or officer of
the corporation, against reasonable expenses incurred in connection therewith,
notwithstanding that he or she was not successful on any other claim, issue or
matter in any such proceeding.


         Section 3. Advance for Expenses.
                    --------------------

         A.     The corporation may pay for or reimburse the reasonable expenses
incurred by a director or officer who is a party to a proceeding in advance of
final disposition of the proceeding if:


<PAGE>

         (1)    The  director or officer  furnishes  the  corporation  a written
                affirmation of good faith belief that he or she has met the
                standard of conduct described in Section 1;


         (2)    The director or officer furnishes the corporation a written
                undertaking, executed personally or on behalf of the director or
                officer to repay the advance if it is ultimately determined that
                the director did not meet the standard of conduct, or is not
                otherwise entitled to indemnification under subsection 1(d) of
                this Article, unless indemnification is approved by a court
                pursuant to statutory authorization.

         (3)    A determination is made that the facts then known to those
                making the determination would not preclude  indemnification
                under this Article.

         B.     The underwriting required by subsection A(2) of this Article
must be an unlimited general obligation of the director or officer but need not
be secured and may be accepted without reference to financial ability to make
repayment.

         C.     Determination and authorizations of payments under this section
shall be made in the manner specified in Section 4.

         Section 4.  Determination and Authorization of Indemnification.
                     --------------------------------------------------

         A.     The corporation may not indemnify a director or officer under
Section 1 unless authorized in the specific case after a determination has been
made that indemnification of the director or officer is permissible in the
circumstances because the director or officer has met the standard of conduct
set forth in Section 1.

         B.     The determination shall be made:

         (1)    By the Board of Directors by majority vote of a quorum
                consisting of directors not at the time parties to the
                proceeding:


         (2)    If a quorum cannot be obtained under subdivision (1),  by
                majority vote of a committee duly designated by the Board of
                Directors (in which designation directors who are parties may
                participate) consisting solely of two or more directors not at
                the time parties to the proceeding:

         (3)    By special legal counsel:

                (i)  Selected by the Board of Directors or its committee in the
                     manner prescribed in subdivision (1) or (2); or


<PAGE>

                (ii) If a quorum of the Board of Directors cannot be obtained
                     under subdivision (1) and a committee cannot be designated
                     under subdivision (2), selected by majority vote of the
                     full Board of Directors (in which selection directors who
                     are parties may participate); or

         (4)    By the shareholders, but shares owned by or voted under the
                control of directors who are at the time parties to the
                proceeding may not be voted on the determination. A majority of
                the shares that are entitled to vote on the transaction by
                virtue of not being owned by or under the control of such
                directors constitutes a quorum for the purpose of taking action
                under this section.

         C.     Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection B(3)
to select counsel.

                Section 5. Insurance. The corporation may purchase and maintain
                           ---------
insurance, or furnish similar protection (including but not limited to trust
funds, self-insurance reserves, or the like), on behalf of an individual who is
or was a director, officer, employee, or agent of the corporation, or who, while
a director, officer, employee, or agent of the corporation, is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture trust, employee benefit plan, or other enterprise, against
liability asserted against or incurred by him or her in that capacity or
arising from his or her status as a director, officer, employee, or agent,
whether or not the corporation would have power to indemnify him or her against
the same liability under Section 1 or 2.

                THIRD: The shareholders of the corporation shall exchange for
the 10,800 shares of the common stock presently outstanding 10,800 shares of the
Voting Common and 10,800 of the Non-Voting Common so that each shareholder will
receive one share of Voting Common and one share of Non-Voting Common for each
share of common stock owned by such shareholder.

                FOURTH:  The number of shares of the  corporation  outstanding
at the time of such  adoption  was  10,800;  and the number of shares entitled
to vote thereon was 10,800.


<PAGE>

         FIFTH:   The number of shares that voted for such  amendment  was
10,800,  and the number of shares  that voted  against  such amendment was zero.

         DATED: September 1 1998.

                                            COMPUTER PROGRAMS AND SYSTEMS, INC.


                                            By: /s/ Dennis P. Wilkins
                                                --------------------
                                                DENNIS P. WILKINS
                                                Its President


<PAGE>

STATE OF ALABAMA,
COUNTY OF MOBILE.

         Before me, the undersigned Notary Public in and for said County and
State, this day personally appeared DENNIS P. WILKINS, President of COMPUTER
PROGRAMS AND SYSTEMS, INC., whose name is signed to the foregoing statement, and
who, being by me first duly sworn, deposes and says:

         That he is the President of COMPUTER PROGRAMS AND SYSTEMS, INC., and
that all matters, facts and things contained in the above and foregoing
statement are true and correct as therein written.

                                                /s/ Dennis P. Wilkins
                                                ---------------------
                                                DENNIS P. WILKINS


Sworn to and subscribed before me on this
1st day of September, 1998.


/s/ Nell Brooks Weiss
---------------------
NOTARY PUBLIC


My Commission Expires 3-28-2000




This Instrument Prepared By:
Ronald P. Davis, Esq., Esq.
Vickers, Riis, Murray and Curran, L.L.C.
8th Floor, Regions Bank Building
106 St. Francis Street
Mobile, Alabama 36602



<PAGE>


                                                                    Exhibit 3.4



                          CERTIFICATE OF INCORPORATION
                                       OF
                       COMPUTER PROGRAMS AND SYSTEMS, INC.

                                    ARTICLE I
                                      NAME

         The name of the corporation is Computer Programs and Systems, Inc.

                                   ARTICLE II
                           REGISTERED OFFICE AND AGENT

         The address of the registered office of the Corporation in the state of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.

                                   ARTICLE III
                                     PURPOSE

         The purpose for which the Corporation is organized is to engage in any
lawful act or activity for which Corporations may be organized under the General
Corporation Law of the State of Delaware, now or as hereafter amended.

                                   ARTICLE IV
                                  CAPITAL STOCK

         Section 1. The total number of shares of stock which the Corporation
shall have authority to issue is thirty million (30,000,000) shares, which shall
consist entirely of thirty million (30,000,000) shares of common stock, $.001
par value per share (Common Stock).

         Section 2. At all lawfully constituted meetings of the stockholders of
the Corporation, the holders of shares of Common Stock shall be entitled to one
vote per share. The holders of shares of Common Stock shall, except as herein
otherwise provided, have such other
 rights and privileges as are expressly
provided by law.

         Section 3. No holder of shares of authorized stock shall have
preemptive rights or shall otherwise be entitled, as a matter of right, to
subscribe for or purchase shares of any class now or hereafter authorized, or to
purchase or subscribe for securities convertible into or exchangeable for shares
of any class of stock, or to which shall be attached or appertain any warrants
or rights entitling the holder thereto to purchase or subscribe for shares of
any class of stock.


<PAGE>

                                    ARTICLE V
                                    DIRECTORS

         Section 1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.

         Section 2. Following the closing of an initial public offering pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
director shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.

         Section 3. Any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other causes and any newly
created directorships resulting from any increase in the number of directors,
shall, unless the Board of Directors determines by resolution that any such
vacancies or newly created directorships shall be filled by the stockholders,
except as otherwise provided by law, be filled only by the affirmative vote of a
majority of the directors then in office, even though less than a quorum of the
Board of Directors, and not by the stockholders. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified.

                                   ARTICLE VI
                              ELECTION OF DIRECTORS

         Section 1. Stockholders of the Corporation shall not have the right to
cumulate votes in the election of directors.

         Section 2. The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.

                                     - 2 -


<PAGE>

                                   ARTICLE VII
                              STOCKHOLDER MEETINGS

         Section 1. No action shall be taken by the stockholders of the
Corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws or by written consent of stockholders in accordance
with the Bylaws prior to the closing of the Initial Public Offering, and
following the closing of the Initial Public Offering, no action shall be taken
by the stockholders by written consent, such ability to act by written consent
in lieu of a meeting is specifically denied.

         Section 2. Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.

         Section 3. Special meetings of the stockholders of the Corporation for
any purpose or purposes may be called at any time by the Board of Directors, or
by a committee of the Board of Directors which has been duly designated by the
Board of Directors and whose powers and authority, as provided in a resolution
of the Board of Directors or in the Bylaws of the Corporation, include the power
to call such meetings, but such special meetings may not be called by any other
person or persons.

                                  ARTICLE VIII
                               AMENDMENT OF BYLAWS

         In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, adopt, repeal,
alter, amend, and rescind the Bylaws of the Corporation by a resolution adopted
by a majority of the directors.

                                   ARTICLE IX
                        LIMITATION OF DIRECTOR LIABILITY

          No director of the Corporation shall have personal liability to the
Corporation or its stockholders for monetary damages for breach of a fiduciary
duty as a director, except that this provision shall not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the General Corporation Law of Delaware (or any provision of
Delaware law that replaces Section 174) or (d) for any transaction from which
the director derived an improper personal benefit. If the Delaware General
Corporation Law hereafter is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation, in addition to the limitations on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
General Corporation Law. Any repeal or modification of this Article IX that
increases the exposure of directors to personal liability shall be prospective
only and will not apply to any action or failure to act by directors prior to
such repeal or modification.

                                     - 3 -


<PAGE>

                                    ARTICLE X
                MERGERS, SHARE EXCHANGES, AND OTHER TRANSACTIONS

         A merger, share exchange, sale of substantially all of the
Corporation's assets, or dissolution must be approved by the affirmative vote of
a majority of the Corporation's outstanding shares entitled to vote, or if
separate voting by voting groups is required then by not less than a majority of
all the votes entitled to be cast by that voting group.

                                   ARTICLE XI
                   CORPORATION'S ACQUISITION OF ITS OWN SHARES

         The Corporation may purchase, redeem, receive, take or otherwise
acquire, own and hold, sell, lend, exchange, transfer or otherwise dispose of,
pledge, use and otherwise deal with and in its own shares. The shares, so
acquired shall have the status of authorized and unissued shares of Common Stock
and shall not be regarded as cancelled or as a reduction to the authorized
capital of the Corporation unless specifically so designated by the Board of
Directors in an amendment to this Certificate of Incorporation. Nothing in this
Article limits or restricts the right of the Corporation to resell or otherwise
dispose of any of its shares previously acquired for such consideration and
according to such procedures as established by the Board of Directors.

                                   ARTICLE XII
                                 INDEMNIFICATION

         Section 1. Each person who was or is made a party to or is threatened
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person of whom he or she is the legal
representative, 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 or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefits plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
Director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorney's fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a Director, officer, employee or
agent and shall insure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Section 2 of this
Article, the Corporation shall indemnify any such person seeking indemnification
in

                                     - 4 -


<PAGE>

connection with a proceeding (or part hereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.

         The right to indemnification conferred in this Article shall be a
contract right and shall include the right to be paid by the corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a Director or officer in his
or her capacity as a Director or officer (and not in any other capacity in which
service was or is rendered by such person while a Director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
Director or officer is not entitled to be indemnified under this Article or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of Directors and officers.

         Section 2. If a claim under Section 1 of this Article is not paid in
full by the Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time hereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.

         Section 3. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of this Certificate or
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise.

         Section 4. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, officer, employee or agent of the Corporation
or another Corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.

                                     - 5 -


<PAGE>

         Section 5. As used in this Article, references to "the Corporation"
shall include, in addition to the resulting or surviving corporation, any
constituent corporation absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its Directors, officers, employees and agents, so that any person who
is or was a Director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust, or other enterprise, shall stand in the same position
under the provisions of the Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation of its
separate existence had continued.

         Section 6. If this Article or any portion hereof shall have invalidated
on any ground by a court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each Director, officer, employee and agent of the
Corporation as to expenses (including attorney's fees), judgments, fines and
amounts paid in settlement with respect to any action, suite or proceeding,
whether civil, criminal, administrative or investigative, including a grand jury
proceeding and an action by the Corporation, to the fullest extent permitted (i)
by any applicable portion of this Article that shall not have been invalidated
or (ii) by any other applicable law.

                                  ARTICLE XIII
                    AMENDMENT OF CERTIFICATE OF INCORPORATION

         The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, or as expressly provided for herein, and all
rights conferred upon the stockholders herein are granted subject to this
reservation.

                                   ARTICLE XIV
               BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS

         Until such time as this Article may be changed in accordance with
applicable law, the Corporation shall not be governed by Section 203 of the
General Corporation Law of the State of Delaware ("Section 203"), and the
restrictions contained in Section 203 shall not apply to the Corporation.

                                   ARTICLE XV
                                  INCORPORATOR

         The name and the mailing address of the Sole Incorporator is as
follows:

                                  Gregory S. Curran, Esq.
                                  Maynard, Cooper and Gale, P.C.
                                  1901 Sixth Avenue North
                                  2400 AmSouth/Harbert Plaza
                                  Birmingham, AL  35203

                                     - 6 -


<PAGE>

         IN WITNESS WHEREOF, this Certificate has been subscribed this 13th day
of March, 2002 by the undersigned who affirms that the statements made herein
are true and correct.


                                                  /s/  Gregory S. Curran
                                                  ------------------------------
                                                  Gregory S. Curran
                                                  Sole Incorporator

                                      - 7 -


<PAGE>


                                                                     Exhibit 3.5
                                     BYLAWS
                                       OF
                       COMPUTER PROGRAMS AND SYSTEMS, INC.

                               ARTICLE I. OFFICES

         The principal office of the Corporation in the State of Alabama shall
be located in the City of Mobile, Mobile County. The Corporation may have such
other offices, either within or without the State of Alabama, as the Board of
Directors may designate or as the business of the Corporation may require from
time to time.

         The registered office of the Corporation, required by the Alabama
Business Corporation Act to be maintained in the State of Alabama may be, but
need not be, identical with the principal office in the State of Alabama, and
the address of the registered office may be changed from time to time by the
Board of Directors.

                            ARTICLE II. SHAREHOLDERS

         Section 1. Annual Meeting. The annual meeting of the Shareholders shall
                    ---------------
be held on the third Tuesday in the month of March in each year, beginning with
the year 2001, at the hour of 10:00 o'clock a.m., or at such other time on such
other day within such month as shall be fixed by the Board of Directors, for the
purpose of electing Directors and for the transaction of such other business as
may come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday in the State of
 Alabama, such meeting shall be held on the next
succeeding business day. If the election of Directors shall not be held on the
day designated herein for any annual meeting of the Shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be.

         Section 2. Special Meetings. Special meetings of the Shareholders, for
                    -----------------
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by a majority of the Board of Directors, and shall be called
by the President at the request of the Holders of not less than one-tenth
(1/10th) of all outstanding shares of the Corporation entitled to vote at the
meeting.

         Section 3. Place of Meeting. The Board of Directors may designate any
                    -----------------
place, either within or without the State of Alabama, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all Shareholders entitled to vote at a
meeting may designate any place, either within or without the State of Alabama,
as the place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the corporation in the State of Alabama.

         Section 4. Notice of Meeting. Written notice stating the place, day and
                    ------------------
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than fifty (50) days before the
date of the meeting, either personally or by mail, by or at the direction of the
President, or the Secretary, or the officer or other persons calling the
meeting, to each Shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the Shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
Notwithstanding the provisions of this section, the stock or bonded indebtedness
of the Corporation shall not be increased at a meeting unless notice of such
meeting shall have been given as may be required by Section 234 of the
Constitution of Alabama as the same may be amended from time to time.

         Section 5. Closing of Transfer Books or Fixing of Record Date. For the
                    ---------------------------------------------------
purpose of determining Shareholders entitled to notice of or to vote at any
meeting of Shareholders or any adjournment thereof, or Shareholders entitled to
receive payment of any dividend, or in order to make a determination of
Shareholders for


<PAGE>

any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty (50) days. If the stock transfer books shall be
closed for the purpose of determining Shareholders entitled to notice of or to
vote at a meeting of Shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of Shareholders, such date in any case to be not
more than fifty (50) days and, in case of a meeting of Shareholders, not less
than ten (10) days prior to the date on which the particular action, requiring
such determination of Shareholders, is to be taken. If the stock transfer books
are not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of Shareholders
entitled to vote at any meeting of Shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of the stock transfer
books and the stated period of closing has expired.

         Section 6. Voting Record. The officer or agent having charge of the
                    --------------
stock transfer books for shares of the Corporation shall make, at least ten (10)
days before each meeting of Shareholders, a complete list of the Shareholders
entitled to vote at each meeting of Shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. For a period of ten days prior to any meeting of Shareholders,
such list shall be kept on file at the principal office of the Corporation and
shall be subject to inspection by any Shareholder making written request
therefor at any time during usual business hours. The list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any Shareholder during the whole time of the meeting.

         Section 7. Quorum. A majority of the outstanding shares of the
                    -------
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of Shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at a meeting as
originally noticed. The Shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.

         Section 8. Proxies. At all meetings of Shareholders, a Shareholder may
                    --------
vote in person or by proxy executed in writing by the Shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.

         Section 9. Voting of Shares. Each outstanding share entitled to vote
                    -----------------
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of Shareholders.

         Section 10. Voting of Shares by Certain Holders. Shares standing in the
                     ------------------------------------
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the bylaws of such other corporation may prescribe, or, in the
absence of such provision, as the board of directors of such other corporation
may determine.

         Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name and no corporate
trustee shall be entitled to vote in the election of directors shares held by it
solely in a fiduciary capacity if such shares are shares issued by the corporate
trustee itself.

                                       2


<PAGE>

         Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.

         A Shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.

         Neither treasury shares of its own stock held by the Corporation, nor
shares held by another corporation if a majority of the shares entitled to vote
for the election of directors of such other corporation is held by the
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time.

         Section 11. Informal Action by Shareholders. Any action required or
                     --------------------------------
permitted to be taken at a meeting of the Shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter.

         Section 12. Cumulative Voting. Cumulative voting shall not be
                     ------------------
permitted.

         Section 13. Order of Business. At all meetings of Stockholders, any
                     ------------------
Stockholder present and entitled to vote in person or by proxy shall be entitled
to require, by written request to the Chairman of the meeting, that the order of
business shall be as follows: (1) organization; (2) proof of notice of meeting
or of waivers thereof; (The certificate of the Secretary of the Corporation, or
the affidavit of any other person who mailed the notice or caused the same to be
mailed, being proof of service of notice by mail.); (3) submission by Secretary,
or by inspectors, if any shall have been elected or appointed, of list of
Stockholders entitled to vote, present in person or by proxy; (4) if an annual
meeting, or a meeting called for that purpose, reading of unapproved minutes of
preceding meetings, and action thereon; (5) reports; (6) if an annual meeting,
or a meeting called for that purpose, the election of directors; (7) unfinished
business; (8) new business; (9) adjournment.

                         ARTICLE III. BOARD OF DIRECTORS

         Section 1.  General Powers.  The business and affairs of the
                     ---------------
Corporation shall be managed by its Board of Directors.


         Section 2. Number, Tenure and Qualifications. The number of Directors
                    ----------------------------------
of the Corporation shall be three (3). Each Director shall hold office until the
next annual meeting of Shareholders and until his successor shall have been
elected and qualified. Directors need not be residents of the State of Alabama
or Shareholders of the Corporation.

         Section 3. Regular Meetings. A regular meeting of the Board of
                    -----------------
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of Shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Alabama, for the holding of additional regular meetings
without other notice than such resolution.

         Section 4. Special  Meetings. Special meetings of the Board of
                    ------------------
Directors may be called by or at the request of the President or any two
Directors.

         Section 5. Place of Meeting. The Board of Directors may designate any
                    -----------------
place whether within or without the State of Alabama as the place of meeting for
any regular or special meeting of the Board of Directors except in the instance
where the special meeting is called by or at the request of the President or any
two Directors in which instance the President or the two Directors, as the case
may be, calling the special meeting, shall designate such place whether within
or without the State of Alabama. Members of the Board of Directors may
participate in a meeting of such Board by means of a conference telephone or
similar communication



                                       3


<PAGE>

equipment by means of which all persons participating in the meeting can hear
each other at the same time and participation by such means shall constitute
presence in person or at a meeting.

         Section 6. Notice. Notice of any special meeting shall be given at
                    -------
least forty-eight (48) hours previously thereto by written notice delivered
personally or mailed to each Director at his business address, or by telegram.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, so addressed, with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed to be delivered when the telegram
is delivered to the telegraph company. Any Director may waive notice of any
meeting. The attendance of a Director at a meeting shall constitute a waiver of
notice of such meeting, except where a Director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. The business to be transacted at,
or the purpose of, any special meeting of the Board of Directors shall be
specified in the notice of such meeting.

         Section 7. Quorum. A majority of the number of Directors fixed by
                    -------
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice.

         If a quorum is present when the meeting is convened, the directors
present may continue to do business taking action by a vote of a majority of a
quorum, until adjournment, notwithstanding the withdrawal of enough directors to
leave less than a quorum present, or the refusal of any Director present to
vote.

         Section 8. Manner of Acting. The act of the majority of the Directors
                    -----------------
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.

         Section 9. Action Without a Meeting. Any action required or permitted
                    -------------------------
to be taken by the Board of Directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the Directors.

         Section 10. Vacancies. Any vacancy occurring in the Board of Directors
                     ----------
may be filled by the affirmative vote of a majority of the remaining Directors
though less than a quorum of the Board of Directors. A Director elected to fill
a vacancy shall be elected to serve until the next annual meeting of
shareholders. Any directorship to be filled by reason of an increase in the
number of Directors shall be filled by election at an annual meeting or at a
special meeting of Shareholders called for that purpose.

         Section 11. Compensation. By resolution of the Board of Directors, each
                     -------------
director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors and may be paid a stated salary as Director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.

         Section 12. Presumption of Assent. A Director of the Corporation who is
                     ----------------------
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.

                              ARTICLE IV. OFFICERS

         Section 1. Number. The officers of the Corporation shall be a President
                    -------
and a Secretary, both of whom shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary

                                       4


<PAGE>

may be elected or appointed by the Board of Directors. Any two or more offices
may be held by the same person.

         Section 2. Election and Term of Office. The officers of the Corporation
                    ----------------------------
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the Shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.

         Section 3. Removal. Any officer or agent may be removed by the Board of
                    --------
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself created contract rights.

         Section 4. Vacancies. A vacancy in any office because of death,
                    ----------
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.

         Section 5. President. The President shall be the principal executive
                    ----------
officer of the Corporation and, subject to the control of the Board of
Directors, shall, in general, supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the Shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the Corporation thereunto authorized by the Board
of Directors, certificates for shares of the Corporation and deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.

         Section 6. The Vice Presidents. In the absence of the President or in
                    --------------------
the event of his death, inability or refusal to act, the Vice President (or in
the event there be more than one Vice President, the Vice Presidents, in the
order designated at the time of their election or, in the absence of any
designation, then in the order of their election) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Any Vice President may sign, with
the Secretary or any other proper officer of the Corporation thereunto
authorized by the Board of Directors, certificates for shares of the
Corporation; and shall perform such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.

         Section 7. The Secretary. The Secretary shall: (a) keep the minutes of
                    --------------
the proceedings of the Shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep a
register of the post office address of each Shareholder which shall be furnished
to the Secretary by such Shareholder; (e) sign with the President, any Vice
President, or the Treasurer, certificates for shares of the Corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
Corporation; and (g) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.

         Section 8. The Treasurer. The Treasurer shall: (a) have charge and
                    --------------
custody of and be responsible for all funds and securities of the Corporation;
(b) receive and give receipts for moneys due and payable to the Corporation from
any source whatsoever, and deposit all such moneys in the name of the
Corporation in such

                                       5


<PAGE>

banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article V of these Bylaws; and (c) in general perform all
of the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the President or by the Board of
Directors. The Treasurer may sign, with the Secretary or any other proper
officer of the Corporation thereunto authorized by the Board of Directors,
certificates for shares of the Corporation. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.

         Section 9. Assistant Secretaries and Assistant Treasurers. The
                    -----------------------------------------------
Assistant Secretaries or Assistant Treasurers, when authorized by the Board of
Directors, may sign with the President, any Vice President or the Treasurer,
certificates for shares of the Corporation, the issuance of which shall have
been authorized by a resolution of the Board of Directors. The Assistant
Treasurers shall respectively, if required by the Board of Directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine. The Assistant Secretaries and
Assistant Treasurers, in general, shall perform such duties as shall be assigned
to them by the Secretary or the Treasurer, respectively, or by the President or
the Board of Directors.

         Section 10. Salaries. The salaries of the officers shall be fixed from
                     ---------
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.


                ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS

         Section 1. Contracts. The Board of Directors may authorize any officer
                    ----------
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.

         Section 2. Loans. No loans shall be contracted on behalf of the
                    ------
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.

         Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for
                    --------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.

         Section 4. Deposits. All funds of the Corporation not otherwise
                    ---------
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.

                       ARTICLE VI. CERTIFICATES FOR SHARES

         Section 1. Certificates for Shares. Certificates representing shares of
                    ------------------------
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman of the Board, the
President, any Vice President, or the Treasurer, and by the Secretary, an
Assistant Vice President, an Assistant Secretary, or an Assistant Treasurer, and
sealed with the corporate seal or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimiles if the certificate is manually
signed on behalf of a transfer agent or a registrar, other than the Corporation
itself or one of its employees. Each certificate for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number and
class of shares and date of issue, shall be entered on the stock transfer books
of the Corporation. All certificates surrendered to the Corporation for transfer
shall be


                                       6


<PAGE>

cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.

         Section 2. Transfer of Shares. Transfer of shares of the Corporation
                    -------------------
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the Corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the Corporation shall be deemed by
the Corporation to be the owner thereof for all purposes.

         Section 3. Lost, Stolen, Destroyed, or Mutilated Certificates. No
                    ---------------------------------------------------
certificate for shares of stock in the Corporation shall be issued in place of
any certificate alleged to have been lost, destroyed or stolen, except on
production of such evidence of such loss, destruction or theft as the Board of
Directors may in its discretion require, and on delivery to the Corporation, if
the Board of Directors shall so require, of a bond of indemnity, upon such terms
and secured by such surety as the Board of Directors may in its discretion
require.

                            ARTICLE VII. FISCAL YEAR

         The fiscal year of the Corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.

                             ARTICLE VIII. DIVIDENDS

         The Board of Directors may, from time to time, declare and the
Corporation may pay dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.

                           ARTICLE IX. CORPORATE SEAL

         The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and words "Corporate Seal".

                           ARTICLE X. WAIVER OF NOTICE

         Whenever any notice is required to be given to any Shareholder or
Director of the Corporation under the provisions of these Bylaws or the
provisions of the Articles of Incorporation or under the provisions of the
Constitution of Alabama or the Alabama Business Corporation Act, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.

                             ARTICLE XI. AMENDMENTS

         These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors or by the Shareholders at any regular or
special meeting, provided, however, that the Board of Directors may not alter,
amend or repeal any bylaw establishing what constitutes a quorum at shareholders
meetings.

                                                   /s/ Dennis P. Wilkins
                                                   ------------------------
                                                   DENNIS P. WILKINS
                                                   President

                                       7


<PAGE>

                                                                    Exhibit 16.1

March 21, 2002


Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Dear Madam or Sir:

We have read the statements under the caption "Change of Independent Auditors"
made by Computer Programs and Systems, Inc. (the Company), included as part of
the Company's Registration Statement on Form S-1 dated March 21, 2002. We agree
with the statements concerning our Firm under such caption in the Form S-1.


Very truly yours,

/s/ Wilkins Miller, P.C.
--------------------------
Wilkins Miller, P.C.




<PAGE>

                                                                    Exhibit 23.1

               Consent of Ernst & Young LLP, Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 15, 2002 (except for Note 12 as to which the
date is _________, 2002) in the Registration Statement (Form S-1 No. 333-000000)
and related Prospectus of Computer Programs and Systems Inc. for the
registration of 3,000,000 shares of common stock.


                                                               Ernst & Young LLP

Birmingham, Alabama

The foregoing consent is in the form that will be signed upon the completion of
the restatement of capital accounts described in Note 12 to the financial
statements.

                                                           /s/ Ernst & Young LLP

Birmingham, Alabama
March 21, 2002






<PAGE>

                                                                   Exhibit 23.2


             Consent of Wilkins Miller, P.C., Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 16, 2001 (except for Note 12 as to which the
date is _________, 2002) in the Registration Statement (Form S-1 No. 333-000000)
and related Prospectus of Computer Programs and Systems, Inc. for the
registration of 3,000,000 shares of common stock.

                                   Wilkins Miller, P.C.


Mobile, Alabama



The foregoing consent is in the form that will be signed upon the completion
of the restatement of capital accounts described in Note 12 to the financial
statements.

                                   /s/ Wilkins Miller, P.C.

Mobile, Alabama
March 21, 2002




<PAGE>



                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned director of Computer Programs and Systems, Inc. (the
"Company") constitutes and appoints John Morrissey, David A. Dye and M. Stephen
Walker, and each of them severally, his true and lawful attorneys-in-fact for
him and in his name, place and stead, in any and all capacities, to sign the
registration statement on Form S-1 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the purpose of
registering shares of common stock of the Company and any and all amendments and
post-effective amendments thereto, and to file the same with all exhibits
thereto and other documents required in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this
 Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ Dennis P. Wilkins
                                     --------------------------------
                                     Dennis P. Wilkins
                                     Director
                                     Date:  March 18, 2002





<PAGE>

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned director of Computer Programs and Systems, Inc. (the
"Company") constitutes and appoints John Morrissey, David A. Dye and M. Stephen
Walker, and each of them severally, his true and lawful attorneys-in-fact for
him and in his name, place and stead, in any and all capacities, to sign the
registration statement on Form S-1 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the purpose of
registering shares of common stock of the Company and any and all amendments and
post-effective amendments thereto, and to file the same with all exhibits
thereto and other documents required in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ M. Kenny Muscat
                                     --------------------------------
                                     M. Kenny Muscat
                                     Director
                                     Date: March 18, 2002






<PAGE>

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned director of Computer Programs and Systems, Inc. (the
"Company") constitutes and appoints David A. Dye and M. Stephen Walker, and each
of them severally, his true and lawful attorneys-in-fact for him and in his
name, place and stead, in any and all capacities, to sign the registration
statement on Form S-1 to be filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, for the purpose of registering
shares of common stock of the Company and any and all amendments and
post-effective amendments thereto, and to file the same with all exhibits
thereto and other documents required in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ John Morrissey
                                     ----------------------------------
                                     John Morrissey
                                     Chairman of the Board and Director
                                     Date: March 18, 2002






<PAGE>

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned director of Computer Programs and Systems, Inc. (the
"Company") constitutes and appoints John Morrissey, David A. Dye and M. Stephen
Walker, and each of them severally, his true and lawful attorneys-in-fact for
him and in his name, place and stead, in any and all capacities, to sign the
registration statement on Form S-1 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the purpose of
registering shares of common stock of the Company and any and all amendments and
post-effective amendments thereto, and to file the same with all exhibits
thereto and other documents required in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ Ernest F. Ladd, III
                                     --------------------------------
                                     Ernest F. Ladd, III
                                     Director
                                     Date: March 18, 2002






<PAGE>

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned director of Computer Programs and Systems, Inc. (the
"Company") constitutes and appoints John Morrissey, David A. Dye and M. Stephen
Walker, and each of them severally, his true and lawful attorneys-in-fact for
him and in his name, place and stead, in any and all capacities, to sign the
registration statement on Form S-1 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the purpose of
registering shares of common stock of the Company and any and all amendments and
post-effective amendments thereto, and to file the same with all exhibits
thereto and other documents required in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ W. Austin Mulherin, III
                                     --------------------------------
                                     W. Austin Mulherin, III
                                     Director
                                     Date: March 18, 2002







<PAGE>

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned director of Computer Programs and Systems, Inc. (the
"Company") constitutes and appoints John Morrissey, David A. Dye and M. Stephen
Walker, and each of them severally, his true and lawful attorneys-in-fact for
him and in his name, place and stead, in any and all capacities, to sign the
registration statement on Form S-1 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the purpose of
registering shares of common stock of the Company and any and all amendments and
post-effective amendments thereto, and to file the same with all exhibits
thereto and other documents required in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ William R. Seifert, II
                                     --------------------------------
                                     William R. Seifert, II
                                     Director
                                     Date: March 18, 2002






<PAGE>

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned officer and director of Computer Programs and Systems,
Inc. (the "Company") constitutes and appoints John Morrissey and M. Stephen
Walker, and each of them severally, his true and lawful attorneys-in-fact for
him and in his name, place and stead, in any and all capacities, to sign the
registration statement on Form S-1 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the purpose of
registering shares of common stock of the Company and any and all amendments and
post-effective amendments thereto, and to file the same with all exhibits
thereto and other documents required in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ David A. Dye
                                     ----------------------------------
                                     David A. Dye
                                     President, Chief Executive Officer
                                       and Director
                                     Date: March 18, 2002






<PAGE>
                                                                    EXHIBIT 24.1


                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned officer and director of Computer Programs and Systems,
Inc. (the "Company") constitutes and appoints John Morrissey and M. Stephen
Walker, and each of them severally, his true and lawful attorneys-in-fact for
him and in his name, place and stead, in any and all capacities, to sign the
registration statement on Form S-1 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the purpose of
registering shares of common stock of the Company and any and all amendments and
post-effective amendments thereto, and to file the same with all exhibits
thereto and other documents required in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ J. Boyd Douglas
                                     --------------------------------
                                     J. Boyd Douglas
                                     Executive Vice President, Chief
                                     Operating Officer and Director
                                     Date: March 18, 2002




<PAGE>


                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned officer of Computer Programs and Systems, Inc. (the
"Company") constitutes and appoints John Morrissey and David A. Dye, and each of
them severally, his true and lawful attorneys-in-fact for him and in his name,
place and stead, in any and all capacities, to sign the registration statement
on Form S-1 to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, for the purpose of registering shares of
common stock of the Company and any and all amendments and post-effective
amendments thereto, and to file the same with all exhibits thereto and other
documents required in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all said
attorneys-in-fact and agents or any of them or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ M. Stephen Walker
                                     ----------------------------------
                                     M. Stephen Walker
                                     Vice President - Finance and Chief
                                     Financial Officer
                                     Date: March 20, 2002






<PAGE>

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS THAT:

         The undersigned officer of Computer Programs and Systems, Inc. (the
"Company") constitutes and appoints John Morrissey, David A. Dye and M. Stephen
Walker, and each of them severally, his true and lawful attorneys-in-fact for
him and in his name, place and stead, in any and all capacities, to sign the
registration statement on Form S-1 to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, for the purpose of
registering shares of common stock of the Company and any and all amendments and
post-effective amendments thereto, and to file the same with all exhibits
thereto and other documents required in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, I have signed this Power of Attorney in the
capacity and on the date indicated below.

                                     /s/ Darrell G. West
                                     --------------------------------
                                     Darrell G. West
                                     Controller
                                     Date:  March 18, 2002