<PAGE>

                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT


     THIS AGREEMENT (the "Agreement") is made as of this 2nd day of August,
1999, by and between Allscripts, Inc., a corporation organized and existing
under the laws of the State of Illinois, with its principal place of business at
2401 Commerce Drive, Libertyville, Illinois 60048 ("Company") and Joseph E.
Carey ("Executive").

                                    RECITALS


     WHEREAS, the Company desires to employ Executive as its Chief Operating
Officer;

     WHEREAS, Executive desires to be employed by Company in the aforesaid
capacity;

     NOW THEREFORE, in consideration of the foregoing premises, of the mutual
agreements and covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

                                   AGREEMENT


I.   Employment

     The Company hereby agrees to employ Executive, and Executive hereby accepts
employment as Chief Operating Officer of the Company, pursuant to the terms of
this Agreement.  Executive shall report directly to the President.  Executive
shall have the duties and responsibilities of Chief Operating Officer, and such
other duties and responsibilities not inconsistent with the performance of his
duties as Chief Operating Officer as are reasonably assigned.

     During the term of this Agreement, Executive shall carry out his
responsibilities hereunder to the best of his ability on a full-time basis.

II.  Effective Date and Term

     The initial term of Executive's employment by the Company under this
Agreement shall commence as of August 2, 1999 and shall continue until December
31, 2000.  On December 31, 2000, and on each December 31 thereafter, this
Agreement shall automatically renew for a one (1) year term unless the Company
or Executive elects not to renew this Agreement in a written notice to the other
party given at least thirty (30) days preceding such December 31.  The
Executive's employment period hereunder ("Employment Period") shall begin on
August 2, 1999 and end on the December 31 on which its term expires by reason of
an election not to renew by the Company or the Executive ("Expiration Date")
except that if Executive's employment is terminated pursuant to Section IV
hereof the Employment Period shall terminate on the Effective Termination Date
(as defined in Section IV).

III. Compensation and Benefits

     In consideration for the services Executive shall render under this
Agreement, the Company shall provide or cause to be provided to Executive the
following compensation and benefits:
<PAGE>

A.   Base Salary

     During the Employment Period, the Company shall pay or cause to be paid to
Executive an annual base salary at a rate of $190,000 for each twelve month
period ending July 15 ("Base Salary"), subject to all appropriate federal and
state withholding taxes and payable in accordance with the Company's normal
payroll procedures. Such sum shall be reviewed prior to each July 15 during the
Employment Period by the Board or its Compensation Committee for the purposes of
determining appropriate merit increases based on Executive's performance. The
results of such review shall be reported to Executive prior to each such July
15.

B.   Benefits

     During the Employment Period and as otherwise provided hereunder, the
Company shall provide or cause to be provided to Executive the following:

1.   Twenty (20) business days per year of paid vacation, such vacation time
     not to be cumulative (i.e., vacation time not taken in one year shall
     not be carried forward and used in any subsequent year).

2.   Health and/or dental insurance, including immediate coverage for
     Executive and his eligible dependents as provided by the Company in
     accordance with its group health insurance plan coverage applicable to
     senior executive employees; and

3.   To the extent that they do not duplicate benefits and perquisites
     provided in this Agreement, such other benefits and perquisites as are
     provided in accordance with the Company's plans, practices, policies
     and programs for senior executive employees of the Company.

C.   Performance Bonus

     Executive shall be entitled to a cash bonus ("Performance Bonus") (i) of
$25,000 as a sign-on bonus payable upon commencement of employment, (ii) an
annual bonus for each whole calendar year falling within the Employment Period,
and (iii) to the extent provided in Section IV, for the portion of the last
calendar year falling within the Employment Period if the Employment Period
terminates on the Effective Termination Date. The Performance Bonus for periods
beginning on and after January 1, 2000 shall be contingent upon the attainment
of such Company objectives and shall be in such amounts as are determined
annually by the Chief Executive Officer in consultation with the Board or its
Compensation Committee prior to January 1, 2000 and prior to each January 1
thereafter falling within the Employment Period. The Performance Bonus, if any,
shall be payable on or before March 31 of the year immediately succeeding the
calendar year for which such Performance Bonus was earned, provided, however,
that if the applicable Company objectives are based on the Company's annual
audited financial statements and if on such March 31 such financial statements
have not yet been issued, the Performance Bonus, if any, shall be payable
promptly upon the issuance of such financial statements.

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<PAGE>

    D.   Expenses
         --------

         The Company shall reimburse Executive for proper and necessary expenses
    incurred by him in the performance of his duties under this Agreement from
    time to time upon Executive's submission to the Company of invoices for such
    expenses in reasonable detail.

IV.      TERMINATION PRIOR TO EXPIRATION DATE AND CONSEQUENCES THEREOF

         This Section IV sets forth the circumstances in which the Employment
    Period shall terminate on a date ("Effective Termination Date") prior to the
    Expiration Date (as defined in Section II hereof).

    A.   Death or Disability
         -------------------

         The Employment Period shall terminate upon the Executive's date of
    death or the date the Executive is given written notice that he has been
    determined to be disabled by the Company. For purposes of this Agreement,
    the Executive shall be deemed to be "disabled" if the Executive, as a result
    of illness or incapacity, (1) shall be unable to perform substantially his
    required duties for a period of three (3) consecutive months or for any
    aggregate period of three (3) months in any six (6) month period. In the
    event of a dispute as to whether Executive is disabled, the Company may
    refer Executive to a licensed practicing physician of the Company's choice,
    and Executive agrees to submit to such tests and examination as such
    physician shall deem appropriate.

    B.   Termination by Company For Cause
         --------------------------------

         The Employment Period shall terminate on the date the Company provides
    the Executive with written notice that he is being terminated for cause.

         For the purposes of this Agreement, the term "Cause" shall mean:

               (i)    the willful or grossly negligent failure by Executive to
         perform his duties and obligations hereunder in any material respect,
         other than any such failure resulting from his disability;

               (ii)   Executive's conviction of a felony involving moral
         turpitude; or

               (iii)  Executive's violation of the law in connection with his
         employment which is materially injurious to the Company, monetarily or
         otherwise.

         Notwithstanding the foregoing, Cause shall not exist under clause (i)
    above until notice of such failure has been given to Executive by the
    Company and one week has lapsed following such notice without Executive
    curing such failure; provided, however, that such notice and lapse of time
    shall not be required with respect to any event or circumstance which is the
    same or substantially the same as an event or circumstance with respect to
    which notice and opportunity to cure has been given within the previous six
    months.

    C.   Termination by Company Without Cause
         ------------------------------------

                                       3
<PAGE>

         The Employment Period shall terminate on the date the Company provides
    the Executive with written notice that the Company is exercising its rights
    under this Section IV (C) to terminate the Employment Period without Cause.
    If the Company elects not to renew this Agreement for any renewal period
    pursuant to Section II hereof, such election shall not constitute a
    termination of the Employment Period without Cause.

    D.   Termination by Executive for Good Reason
         ----------------------------------------

         The Employment Period shall terminate thirty days following the date
    the Executive provides the Company with written notice that the Executive is
    exercising his right under this Section IV (D) to terminate the Employment
    Period for good reason. For purpose of this Agreement "good reason" shall
    mean:

               (i) an intentional, willful and material failure of the Company
         to meet its obligations in any material respect under this Agreement
         which remains uncured after the Executive has provided written notice
         of such failure and one week has elapsed following such notice without
         the Company curing such failure; provided, however, that such notice
         and lapse of time shall not be required with respect to any event or
         circumstance which is the same or substantially the same as an event or
         circumstance with respect to which notice and an opportunity to cure
         has been given within the previous six months;

               (ii) a substantial adverse alteration in the nature or status of
         the Executive's responsibilities with the Company; or

               (iii) a request of the Executive to relocate his residence
         greater than 100 miles from his then current residence without his
         consent; and an exercise by him of his right under this Section IV (D)
         within sixty (60) days after such request.

    E.   Termination by Executive Without Good Reason
         --------------------------------------------

         The Employment Period shall end thirty (30) days following the date the
    Executive provides the Company with written notice that Executive is
    exercising his right under this Section IV (E) to terminate the Employment
    Period without good reason. If the Executive elects not to renew this
    Agreement for any renewal period pursuant to Section II hereof, such
    election shall not constitute a termination of the Employment Period without
    good reason.

    F.   Consequence of Termination Under this Section IV
         ------------------------------------------------

         The table at the end of this Section IV (F) sets out the consequences
    of a termination of the Employment Period on the Effective Termination Date,
    i.e., a date other than the Expiration Date as defined in Section II. Such
    consequences are as follows;

               (i) Termination Without Cause or for Good Reason. If the Company
    exercises its right to terminate the Employment Period without Cause or if
    Executive exercises his right to terminate the Employment Period for good
    reason, the Company shall be obligated to pay Executive (a) any salary that
    was accrued but not yet paid as of the Effective Termination Date; (b) as
    severance

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<PAGE>

         pay, an amount, payable in twelve equal monthly installments commencing
         on the Effective Termination Date, equal to Executive's annual Base
         Salary in effect immediately prior to the Effective Termination Date
         (such amount to be payable regardless of whether (x) Executive obtains
         other employment and is compensated therefor, (y) the Effective
         Termination Date is less than twelve months prior to the Expiration
         Date or (z) Executive dies prior to the first anniversary of the
         Effective Termination Date, but only for so long as Executive is not in
         violation of Section V hereof); (c) the unpaid Performance Bonus, if
         any, with respect to the calendar year preceding the Effective
         Termination Date (such Performance Bonus, if any, to be determined in
         the manner it would have been determined and payable at the time it
         would have been payable under Section III(C) had there been no
         termination of the Employment Period); and (d) any Performance Bonus
         for the calendar year in which the Effective Termination Date occurs
         that would have been payable under Section III(C) had there been no
         termination of the Employment Period (such Performance Bonus, if any,
         to be determined in the manner it would have been determined and
         payable at the time it would have been payable under Section III(C) had
         there been no termination of the Employment Period).

               (ii) Termination With Cause or Without Good Reason. If the
         Company exercises its right to terminate the Employment Period with
         Cause or if Executive exercises his right to terminate the Employment
         Period without good reason, the Company shall be obligated to pay
         Executive (a) any salary that was accrued but not yet paid as of the
         Effective Termination Date; and (b) the unpaid Performance Bonus, if
         any, with respect to the calendar year preceding the Effective
         Termination Date (such Performance Bonus, if any, to be determined in
         the manner it would have been determined and payable at the time it
         would have been payable under Section III(C) had there been no
         termination of the Employment Period).

               (iii) Termination Upon Death or Disability. If the Employment
         Period is terminated because of the death or disability of Executive,
         the Company shall be obligated to pay Executive or, if applicable,
         Executive's estate (a) any salary that was accrued but not yet paid as
         of the Effective Termination Date; (b) the unpaid Performance Bonus, if
         any, with respect to the calendar year preceding the Effective
         Termination Date (such Performance Bonus, if any, to be determined in
         the manner it would have been determined and payable at the time it
         would have been payable under Section III(C) had there been no
         termination of the Employment Period); and (c) a Pro Rata Share of any
         Performance Bonus for the calendar year in which the Effective
         Termination Date occurs that would have been payable under Section
         III(C) had there been no termination of the Employment Period (such
         Performance Bonus, if any, to be determined in the manner it would have
         been determined and payable at the time it would have been payable
         under Section III(C) had there been no termination of the Employment
         Period). "Pro Rata Share" means a fraction the numerator of which is
         the number of days prior to the Effective Termination Date in the
         calendar year in which the Effective Termination Date occurs and the
         denominator of which is 365.

                                       5
<PAGE>

         Table Setting Out Consequences of a Termination of Employment
         -------------------------------------------------------------
                   Period on the Effective Termination Date
                   ----------------------------------------

<TABLE>
<CAPTION>
          Paragraph                   Salary                                Severance             Cobra
          Reference                  Ceases?              Bonus?              Paid?             Continues?
------------------------------  ------------------  ------------------  ------------------  ------------------
<S>                             <C>                 <C>                 <C>                 <C>
(A)  Death or Disability               Yes            Prorated Bonus            No             No on death
                                                                                            Yes on disability
(B)  Company terminates for            Yes               No Bonus               No                 Yes
     cause
(C)  Company terminates no             Yes              Full Bonus             Yes                 Yes
     cause
(D)  Executive terminates for          Yes              Full Bonus             Yes                 Yes
     good reason
(E)  Executive terminates              Yes               No Bonus               No                 Yes
     without good reason
</TABLE>


V.  NONCOMPETITION AND CONFIDENTIALITY

    1.   For purposes of this Agreement, the term "Direct Competitor" shall mean
         any person or entity engaged in the business of marketing or providing
         within the continental United States prescription products or services
         or pharmacy benefit management products or services, including, without
         limitation, prepackaged prescription products or services, point of
         care pharmacy dispensing systems, mail service pharmacy products or
         services, or pharmaceuticals or pharmaceutical delivery systems.

    2.   During the Employment Period and for a period of one year after the
         termination, for any reason, of the Employment Period, Executive shall
         not, (i) directly or indirectly act in concert or conspire with any
         person employed by the Company in order to engage in or prepare to
         engage in or to have a financial or other interest in any business
         which is a Direct Competitor; or (ii) serve as an employee, agent,
         partner, shareholder, director or consultant for, or in any other
         capacity participate, engage or have a financial or other interest in
         any business which is a Direct Competitor (provided, however that
         notwithstanding anything to the contrary contained in this Agreement,
         Executive may own up to 2% of the outstanding shares of the capital
         stock of a company whose securities are registered under Section 12 of
         the Securities Exchange Act of 1934).

    3.   The Company has advised Executive and Executive acknowledges that it is
         the policy of the Company to maintain as secret and confidential all
         Protected Information (as defined below), and that Protected
         Information has been and will be developed at substantial cost and
         effort to the Company. Executive shall not at any time, directly or
         indirectly, divulge, furnish or make accessible to any person, firm,
         corporation, association or other entity (otherwise than as may be
         required in the regular course of Executive's

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<PAGE>

          employment), nor use in any manner, either during the Employment
          Period or after the termination, for any reason, of the Employment
          Period, any Protected Information, or cause any such information of
          the Company to enter the public domain. "Protected Information" means
          trade secrets, confidential and proprietary business information of
          the Company, and any other information of the Company, including but
          not limited to, customer lists (including potential customers),
          sources of supply, processes, plans, materials, pricing information,
          internal memoranda, marketing plans, internal policies, and products
          and services which may be developed from time to time by the Company
          and its agents or employees, including Executive; provided, however,
          that information that is in the public domain (other than as a result
          of a breach of this Agreement), approved for release by the Company or
          lawfully obtained from third parties who are not bound by a
          confidentiality agreement with the Company, is not Protected
          Information.

     4.   Executive acknowledges and agrees that the restrictions imposed upon
          him by this Section V and the purpose for such restrictions are
          reasonable and are designed to protect the trade secrets, confidential
          and proprietary business information and the continued success of the
          Company without unduly restricting Executive's future employment by
          others. Furthermore, Executive acknowledges that in view of the
          confidential information of the Company which he has or will acquire
          or has or will have access to and the necessity of the restrictions
          contained in this Section V, any violation of the provisions of this
          Section V would cause irreparable injury to the Company and its
          successors in interest with respect to the resulting disruption in
          their operations. By reason of the foregoing, Executive consents and
          agrees that if he violates any of the provisions of this Section V,
          the Company and its successors in interest as the case may be, shall
          be entitled, in addition to any other remedies that they may have,
          including monetary damages, to an injunction to be issued by a court
          of competent jurisdiction, restraining Executive from committing or
          continuing any violation of this Section V.

VI.  Miscellaneous

     A.   Valid Obligation
          ----------------

          This Agreement has been duly authorized, executed and delivered by the
     Company and has been duly executed and delivered by Executive and is a
     legal, valid and binding obligation of the Company and of Executive,
     enforceable in accordance with its terms.

     B.   No Conflicts
          ------------

          Executive represents and warrants that the performance by him of his
     duties hereunder will not violate, conflict with or result in a breach of
     any provision of, any agreement to which he is a party.

     C.   Applicable Law
          --------------

          This Agreement shall be construed in accordance with the laws of the
     State of Illinois, without reference to Illinois' choice of law statutes or
     decisions.

     D.   Severability
          ------------

                                       7
<PAGE>

   The provisions of this Agreement shall be deemed severable, and the
invalidity or unenforceability of any one or more of the provisions hereof shall
not affect the validity or enforceability of any other provision. In the event
any clause of this Agreement is deemed to be invalid, the parties shall endeavor
to modify that clause in a manner which carries out the intent of the parties in
executing this Agreement.

E.   No Waiver

     The waiver of a breach of any provision of this Agreement by any party
shall not be deemed or held to be a continuing waiver of such breach or a waiver
of any subsequent breach of any provision of this Agreement or as nullifying the
effectiveness of such provision, unless agreed to in writing by the parties.

F.   Notices

     All notices hereunder shall be in writing and shall be sent by hand
delivery, overnight courier, or by certified mail, return receipt requested, to
the parties at the addresses set forth below:


               To the Company:  Allscripts, Inc.
                                2401 Commerce Drive
                                Libertyville, Illinois 60048
                                Attention:  Chief Executive Officer

               with a copy to:  Gardner, Carton & Douglas
                                321 North Clark Street
                                Chicago, Illinois 60610
                                Attention:  Joseph H. Greenberg

               to Executive:    Joseph E. Carey
                                2636 Oak Avenue
                                Northbrook, Illinois 60062

               with a copy to:  _________________________
                                _________________________
                                _________________________
                                Attention:  _____________

G.   Assignment of Agreement

     This Agreement shall inure to the benefit of Executive and the Company,
their respective successors and assignees and Executive's heirs and personal
representatives. Neither party may assign any rights or obligations hereunder to
any person or entity without the prior written consent of the other party. This
Agreement shall be personal to Executive for all purposes.

H.   Entire Agreement

     Except as otherwise provided herein, this Agreement contains the entire
understanding between the parties, and there are no other agreements or
understandings between the parties with

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<PAGE>

     respect to Executive's employment by the Company and his obligations.
     Executive acknowledges that he is not relying upon any representations or
     warranties concerning his employment by the Company except as expressly set
     forth herein. No alteration or modification hereof shall be valid except by
     a subsequent written instrument executed by the parties hereto.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.


                              ALLSCRIPTS, INC.


                              By: /s/David B. Mullen
                                 -------------------------------
                              Name: David B. Mullen
                                   -----------------------------
                              Title: President
                                    ----------------------------


                              /s/Joseph E. Carey
                              ----------------------------------
                                     [Name of Executive]

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