I think it would be best to get the latest version in this case which is Monarch v13 since you will be upgrading your employees.
Do not worry about the report files and models as Monarch v13 and 12 support the .xmod format for models and as such the people using v13 can still use the models and projects that were created in version 11.
Hope this Helps!
My sympathy to both you and your colleague - this won't be easy. Monarch v10,5 was wonderful - v11.7 didn't add much under the hood, introduced the ribbon interface, and you've lost the ability to automate desktop processes. Now with v12, the power is there with local SQL instead of Access, but the interface is more challenging and a load of useful usability tricks didn't get released until v13. And, v12 can read your xmod model files, but only saves them as dmod format - so sharing work between you will be a one way process. I'd suggest the best bet would be upgrade everyone to v13.