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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ------------------------

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM__________TO____________

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

                         Commission File Number 0-26816

                             IDX SYSTEMS CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

             Vermont                                     03-0222230
(State or Other Jurisdiction of                       (I.R.S. Employer
 Incorporation or Organization)                       Identification No.)

                                  40 IDX Drive
                           South Burlington, VT 05403
                    (Address of Principal Executive Offices)

       Registrant's Telephone Number, Including Area Code: (802-862-1022)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes  X    No
                                    ---      ---
The number of shares outstanding of the registrant's common stock as of May 3,
2002 was 28,861,187.
================================================================================

                                  Page 1 of 29
<PAGE>


                             IDX SYSTEMS CORPORATION
                                    FORM 10-Q
                       For the Period Ended March 31, 2002


                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION

         Item 1.   Interim Financial Statements (Unaudited)
         Condensed Consolidated Balance Sheets .............................3
         Condensed Consolidated Statements of Operations ...................4
         Condensed Consolidated Statements of Cash Flows ...................5
         Notes to Condensed Consolidated Financial Statements ..............6
         Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations .............................13
         Item 3.  Quantitative and Qualitative Disclosures About
           Market Risk .....................................................25

PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings ........................................26
         Item 2.  Changes In Securities and Use of Proceeds.................27
         Item 3.  Defaults Upon Senior Securities ..........................27
         Item 4.  Submission of Matters to a Vote of Security Holders ......27
         Item 5.  Other Information ........................................27
         Item 6.  Exhibits And Reports On Form 8-K .........................27


SIGNATURES..................................................................28


EXHIBIT INDEX...............................................................29


                                  Page 2 of 29

<PAGE>


PART I.   FINANCIAL INFORMATION

ITEM 1.   INTERIM FINANCIAL STATEMENTS

                            IDX SYSTEMS CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                              MARCH 31,           DECEMBER 31,
                                                2002                  2001
                                              ---------           ------------
                                              (unaudited)         (audited)
<S>                                           <C>                 <C>

ASSETS
Cash and marketable securities                $   48,841          $  56,373
Accounts receivable, net                         103,576             95,478
Refundable income taxes                            9,143             12,100
Prepaid and other current assets                   7,713              6,189
Deferred tax asset                                 7,718              7,718
                                              ----------          ---------
TOTAL CURRENT ASSETS                             176,991            177,858

Property and equipment, net                       78,806             77,636
Capitalized software costs, net                    2,493              2,055
Goodwill, net                                      1,511              1,391
Other assets                                       5,649              5,592
Deferred tax asset                                   790                790
                                              ----------          ---------
TOTAL ASSETS                                  $  266,240          $ 265,322
                                              ==========          =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and
  other liabilities                           $  45,093           $  51,963
Deferred revenue                                 20,117              20,361
Notes payable to bank                            18,727              15,000
                                              ---------           ---------
TOTAL CURRENT LIABILITIES                        83,937              87,324

Stockholders' equity                            182,303             177,998
                                              ---------           ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $ 266,240           $ 265,322
                                              =========           =========
</TABLE>

          SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                  Page 3 of 29

<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1.  INTERIM FINANCIAL STATEMENTS

                            IDX SYSTEMS CORPORATION
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                   (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>

                                                     THREE MONTHS ENDED
                                                          MARCH 31,
                                               ---------------------------------
                                                  2002                2001
                                               ----------          -------------
<S>                                            <C>                 <C>

REVENUES
Systems sales                                  $  27,216           $  26,162
Maintenance and service fees                      77,409              65,647
                                               ---------           ---------

TOTAL REVENUES                                   104,625              91,809

OPERATING EXPENSES
Cost of systems sales                              9,224              11,329
Cost of maintenance and services                  59,666              52,019
Selling, general and administrative               21,990              18,951
Software development costs                        12,134              10,501
                                               ---------           ---------

TOTAL OPERATING EXPENSE                          103,014              92,800
                                               ---------           ---------

Operating income (loss)                            1,611                (991)

OTHER INCOME
Other income                                         276                 684
Gain on sale of investment in subsidiary           4,273              35,546
Gain on investment                                     -               5,849
                                                --------           ---------
TOTAL OTHER INCOME                                 4,549              42,079
                                                --------           ---------
Income before income taxes and equity in
  loss of unconsolidated affiliate                 6,160              41,088

Equity in loss of unconsolidated affiliate             -              (6,051)
Income tax provision                              (2,033)            (15,277)
                                                ---------          ---------

NET INCOME                                      $  4,127           $  19,760
                                                ========           =========

BASIC EARNINGS PER SHARE                        $   0.14           $    0.69
                                                ========           =========

Basic weighted average shares outstanding         28,841              28,434
                                                ========           =========
DILUTED EARNINGS PER SHARE                      $   0.14           $    0.68
                                                ========           =========
Diluted weighted average shares outstanding       29,015              28,871
                                                ========           =========
</TABLE>

          SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  Page 4 of 29
<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1.  INTERIM FINANCIAL STATEMENTS

                            IDX SYSTEMS CORPORATION
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                  THREE MONTHS ENDED
                                                         MARCH 31,
                                                  2002             2001
                                                  ----             ----
<S>                                               <C>              <C>

OPERATING ACTIVITIES:
Net income                                        $   4,127        $   19,760
Adjustments to reconcile net income
  to net cash used in operating activities:
     Depreciation                                     3,826             3,751
     Amortization                                       432                83
     Deferred tax provision                               -             4,316
     Increase in allowance for doubtful
       accounts                                         444               612
     Minority interest                                    -               245
     Gain on investment                                   -            (5,849)
     Equity in loss of unconsolidated affiliate           -             6,051
     Gain on sale of investment in subsidiary        (4,273)          (35,546)
     Loss on disposition of assets                        -               404
     Changes in operating assets and liabilities:
         Accounts receivable                         (8,544)            2,075
         Prepaid expenses and other assets           (2,576)           (2,390)
         Accounts payable and accrued expenses       (2,598)           (6,730)
         Federal and state income taxes               2,957            11,914
         Deferred revenue                              (244)             (133)
                                                  ----------       -----------
         Net cash used in operating activities       (6,449)           (1,437)

INVESTING ACTIVITIES:
Purchase of property and equipment, net              (4,994)           (5,374)
Purchase of securities available-for-sale            (6,051)          (22,231)
Proceeds from sale of securities available-
  for-sale                                           15,006            15,925
Proceeds from sale of investment                          -            11,282
Other assets                                              -                 -
                                                  ----------       -----------
          Net cash provided by (used in)
            investing activities                      3,961              (398)

FINANCING ACTIVITIES:
Proceeds from sale of common stock                      171               747
Proceeds from notes payable to bank                   3,727                 -
                                                  ----------       -----------
          Net cash provided by financing
            activities                                3,898               747
                                                  ----------       -----------

Increase (decrease) in cash and cash equivalents      1,410            (1,088)

Cash and cash equivalents at beginning of period     38,083            16,357
                                                  ----------       -----------
Cash and cash equivalents at end of period           39,493            15,269
Securities available-for-sale                         9,348            49,334
                                                  ----------       -----------
Total cash and securities available-for-sale      $  48,841        $   64,603
                                                  ==========       ===========

Noncash investing activities:
Fair value of stock received from sale of
  investment in subsidiary                       $        -        $   17,624

</TABLE>

          SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  Page 5 of 29
<PAGE>


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

The interim unaudited condensed consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission and in accordance with accounting principles generally
accepted in the United States. Accordingly, certain information and footnote
disclosures normally included in annual financial statements have been omitted
or condensed. In the opinion of management, all necessary adjustments
(consisting of normal recurring accruals and adjustments) have been made to
provide a fair presentation. The operating results for the three months ended
March 31, 2002 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2002. For further information, refer
to the consolidated financial statements and footnotes included in the Company's
latest annual report on Form 10-K filed with the Securities and Exchange
Commission.


Note 2 - New Accounting Standards

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 applies to all business combinations completed after June
30, 2001, which among other things, requires the use of the purchase method of
accounting. SFAS No. 141 also establishes new criteria for determining whether
intangible assets should be recognized separately from goodwill. SFAS No. 142
provides that goodwill and intangible assets with indefinite lives will not be
amortized, but rather will be reviewed for impairment at least annually. SFAS
No. 142 is effective for fiscal years beginning after December 15, 2001. The
Company has adopted SFAS No. 141 and SFAS No. 142 and has determined that they
had no significant impact on its financial condition or results of operations.
Accordingly, pro forma results of IDX for the quarter ended March 31, 2001 have
not been presented to reflect the impact of SFAS No. 142, had the standard been
adopted on January 1, 2001.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," which
superseded SFAS No. 121, "Accounting for Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The Company is required to adopt SFAS No. 144 in the
first quarter of fiscal 2002. The Company has adopted SFAS No. 144 effective
January 1, 2002 and has determined that it had no significant impact on its
financial condition or results of operations.



Note 3 - Deconsolidation and Acquisitions

Through April 19, 2001, the Company's consolidated financial statements included
the accounts of the Company and BDP Realty Associates (BDP), a real estate trust
owned by certain stockholders and key employees of the Company whose real estate
was leased exclusively by the Company. Effective with the date of the
acquisition of the Company's corporate headquarters from BDP, the Company has
deconsolidated BDP and eliminated the net assets, principally real estate and a
minority interest, included in the Company's consolidated balance sheet as of
that date. The Company's corporate headquarters were purchased from BDP for
cash, at the fair market value as determined by independent appraisers, for
approximately $15.0 million in the second quarter of 2001. This amount has been
recorded as property and equipment.

In May 2001, the Company acquired PVI, LLC for approximately $1.0 million. This
acquisition has been accounted for under the purchase method of accounting. The
purchase price has been allocated based on estimated fair market values of PVI,
LLC's assets at the date of acquisition, principally to software. There are

                                  Page 6 of 29
<PAGE>


contingent payments based on a percentage of future sales related to this
purchase, however, there have been no sales to date.

In June 2001, the Company acquired Vogt Management Consulting, Inc. for
approximately $1.1 million. This acquisition has been accounted for under the
purchase method of accounting. The purchase price has been allocated,
principally to goodwill, based on estimated fair market values of Vogt
Management Consulting, Inc.'s assets at the date of acquisition.

Had these purchase acquisitions occurred as of the beginning of the year in
which they occurred, the Company's pro forma operating results would not be
materially different than as reported in the accompanying consolidated financial
statements.


Note 4 - Restructuring Charges

On September 28, 2001, the Company announced its plan to restructure and
realign its large physician group practice businesses. The Company implemented a
workforce reduction and restructuring program affecting approximately four
percent of the Company's employees. Though the Company reduced certain expenses
in the cost of sales and services and selling, general and administrative areas
as a result of the workforce restructuring program, the Company continues to
evaluate and invest resources in the development of various products, new
opportunities and initiatives that management believes will provide appropriate
returns to shareholders. The restructuring program resulted in a charge to
earnings of approximately $19.5 million during the fourth quarter of 2001, in
connection with costs associated with employee severance arrangements of
approximately $5.5 million, lease payment costs of approximately $5.2 million
and equipment and leasehold improvement write-offs related to the leased
facilities and workforce reduction of $8.8 million. Workforce related accruals,
consisting principally of employee severance costs, were based on specific
identification of employees to be terminated, along with their job
classification and functions, and their location. Substantially all work-force
related actions were completed during the fourth quarter of 2001, with the
exception of a minimal number of staff assigned to transition teams. As of March
31, 2002, the Company had an accrual balance of $4.1 million related to leased
facilities. Cash expenditures related to these accruals are expected to be
approximately $1.7 million in 2002 and approximately $2.4 million thereafter.

On June 21, 2000, the Company recorded an expense related to a restructuring
program. As of March 31, 2002, the Company had an accrued expense balance of
$670,000 related to restructuring costs.

Note 5 - Sale of Investment in Subsidiary and Other Related Matters

On January 8, 2001, the Company sold certain operations of its majority owned
subsidiary, ChannelHealth Incorporated to Allscripts Healthcare Solutions, Inc.,
a leading provider of point-of-care e-prescribing and productivity solutions for
physicians. ChannelHealth provided a set of Internet-based clinical and
productivity solutions for physicians. IDX retained the operations of the
Patient and e-Commerce Channels, which were previously part of Channelhealth. In
addition to the sale, the Company has entered into a ten-year strategic alliance
whereby Allscripts will become the exclusive provider of point-of-care clinical
applications sold by IDX to physician practices.

Allscripts acquired ChannelHealth in exchange for 8.6 million shares, or 21.3%
of Allscripts stock on a pro-forma fully diluted basis, of which IDX received
approximately 90% or 7.5 million shares of Allscripts stock. The Allscripts
shares received are subject to restrictions on any transfer of the securities
for a period of one year from the date of the transaction and, after one year,
on the transfer of more than 25% of the Allscripts shares in any one year, and
16.67% in any one month and, under certain circumstances, more favorable sale
restrictions may apply. IDX recorded the Allscripts shares at fair value of
$29.5 million, which included a discount from market value due to restrictions
on transfer, resulting in a $35.5 million gain on the transaction. The reported
gain is greater than the fair market value of the stock received due to the
Company's negative carrying value at the time of the sale of the underlying

                                  Page 7 of 29
<PAGE>


investment in ChannelHealth. Pursuant to the strategic alliance agreement, IDX
had guaranteed that Allscripts will have gross revenues resulting from the
alliance (less any commissions paid to IDX) of at least $4.5 million for fiscal
year 2001. IDX accrued the $4.5 million liability as of the date of the
transaction. IDX and Allscripts have finalized the analysis related to the
Allscripts 2001 eligible gross revenues guarantee and accordingly, IDX has
recognized an additional gain on the sale of Channelhealth of $4.3 million
during the first three months of 2002. IDX accounts for its investment in
Allscripts under the equity method of accounting. Under the equity method of
accounting, IDX has recognized its pro-rata share of Allscripts 2001 losses
which resulted in the elimination of the carrying value of this investment
during the third quarter of 2001. IDX recorded an equity loss during 2001 of
$17.6 million, including $6.1 million during the first quarter of 2001.

At March 31, 2002, IDX owns approximately 20% of the outstanding common stock of
Allscripts and accounts for its investment under the equity method of
accounting. This investment has a market value, which is not currently reflected
on the balance sheet, of approximately $47.2 million based on the quoted market
price as of March 31, 2002, however, as outlined above, the Company's investment
is subject to certain sale restrictions.


Summary audited financial information for Allscripts for the year ended December
31, 2001 is as follows in thousands:

      Revenue                               $    70,754
      Gross profit                                4,633
      Net loss                                 (418,931)


      Current assets                             64,846
      Non current assets                         52,598
      Current liabilities                        18,485
      Non current liabilities                       325





Summary unaudited financial information for Allscripts for the three months
ended March 31, 2002 and 2001 is as follows in thousands:
<TABLE>
<CAPTION>

                                     2002                   2001
                                     ----                   ----
       <S>                           <C>                    <C>

       Revenue                       $18,773                $16,599
       Gross profit                    3,822                  1,011
       Net loss                       (6,024)               (30,801)

</TABLE>


Note 6 - Subsequent Event

In April 2002, the Company invested $7.5 million in a strategic partner,
Stentor, Inc. This investment will be carried at cost. Stentor, Inc., a
California based medical informatics company, is a world leader in medical image
and information management.

                                  Page 8 of 29
<PAGE>

Note 7 - Income Taxes

The 2002 effective tax rate is lower than the statutory rate, primarily the
result of research credits. The 2001 effective tax rate was higher than the
statutory rate principally due to the non-deductible nature of certain costs
related to the sale of ChannelHealth. The net deferred tax assets as of March
31, 2002 of approximately $8.5 million are expected to be realized by generating
future taxable income and are otherwise recoverable through available tax
planning strategies.


Note 8 - Segment Information

The Company is required to disclose segment information in accordance with the
provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 131 establishes standards for reporting
information regarding operating segments in annual financial statements and
requires selected information for those segments to be presented in interim
financial reports issued to stockholders. SFAS No. 131 also establishes
standards for related disclosures about major customers, products and services,
and geographic areas. Operating segments are identified as components of an
enterprise about which separate discrete financial information is available for
evaluation by the chief operating decision maker, or decision making group, in
making decisions on how to allocate resources and assess performance. The
Company views its operations and manages its business as principally two
segments, healthcare information solutions that include software, hardware and
related services and medical transcription services.

The Company's business units have separate management teams and infrastructures
that offer different products and services. Accordingly, these business units
have been classified as reportable segments.

Information Systems and Services:  This reportable segment consists of IDX
Systems Corporation's  healthcare information solutions that includes software,
hardware and related services. IDX solutions enable healthcare  organizations to
redesign patient care and other workflow processes in order to improve
efficiency  and quality.  The principal markets for this segment include
physician groups,  management service organizations,  hospitals,  and integrated
delivery networks primarily located in the United States.

Medical Transcription Services: This reportable segment consists of EDiX, a
provider of medical transcription  outsourcing  services.  The principal markets
for this segment include hospitals and large physician group practices primarily
located in the United States.

The accounting policies of the reportable segments are the same as those
described  in Note 1 of the  Notes to  Consolidated  Financial  Statements.  The
Company evaluates the performance of its operating segments based on revenue and
operating income. Intersegment revenues are immaterial. No one customer accounts
for greater than 10% of revenue for any reportable segment.

                                  Page 9 of 29
<PAGE>

Summarized financial information concerning the Company's reportable segments is
shown in the following table:

<TABLE>
<CAPTION>

                                                    MEDICAL
                                    INFORMATION     DICTATION AND
                                    SYSTEMS AND     TRANSCRIPTION
                                    SERVICES         SERVICES         TOTAL
                                    -----------     --------------    -----
<S>                                 <C>             <C>               <C>

FOR THE THREE MONTHS ENDED
  MARCH 31, 2002
Net operating revenues              $ 77,677        $ 26,948          $ 104,625
Operating income                         777             834              1,611
Income  (loss)  before  income
  taxes and equity in loss
  of unconsolidated affiliate          6,196             (36)             6,160
Identifiable operating assets        226,995          39,245            266,240


FOR THE THREE MONTHS ENDED
  MARCH 31, 2001
Net operating revenues              $ 69,786        $ 22,023           $ 91,809
Operating income (loss)               (1,864)            873               (991)
Income before income taxes and
   equity in loss of
   unconsolidated affiliate           34,910             127             35,037
Identifiable operating assets        258,058          30,474            288,532

</TABLE>

Corporate headquarter assets and related operating costs are included in IDX
Healthcare Information Systems and Services segment information. Substantially
all of the Company's operations are in the United States.

Note 9 - Comprehensive Income

Total comprehensive income for the quarter ended March 31, 2002 amounted to $4.1
million compared to a comprehensive income of $19.7 million for the same period
in 2001. Comprehensive income/loss includes unrealized gains or losses on the
Company's available-for-sale securities that are included as a component of
stockholders' equity.




                                 Page 10 of 29
<PAGE>


Note 10 - Earnings Per Share Information

The following sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                               March 31,

                                                       2002           2001
                                                       ----           ----
   <S>                                                 <C>            <C>

   Numerator:
     Net income                                        $  4,127       $ 19,760
                                                       --------       --------
   Numerator for basic and diluted
     income per share                                  $  4,127       $ 19,760
                                                       ========       ========

   Denominator:

     Basic weighted-average shares outstanding         28, 841         28,434
     Effect of employee stock options                      174            437
                                                     ---------------------------

Denominator for diluted income per share                29,015         28,871
                                                        ------         ------
   Basic income per share                              $   .14        $   .69
                                                       =======        =======
   Diluted income per share                            $   .14        $   .68
                                                       =======        =======
</TABLE>


Note 11 - Legal Proceedings

On January 18, 2001, the Company commenced a lawsuit against Epic Systems
Corporation, a competitor of the Company, the University of Wisconsin Medical
Foundation (the Foundation), and two individuals, claiming, among other things,
that trade secrets of the Company involving its IDXtend medical group practice
system were wrongfully disclosed to, and misappropriated by, Epic in a series of
meetings that took place in 1998 and 1999. The defendants deny the Company's
claims. The Company's lawsuit seeks damages and injunctive relief and was
brought in the United States District Court for the Western District of
Wisconsin and is entitled, IDX Systems Corporation v. Epic Systems Corporation,
et al. The Foundation brought a counterclaim against the Company claiming that
its lawsuit interferes with a contract between the Foundation and Epic, and that
the confidentiality provisions in IDX's contracts with the Foundation are
invalid. The counterclaim seeks damages and declaratory judgment. The Company
denies the counterclaim.

Subsequently, Epic filed an Answer denying the essential elements of the
Company's claims, and asserted counterclaims against the Company. Epic alleges
that the Company's claims asserting its trade secret rights were brought in bad
faith, with an intent to injure Epic competitively, and thereby violated
Sections 1 and 2 of the Sherman Act because the Company allegedly possesses
monopoly power in the U.S. market for medical practice information systems. Epic
also claims that this same alleged conduct constitutes intentional interference
with its contract with the Foundation. The counterclaim seeks treble damages.
The Company denies the counterclaims. On July 31, 2001, the Company's lawsuit
against Epic, the Foundation and the individuals was dismissed and the
counterclaims of Epic and the Foundation were dismissed. The Company appealed
the dismissal of its lawsuit to the United States Court of Appeals, and on April
1, 2002, that appellate court affirmed the District Court's dismissal of the
trade secret claim, but reversed and remanded the other related claims of the
Company, including breach of contract and tortious interference claims against
the defendants. The Company intends to vigorously pursue such remanded claims at
the District Court. It has resumed its discovery efforts in anticipation of
trial, which has been scheduled to begin in September.

In April 2000, the Company commenced a lawsuit for damages caused by wrongful
cancellation and material breach of contract by St. John Health System (SJHS),
in the United States District Court for Eastern District of Michigan, entitled
IDX Systems Corporation v. St. John Health System. Subsequently, SJHS commenced
a lawsuit against the Company in the Circuit Court of Wayne County, Michigan,
claiming unspecified damages against the Company for anticipatory repudiation,
breach of contract, tort and fraud. On motion of the Company, SJHS's lawsuit was
removed to and consolidated in the federal court. In its answer to the Company's

                                 Page 11 of 29

<PAGE>

lawsuit, SJHS asserted the same claims previously asserted in its state court
action. In September 2001, SJHS specified damage claims of approximately $77
million in allegedly lost savings, and in January 2002 raised another theory of
alleged unspecified damages for "cover". The Company believes the claims of SJHS
are without merit and continues to vigorously defend itself and prosecute its
own claims for damages, which the Company believes may exceed approximately $9
million. The lawsuit is in the trial preparation stage and the parties are
awaiting scheduling of the trial by the court.

From time to time, the Company is a party to or may be threatened with other
litigation in the ordinary course of its business. The Company regularly
analyzes current information including, as applicable, the Company's defenses
and insurance coverage and as necessary, provides accruals for probable and
estimable liabilities for the eventual disposition of these matters. The
ultimate outcome of these matters is not expected to materially affect the
Company's business, financial condition or results of operations.

                                 Page 12 of 29
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION TOGETHER WITH THE CONDENSED FINANCIAL
STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS QUARTERLY REPORT ON
FORM 10-Q. THIS ITEM CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES AND
EXCHANGE ACT OF 1934 THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE INCLUDED IN SUCH FORWARD-LOOKING STATEMENTS.
FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY INCLUDE THOSE SET
FORTH UNDER "FORWARD-LOOKING INFORMATION AND FACTORS AFFECTING FUTURE
PERFORMANCE" COMMENCING ON PAGE 19, AS WELL AS THOSE OTHERWISE DISCUSSED IN THIS
SECTION AND ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities at the date of our financial statements. Those estimates are
based on our historical experience, terms of existing contracts, and our
observance of trends in the industry, information provided by our customers and
information available from other outside sources, as appropriate. Actual results
may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We have identified
the following as critical accounting policies to our Company: revenue
recognition and accounts receivable, income taxes and accounting for litigation,
commitments and contingencies. For a detailed discussion on the application of
these and other accounting policies, see Note 1 of Notes to Consolidated
Financial Statements.

o    Revenue  recognition  and accounts  receivable.  We recognize  revenue when
     evidence of an  arrangement  exists,  contractual obligations  have been
     satisfied,  title and risk of loss (in the case of  hardware)  have been
     transferred  to the customer and collection of the  resulting  receivable
     is  reasonably  assured.  We defer revenue when initial  payment terms
     exceed 90 days. We recognize  revenue  on  software licensing  arrangements
     involving  multiple  elements  by  allocation  of the fair value of the
     transaction to each element,  or more typically  using the residual  method
     when the arrangement  includes  undelivered  elements. Fair value
     determination  requires  management's  judgement on a number of factors
     including  typical sales price.  Revenue from software  licensing
     arrangements  is  principally  recognized  upon  attainment of specified
     contractual  milestones  and dates. Additionally,  we periodically  enter
     into certain  long-term  contracts where revenue is recognized on a
     percentage of completion basis or the completed  contract method,  as
     appropriate  measures of completion for each contract are achieved.  We
     also generate service revenues from the sale of product maintenance
     contracts,  consulting  contracts and transcription  service  arrangements.
     Revenue from maintenance  contracts is recognized ratably over the support
     period,  including the installation  period through the term of the
     agreements,  which is typically one year.  Revenues from consulting and
     transcription  services are recognized in the period in which services are
     performed. Revenue from hardware sales is recognized upon transfer of title
     to customers.

     Management estimates allowances for doubtful accounts receivable based on
     historical experience and management's evaluation of the financial
     condition of the customer. The Company typically does not require
     collateral. Historically, management's estimates have been adequate to
     cover accounts receivable exposures.

                                 Page 13 of 29

<PAGE>

o    Income taxes. Our valuation allowance relating to the net deferred tax
     assets is based on our assessment of historical pre-tax income as well as
     tax planning strategies designed to generate future taxable income. These
     strategies include estimates and involve judgement relating to certain
     favorable lease rights and unrealized gains in the Company's investment in
     common stock of an equity investee. To the extent that facts and
     circumstances change, these tax planning strategies may no longer be
     sufficient to support the deferred tax assets and the Company may be
     required to increase the valuation allowance. As we generate future taxable
     income against which these tax assets may be applied, some portion or all
     of the valuation allowance would be reversed and an increase in net income
     would consequently be reported in future years.

o    Accounting for litigation, commitments and contingencies. We are currently
     involved in certain legal proceedings, which, if unfavorably determined,
     could have a material adverse effect on our operating results and financial
     condition. In connection with management's assessment of these legal
     proceedings, management must determine if an unfavorable outcome is
     probable and evaluate the costs for resolution of these matters, if
     reasonably estimable. These determinations and related estimates have been
     developed in consultation with outside counsel handling our defense in
     these matters and is based upon an analysis of potential results, assuming
     a combination of litigation and defense strategies. See Part II, Item 1.
     "Legal Proceedings" and Note 11 to our audited consolidated financial
     statements included in this quarterly report on Form 10-Q.

The above listing is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgement in their application. There
are also areas in which management's judgement in selecting any available
alternative would not produce a materially different result. See our audited
consolidated financial statements and notes thereto contained in our Annual
Report on Form 10-K which contain accounting policies and other disclosures
required by generally accepted accounting principles.


GENERAL

Revenues increased to $104.6 million for the first quarter of 2002 from $91.8
million for the same period in 2001. Systems sales increased 4.0% in 2002, while
maintenance and service fees grew 17.9% as compared to the same period in the
prior year. The Company reported net income of $4.1 million, or $0.14 per share,
for the first quarter of 2002 as compared to net income of $19.8 million, or
$0.68 per share, for the same period in 2001. Excluding the effect of the gain
on sale of an investment in ChannelHealth of $4.3 million, net income after
income taxes for the three months ended March 31, 2002 was $1.3 million or $0.04
per share. Excluding the effects of the gain on sale of an investment in
ChannelHealth of $35.5 million, a realized gain on investment in an unrelated
entity of $5.8 million and the equity in the loss of an unconsolidated affiliate
of $6.1 million, the net loss after income taxes for the three months ended
March 31, 2001 was $172,000 or $0.01 per share.

During 2000 and continuing into 2001, certain of the Company's customers delayed
making purchasing decisions with respect to certain of the Company's software
systems resulting in longer sales cycles for such systems. Management believes
such delays were due to a number of factors, including customer organization
changes, government approvals, pressures to reduce expenses, product complexity,
competition and the September 11 National Tragedy. While the Company believes
these factors are temporary, they may continue to cause reductions or delays in
spending for new systems and services in the future. If these delays occur, they
may cause unanticipated revenue volatility and affect the future financial
performance of the Company.

On January 8, 2001, the Company sold ChannelHealth, including certain product
lines, to Allscripts Healthcare Solutions, Inc. (Allscripts), a leading provider
of point-of-care e-prescribing and productivity solutions for physicians.
ChannelHealth, incorporated in September 1999, was a majority owned subsidiary
of IDX. IDX retained the Patient and eCommerce Channels, which were previously

                                 Page 14 of 29

<PAGE>

part of Channelhealth, enabling IDX to integrate an Internet solution that
leverages its core competencies in physician practice management systems. In
addition to the sale, the Company entered into a 10-year strategic alliance
whereby Allscripts will become the exclusive provider of point-of-care clinical
applications sold by IDX to physician practices. Allscripts acquired
Channelhealth in exchange for 8.6 million shares, or 21.3% of Allscripts stock
on a pro-forma fully diluted basis, of which IDX received approximately 7.5
million shares (approximately 90%). This investment in Allscripts stock is
accounted for under the equity method. Under this method, IDX is required to
recognize a pro-rata share of Allscripts net income or loss after elimination of
certain related entity transactions. IDX has recorded approximately $17.6
million in its pro-rata share of Allscripts losses in 2001, including $6.1
million during the first quarter of 2001, and has reduced the carrying value of
this investment to zero. In the event Allscripts generates net income in the
future, IDX would not record its share of Allscripts net income until such time
as IDX's share of such future net income aggregated to an amount that was
greater than the proportionate share of cumulative losses IDX has not recorded
subsequent to its investment being written down to zero. IDX is not committed to
and does not currently plan to provide any future investments or advances to
Allscripts. Allscripts has reported losses since 1995 and may report losses in
the future.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001

REVENUES
The Company's total revenues increased to $104.6 million during the three months
ended March 31, 2002 from $91.8 million for the corresponding period in 2001, an
increase of approximately $12.8 million or 14.0%. Revenues from systems sales
increased to $27.2 million during the three months ended March 31, 2002 (26.0%
of total revenues) from $26.2 million for the corresponding period in 2001
(28.5% of total revenues), an increase of $1.1 million or 4.0%. This increase
was primarily due to an increase in new sales and installations of certain IDX
systems.

Revenues from maintenance and service fees increased to $77.4 million during the
three months ended March 31, 2002 (74.0% of total revenues) from $65.6 million
for the corresponding period in 2001 (71.5% of total revenues), an increase of
$11.8 million or 17.9%. The increase was due to a $4.9 million increase in
EDiX's medical transcription service fee revenue, a $3.8 million increase in
maintenance revenue primarily resulting from price increases and an increase in
the Company's installed base, as well as a $3.1 million increase in installation
and consulting services provided by IDX's core business.

COST OF SALES AND SERVICES
The cost of system sales decreased to $9.2 million during the three months ended
March 31, 2002 from $11.3 million for the comparable period in 2001, a decrease
of $2.1 million or 18.6%. The decrease in cost of sales is primarily a result of
a decrease in hardware included as a component of sales of the Company's systems
sales. The gross margin on systems sales increased to 66.1% during the first
quarter of 2002 from 56.7% for the same period in 2001. The increase in the
gross profit margin as a percentage of sales was primarily due to an increase in
software license revenue which has a higher gross profit margin and a decrease
in hardware sales which have a lower gross profit margin as compared to the same
period in the prior year. The cost of services increased to $59.7 million during
the first quarter of 2002 from $52.0 million for the comparable period in 2001,
an increase of $7.6 million or 14.7%. The increase in cost of services resulted
from growth in client services expenses, primarily medical transcription staff,
as well as maintenance, installation and consulting staff. The gross profit
margin on maintenance and service fees increased to 22.9% during the first three
months of 2002 from 20.8% for the same period in 2001 and was due to increased
maintenance revenue in IDX's core business which was partially offset by growth
in service and maintenance expenses combined with operational efficiencies
related to process improvements at EDiX.

The gross profit margin of system sales of IDX's core business, information
systems and services, increased to 66.1% in 2002 from 56.7% in 2001. The

                                 Page 15 of 29

<PAGE>

increase in the gross profit margin as a percentage of sales was primarily due
to an increase in software license revenue which has a higher gross profit
margin and a decrease in hardware sales which have a lower gross profit margin
as compared to the same period in the prior year. The gross profit margin of
services of IDX's core business, information systems and services, increased to
25.0% in the first quarter of 2002 from 22.7% for the same period in 2001
primarily due to increased maintenance revenue which was partially offset by
growth in service and maintenance expenses. The gross profit margin for the
Company's medical dictation and transcription business segment (EDiX) increased
as a percentage of sales to 19.1% for the first three months of 2002 from 17.0%
for the same period in 2001 due to efficiencies in operations related to process
improvements.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $22.0 million for the
first three months of 2002 from $19.0 million for the same period in 2001, an
increase of $3.0 million or 16.0%. As a percentage of total revenues, selling,
general and administrative expenses increased to 21.0% for the first three
months of 2002 from 20.6% for the same period in 2001. IDX's core business,
information systems and services, selling, general and administrative expenses
increased $1.6 million primarily due to increased personnel costs during the
first quarter of 2002 as compared to the same period in the prior year. EDiX's
selling, general and administrative expenses increased $1.4 million during the
first quarter of 2002 as compared to the same period in 2001 due to increased
costs in order to support sales growth.

SOFTWARE DEVELOPMENT COSTS
Software development expenses increased to $12.1 million in 2002 from $10.5
million in 2001, an increase of $1.6 million or 15.6%. As a percentage of total
revenues, software development expenses increased to 11.6% in the first
quarter of 2002 from 11.4% for the same period in 2001. As a percentage of
system sales, software development costs increased to 44.6% in the first quarter
of 2002 from 40.1% for the same period in 2001. The $1.6 million increase is
primarily due to increased personnel costs as compared to the prior year in
IDX's core information systems and services business segment. Research and
development costs in the medical dictation and transcription business segment
(EDiX) increased to $471,000 for the first quarter of 2002 from $415,000 for the
same period in 2001. Approximately $438,000 of software development costs, net
of amortization, were capitalized during the first quarter of 2002 as compared
to $291,000 for the same period in 2001.

OTHER INCOME, NET
Interest income decreased to approximately $327,000 during the first three
months of 2002 as compared to $929,000 for the same period in 2001. This
decrease was primarily due to a lower average invested balance combined with
lower interest rates during the first three months of 2002 as compared to the
same period in 2001. Interest expense during the first three months of 2002
increased to $51,000 from $0 during the comparable period in 2001.

MINORITY INTEREST
The Company's consolidated financial statements included the accounts of the
Company and BDP Realty Associates (BDP) through April 2001. BDP's real estate
was leased exclusively by the Company, and the Company was subject to
substantially all the risks of ownership through the date that this property was
acquired by the Company at the fair market value of approximately $15.0 million
as determined by an independent appraiser. All transactions between the Company
and BDP have been eliminated. The minority interest, which was eliminated in
April 2001, represented the net income and equity of BDP.

GAIN ON SALE OF INVESTMENT IN SUBSIDIARY
On January 8, 2001, Allscripts acquired IDX's interest in ChannelHealth in
exchange for approximately 7.5 million shares of Allscripts common stock
(Allscripts shares). The Allscripts shares received are subject to restrictions
on any transfer of the securities for a period of one year from the date of the
transaction and after one year, on the transfer of more than 25% of the
Allscripts shares in any one year, and 16.67% in any one month. IDX recorded the
Allscripts shares at fair value of $29.5 million, which included a discount from
market value due to the four year restrictions on transfer, resulting in a $35.5
million gain on the transaction. IDX also entered into a ten year strategic

                                 Page 16 of 29

<PAGE>

alliance agreement with Allscripts. Pursuant to the strategic alliance
agreement, IDX had guaranteed that Allscripts will have gross revenues resulting
from the alliance (less any commissions paid to IDX) of at least $4.5 million
for fiscal year 2001. IDX accrued the $4.5 million liability as of the date of
the transaction. IDX and Allscripts have finalized the analysis related to the
Allscripts 2001 eligible gross revenues guarantee and accordingly, IDX has
recognized an additional gain on the sale of Channelhealth of $4.3 million
during the first three months of 2002. IDX accounts for its investment in
Allscripts under the equity method of accounting. As a result of the
transaction, the Company is entitled to representation on Allscripts Board of
Directors.

REALIZED GAIN ON INVESTMENT.
Other income during the first quarter of 2001 includes a $5.8 million realized
gain from a distribution of marketable equity securities related to an
investment in an unrelated investment partnership.

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE.
IDX, through a wholly owned subsidiary, currently owns approximately 20% of the
outstanding common stock of Allscripts and records its investment under the
equity method of accounting. IDX records its interest in the losses of
Allscripts as a reduction to its investment account. IDX recorded an equity loss
during the first three months of 2001 of $6.1 million on a pre-tax basis. IDX's
interest in the losses of Allscripts in 2001 reduced the balance of IDX's
investment carrying balance in Allscripts to zero, and accordingly no share of
Allscripts loss has been recorded during the first quarter of 2002.

INCOME TAXES
The Company recorded income tax expense of approximately $2.0 million during the
first quarter of 2002, an effective tax rate of 33.0%. This is lower than the
Company's historical tax rate of 40.0% due to certain research and
experimentation credits. The Company recorded income tax expense of
approximately $15.3 million during the first quarter of 2001, an effective tax
rate of 43.6%. The higher rate in 2001 is principally due to transaction costs
related to the sale of ChannelHealth that are non-deductible for income tax
purposes. The Company anticipates a consolidated effective tax rate of
approximately 33.0% for the year ending December 31, 2002. This favorable rate
is primarily the result of research credits projected to be generated and
utilized in 2002. The Company anticipates that EDiX's effective tax rate in 2002
will also be less than the statutory rate due to the use of operating loss carry
forwards, subject to annual limitations. The net deferred tax assets as of March
31, 2002 of approximately $8.5 million are expected to be realized by generating
future taxable income and are otherwise recoverable through available tax
planning strategies.

NEW ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 applies to all business combinations completed after June
30, 2001, which among other things, requires the use of the purchase method of
accounting. SFAS No. 141 also establishes new criteria for determining whether
intangible assets should be recognized separately from goodwill. SFAS No. 142
provides that goodwill and intangible assets with indefinite lives will not be
amortized, but rather will be reviewed for impairment at least annually. SFAS
No. 142 is effective for fiscal years beginning after December 15, 2001. The
Company has adopted SFAS No. 141 and SFAS No. 142 and has determined that they
had no significant impact on its financial condition or results of operations.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," which
superseded SFAS No. 121, "Accounting for Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The Company is required to adopt SFAS No. 144 in the
first quarter of fiscal 2002. The Company has adopted SFAS No. 144 effective
January 1, 2002 and has determined that it had no significant impact on its
financial condition or results of operations.

                                 Page 17 of 29

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
The Company principally has funded its operations, working capital needs and
capital expenditures from operations, excluding the net cash used in operations
of ChannelHealth in 1999 and 2000.

Net cash used in operations is principally comprised of net income and
depreciation and is primarily affected by the net effect of the change in
accounts receivable, accounts payable, accrued expenses and non-cash items
relating to the sale of Channelhealth and certain components of restructuring
charges. Due to the nature of the Company's business, accounts receivable,
deferred revenue and accounts payable fluctuate considerably due to, among other
things, the length of installation efforts which are dependent upon the size of
the transaction, the changing business plans of the customer, the effectiveness
of customers' management and general economic conditions. During the first three
months of 2002, accounts receivable from customers have been collected on
average within 89 days which represents a decrease of 15 days in terms of
average days to collect receivables from customers as compared to the
same period in 2001.

Cash flows related to investing activities have historically been related to the
purchase of computer and office equipment, leasehold improvements and the
purchase and sale of investment grade marketable securities. The Company
purchased its corporate headquarters facility from a related party in April 2001
for approximately $15.0 million based on an independent appraisal of its fair
market value. This transaction was reviewed and approved by certain independent
members of the Board of Directors of the Company that had no financial interest
in the transaction. Through March 31, 2002, the Company has spent approximately
$16.0 million on construction related to an expansion of its Corporate
Headquarters facility that is substantially complete as of March 31, 2002. In
April 2000, the Company entered into a new operating lease for office space in
Seattle, Washington, commencing in 2003, for a period of 12 years. The Company
anticipates approximately $8.5 million in cash outlays for improvements related
to this Seattle lease in 2002.

In addition, investing activities may also include purchases of interests in,
loans to and acquisitions of businesses for access to complementary products and
technologies. The Company expects these activities to continue. In April 2002,
the Company invested $7.5 million in a strategic partner, Stentor, Inc. This
investment will be carried at cost. There can be no assurance that the Company
will be able to successfully complete any such purchases or acquisitions in the
future.

Cash flows from financing activities historically relate to the issuance of
common stock through the exercise of employee stock options and in connection
with the employee stock purchase plan and proceeds from line of credit.

Cash, cash equivalents and securities available-for-sale at March 31, 2002 were
$48.8 million, a decrease of $7.5 million from December 31, 2001. The Company
has a revolving demand line of credit with a bank allowing the Company to borrow
up to approximately $19.0 million bearing interest at the bank's base rate,
approximately 4.0% in 2002. This line of credit is subject to certain terms and
conditions including the requirement that the Company must maintain deposits
with the bank that are in excess of the amounts borrowed. At March 31, 2002 and
2001, the Company had $18.7 million and $0 outstanding, respectively, under this
arrangement. As of April 23, 2002 there was no outstanding balance on this line
of credit.

In addition to existing financing arrangements, the Company owns, through a
wholly owned subsidiary, approximately 7.5 million shares of Allscripts stock, a
public company listed on the Nasdaq National Market under the symbol MDRX. This
investment in Allscripts stock is accounted for under the equity method. IDX
recorded an equity loss during the first nine months of 2001 of $17.6 million on
a pre-tax basis that reduced the balance of IDX's investment carrying balance in
Allscripts to zero. This investment has a quoted market value of approximately
$47.2 million as of March 31, 2002, and is subject to certain sale restrictions
that may significantly impact the market value.

The Company expects that its requirements for office facilities and other office
equipment will grow as staffing requirements dictate. The Company's operating
lease commitments consist primarily of office leasing for the Company's
operating facilities. The Company plans to increase the number of its

                                 Page 18 of 29
<PAGE>

professional staff during 2002 as needed to meet anticipated sales volume and to
support research and development efforts for certain products. To the extent
necessary to support increases in staffing, the Company may obtain additional
office space.

As of March 31, 2002, the Company has not entered into other material lease or
purchase commitments not disclosed above. The Company believes that currently
available funds will be sufficient to finance its operating requirements at
least through the next twelve months. To date, inflation has not had a material
impact on the Company's revenues or income.

During the three month period ended March 31, 2002, IDX has not engaged in:

    o    Material off-balance sheet activities, including the use of structured
         finance or special purpose entities, with the exception of BDP Realty
         which has been given full recognition in the financial statements for
         all periods presented as described below,

    o    Trading activities in non-exchange traded contracts, or

    o    Transactions with persons or entities that benefit from their
         non-independent relationship with IDX, other than described below.

Through April 19, 2001, the Company's consolidated financial statements included
the accounts of the Company and BDP Realty Associates (BDP), a real estate trust
owned by certain stockholders and key employees of the Company, Robert H. Hoehl
and Richard E. Tarrant, whose real estate was leased exclusively by the Company.
Effective with the date of the acquisition of the Company's corporate
headquarters from BDP, the Company has deconsolidated BDP and eliminated the net
assets, principally real estate and minority interest, included in the Company's
consolidated balance sheet as of that date. The Company's corporate headquarters
were purchased from BDP for cash, at fair market value as determined by
independent appraisers, for approximately $15.0 million during the second
quarter of 2001. This amount has been recorded as property and equipment. This
transaction was reviewed and approved by certain independent members of the
Board of Directors of the Company that had no financial interest in the
transaction. Total rent expense includes $294,000, $1.2 million and $1.3 million
in 2001, 2000 and 1999, respectively, related to this lease.

The Company leases an office building from 4901 LBJ Ltd. Partnership, a real
estate partnership (REP) owned by certain stockholders and key employees of the
Company. Lease agreements are based on fair market value rents and are reviewed
and approved by independent members of the Board of Directors. Total rent
expense includes $139,600 and $139,300 during the periods ending March 31, 2002
and March 31, 2001, respectively, related to this lease.

FORWARD-LOOKING INFORMATION AND FACTORS AFFECTING FUTURE PERFORMANCE

This Quarterly Report on Form 10-Q contains "forward-looking statements" as
defined in Section 21E of the Securities and Exchange Commission Act of 1934.
For this purpose, any statements contained in this Quarterly Report on Form 10-Q
that are not statements of historical fact may be deemed to be forward-looking
statements. Words such as "believes," "anticipates," "plans," "expects," "will"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause results to differ
materially from those indicated by these forward-looking statements, including
among others, the factors set forth below. If any risk or uncertainty identified
in the following factors actually occurs, our business, financial condition and
operating results would likely suffer. In that event, the market price of IDX's
common stock could decline.

The Company undertakes no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes in future operating results, financial condition or business
over time.

                                 Page 19 of 29
<PAGE>

Because of these and other factors, past financial performance should not be
considered an indicator of future performance. Investors should not use
historical trends to anticipate future results.

The following important factors affect IDX's business and operations generally
or affect more than one segment of our business and operations:

QUARTERLY OPERATING RESULTS MAY VARY. The Company's quarterly operating results
have varied in the past and may vary in the future. IDX expects its quarterly
results of operations to continue to fluctuate. Because a significant percentage
of IDX's expenses are relatively fixed, the following factors could cause these
fluctuations:

    o   delays in customers purchasing decisions due to a variety of factors
        such as consideration and management changes;
    o   long sales cycles;
    o   long installation and implementation cycles for the larger, more complex
        and costlier systems;
    o   recognizing revenue at various points during the installation process,
        typically based on milestones; and
    o   timing of new product and service introductions and product upgrade
        releases.

In light of the above, IDX believes that its results of operations for any
particular quarter or fiscal year are not necessarily meaningful or reliable
indicators of future performance.

VOLATILITY OF STOCK PRICE. IDX has
experienced, and expects to continue to experience, fluctuations in its stock
price due to a variety of factors including:

    o   actual or anticipated quarterly variations in operating results;
    o   changes in expectations of future financial performance;
    o   changes in estimates of securities analysts;
    o   market conditions particularly in the computer software and Internet
        industries;
    o   announcements of technological innovations, including Internet delivery
        of information and use of application service provider technology;
    o   new product introductions by IDX or its competitors;
    o   delay in customers purchasing decisions due to a variety of factors;
    o   market prices of competitors; and o healthcare reform measures and
        healthcare regulation.

These fluctuations have had a significant impact on the market price of our
common stock, and may have a significant impact on the future market price of
our common stock.

These fluctuations may affect operating results as follows:

    o   ability to transact stock acquisitions ; and
    o   ability to retain and incent key employees.

FINANCIAL TRENDS. Although the Company's results from operations improved during
the first three months of 2002, year over year operating results and cash from
operations generally declined during the period from 1998 through 2000. In 2001
and 2000, IDX generated a net loss of approximately $8.6 million and $36.0
million, respectively. If these trends continue, IDX may have difficulty
financing future growth and funding operating initiatives, including future
acquisitions.

DISRUPTION IN THE ECONOMY. The terrorist events of September 11, 2001 have
sensitized the Company and many other businesses to the potential disruption
that such activities can have on the economy, the business cycle and,
ultimately, on the financial performance of these organizations. It is
impossible to know whether such terrorist activities will continue, and whether,
and to what extent, they may cause a disruption which may have a material
adverse effect on the business and financial condition of the Company.

                                 Page 20 of 29
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NEW PRODUCT DEVELOPMENT AND RAPIDLY CHANGING TECHNOLOGY. To be successful, IDX
must enhance its existing products, respond effectively to technology changes
and help its clients adopt new technologies. In addition, IDX must introduce new
products and technologies to meet the evolving needs of its clients in the
healthcare information systems market. IDX may have difficulty in accomplishing
this because of:

    o  the continuing evolution of industry standards, for example, transaction
       standards pursuant to the Health Insurance Portability and Accountability
       Act of 1996; and
    o  the creation of new technological developments, for example, Internet and
       application service provider technology.

IDX is currently devoting significant resources toward the development of
enhancements to its existing products, particularly in the area of Internet-
based functionality and the migration of existing products to new hardware and
software platforms, including relational database technology, object-oriented
architecture and application service provider technology. However, IDX may not
successfully complete these product developments or the adaptation in a timely
fashion, and IDX's current or future products may not satisfy the needs of the
healthcare information systems market. Any of these developments may adversely
affect IDX's competitive position or render its products or technologies
noncompetitive or obsolete.

CHANGES AND CONSOLIDATION IN THE HEALTHCARE INDUSTRY. IDX currently derives
substantially all of its revenues from sales of financial, administrative and
clinical healthcare information systems, medical transcription services and
other related services within the healthcare industry. As a result, the success
of IDX is dependent in part on the political and economic conditions in the
healthcare industry.

Virtually all of IDX's customers and the other entities with which IDX has a
business relationship operate in the healthcare industry and, as a result, are
subject to governmental regulation, including Medicare and Medicaid regulation.
Accordingly, IDX's customers and the other entities with which IDX has a
business relationship are affected by changes in such regulations and
limitations in governmental spending for Medicare and Medicaid programs. Recent
actions by Congress have limited governmental spending for the Medicare and
Medicaid programs, limited payments to hospitals and other providers under such
programs, and increased emphasis on competition and other programs that
potentially could have an adverse effect on IDX's customers and the other
entities with which IDX has a business relationship. In addition, federal and
state legislatures have considered proposals to reform the U.S. healthcare
system at both the federal and state level. If enacted, these proposals could
increase government involvement in healthcare, lower reimbursement rates and
otherwise change the business environment of IDX's customers and the other
entities with which IDX has a business relationship. IDX's customers and the
other entities with which IDX has a business relationship could react to these
proposals and the uncertainty surrounding these proposals by curtailing or
deferring investments, including those for IDX's products and services.

In addition, many healthcare providers are consolidating to create integrated
healthcare delivery systems with greater market power. These providers may try
to use their market power to negotiate price reductions for IDX's products and
services. If IDX is forced to reduce its prices, its operating margins would
likely decrease. As the healthcare industry consolidates, competition for
customers will become more intense and the importance of acquiring each customer
will become greater.

COMPETITION FOR HEALTHCARE INFORMATION SYSTEMS. The market for healthcare
information systems is intensely competitive, rapidly evolving and subject to
rapid technological change. IDX believes that the principal competitive factors
in this market include the breadth and quality of system and product offerings,
the features and capabilities of the systems, the price of the system and
product offerings, the ongoing support for the systems, the potential for
enhancements and future compatible products.

Some of IDX's competitors have greater financial, technical, product
development, marketing and other resources than IDX, and some of its competitors
offer products that it does not offer. The Company's principal existing

                                 Page 21 of 29
<PAGE>

competitors include, Eclipsys Corporation,  McKesson Medquist, Inc., Shared
Medical  Systems  Corporation,  which was  acquired by Siemans AG in 2000,  Epic
Systems  Corporation and Cerner  Corporation.  Each of these competitors offer a
suite of products  that  compete  with many of IDX's  products.  There are other
competitors  that offer a more  limited  number of competing  products.  Many of
IDX's  competitors  have also announced or introduced  Internet  strategies that
will compete with IDX's Internet applications and services. IDX may be unable to
compete successfully against these organizations.  In addition, IDX expects that
major software  information  systems  companies,  large  information  technology
consulting  service providers and system  integrators,  Internet-based  start-up
companies  and  others   specializing  in  the  healthcare  industry  may  offer
competitive  products or services.  In October 2001,  Pfizer,  IBM and Microsoft
announced  the  creation  of  a  joint  venture  known  as  Amicore  to  develop
applications to automate the administrative, clinical and financial functions of
a medical practice and connect the practice to groups, laboratories,  pharmacies
and other  providers for  physicians  and physician  groups.

PRODUCT LIABILITY CLAIMS. Any failure by IDX's products that provide
applications relating to patient medical histories, diagnostic procedures, and
treatment plans could expose IDX to product liability claims. These potential
claims may exceed IDX's current insurance coverage. Unsuccessful claims could be
costly to defend and divert management time and resources. In addition, IDX
cannot make assurances that it will continue to have appropriate insurance
available to it in the future at commercially reasonable rates.

KEY PERSONNEL. The success of IDX is dependent to a significant degree on its
key management, sales, marketing, and technical personnel. To be successful IDX
must attract, motivate and retain highly skilled managerial, sales, marketing,
consulting and technical personnel, including programmers, consultants and
systems architects skilled in the technical environments in which IDX's products
operate. Competition for such personnel in the software and information services
industries is intense. IDX does not maintain "key man" life insurance policies
on any of its executives with the exception of Richard E. Tarrant. Not all of
IDX personnel have executed noncompetition agreements.

GOVERNMENT REGULATION. Virtually all of IDX's customers and the other entities
with which IDX has a business relationship operate in the healthcare industry
and, as a result, are subject to governmental regulation. Because IDX's products
and services are designed to function within the structure of the healthcare
financing and reimbursement systems currently in place in the United States, and
because IDX is pursuing a strategy of developing and marketing products and
services that support its customers' regulatory and compliance efforts, IDX may
become subject to the reach of, and liability under, these regulations.

The Federal Anti-Kickback Law, among other things, prohibits the direct or
indirect payment or receipt of any remuneration for Medicare, Medicaid and
certain other Federal or state healthcare program patient referrals, or
arranging for or recommending referrals or other business paid for in whole or
in part by the federal health care programs. Violations of the Federal Anti-
Kickback Law may result in civil and criminal sanction and liability, including
the temporary or permanent exclusion of the violator from government health
programs, treble damages and imprisonment for up to five years for each
violation. If the activities of a customer of IDX or other entity with which IDX
has a business relationship were found to constitute a violation of the Federal
Anti-Kickback Law and IDX, as a result of the provision of products or services
to such customer or entity, was found to have knowingly participated in such
activities, IDX could be subject to sanction or liability under such laws,
including the exclusion of IDX from government health programs. As a result of
exclusion from government health programs, IDX customers would not be permitted
to make any payments to IDX.

The Federal Civil False Claims Act and the Medicare/Medicaid Civil Money
Penalties regulations prohibit, among other things, the filing of claims for
services that were not provided as claimed, which were for services that were
not medically necessary, or which were otherwise false or fraudulent. Violations
of these laws may result in civil damages, including treble and civil penalties.
In addition the Medicare/Medicaid and other Federal statutes provide for
criminal penalties for such false claims. If, as a result of the provision by
IDX of products or services to its customers or other entities with which IDX

                                 Page 22 of 29
<PAGE>

has a business relationship, IDX provides assistance with the provision of
inaccurate financial reports to the government under these regulations, or IDX
is found to have knowingly recorded or reported data relating to inappropriate
payments made to a healthcare provider, IDX could be subject to liability under
these laws.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) contains
provisions regarding standardization, privacy, security and administrative
simplification in healthcare. As a result of regulations now proposed under
HIPAA, IDX intends to make investments to support customer operations in areas,
such as:

    o   electronic data transactions;
    o   computer system security; and
    o   patient privacy.

Although it is not possible to anticipate the final form of all regulations
under HIPAA, IDX has made and expects to continue to make investments in product
enhancements to support customer operations that are regulated by HIPAA.
Responding to HIPAA's impact may require IDX to make investments in new products
or charge higher prices. It may be expensive to implement security or other
measures designed to comply with any new legislation or regulation.

The United States Food and Drug Administration has promulgated a draft policy
for the regulation of computer software products as medical devices under the
1976 Medical Device Amendments to the Federal Food, Drug and Cosmetic Act. To
the extent that computer software is a medical device under the policy, IDX, as
a manufacturer of such products, could be required, depending on the product,
to:

    o   register and list its products with the FDA;
    o   notify the FDA and demonstrate substantial equivalence to other products
        on the market before marketing such products; or
    o   obtain FDA approval by demonstrating safety and effectiveness before
        marketing a product.

Depending on the intended use of a device, the FDA could require IDX to obtain
extensive data from clinical studies to demonstrate safety or effectiveness, or
substantial equivalence. If the FDA requires this data, IDX would be required to
obtain approval of an investigational device exemption before undertaking
clinical trials. Clinical trials can take extended periods of time to complete.
IDX cannot provide assurances that the FDA will approve or clear a device after
the completion of such trials. In addition, these products would be subject to
the Federal Food, Drug and Cosmetic Act's general controls, including those
relating to good manufacturing practices and adverse experience reporting.
Although it is not possible to anticipate the final form of the FDA's policy
with regard to computer software, IDX expects that the FDA is likely to become
increasingly active in regulating computer software intended for use in
healthcare settings regardless of whether the draft is finalized or changed. The
FDA can impose extensive requirements governing pre- and post-market conditions
like service investigation, approval, labeling and manufacturing. In addition,
the FDA can impose extensive requirements governing development controls and
quality assurance processes.

SYSTEM ERRORS AND WARRANTIES. IDX's healthcare information systems are very
complex. As with complex systems offered by others, IDX's healthcare information
systems may contain errors, especially when first introduced. IDX's healthcare
information systems are intended to provide information to healthcare providers
for use in the diagnosis and treatment of patients. Therefore, users of IDX's
products may have a greater sensitivity to system errors than the market for
software products generally. Failure of an IDX customer's system to perform in
accordance with its documentation could constitute a breach of warranty and
require IDX to incur additional expenses in order to make the system comply with
the documentation. If such failure is not timely remedied, it could constitute a
material breach under a contract allowing the client to cancel the contract and
subject IDX to liability.

POTENTIAL INFRINGEMENT OF PROPRIETARY RIGHTS OF OTHERS. If any of IDX's products
violate third party proprietary rights, IDX may be required to reengineer its
products or seek to obtain licenses from third parties to continue offering its
products without substantial reengineering. Any efforts to reengineer IDX's
products or obtain licenses from third parties may not be successful, in which
case IDX may be forced to stop selling the infringing product or remove the
infringing functionality or feature. IDX may also become subject to damage

                                 Page 23 of 29

<PAGE>

awards as a result of infringing the proprietary rights of others, which could
cause IDX to incur additional losses and have an adverse impact on its financial
position. IDX does not conduct comprehensive patent searches to determine
whether the technologies used in its products infringe patents held by others.
In addition, product development is inherently uncertain in a rapidly evolving
technological environment in which there may be numerous patent applications
pending, many of which are confidential when filed, with regard to similar
technologies.

LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY. IDX's success and competitiveness
are dependent to a significant degree on the protection of its proprietary
technology. IDX relies primarily on a combination of copyrights, trade secret
laws, patents, and restrictions on disclosure to protect its proprietary
technology. Despite these precautions, others may be able to copy or reverse
engineer aspects of IDX's products, to obtain and use information that IDX
regards as proprietary or to independently develop similar technology.
Litigation may continue to be necessary to enforce or defend IDX's proprietary
technology or to determine the validity and scope of the proprietary rights of
others. This litigation, whether successful or unsuccessful, could result in
substantial costs and diversion of management and technical resources.

RISKS ASSOCIATED WITH ACQUISITION STRATEGY. IDX intends to continue to grow in
part through either acquisitions of complementary products, technologies and
businesses or alliances with complementary businesses. IDX may not be successful
in these acquisitions or alliances, or in integrating any such acquired or
aligned products, technologies or businesses into its current business and
operations. Factors which may affect IDX's ability to expand successfully
include:

    o    the generation of sufficient financing to fund potential acquisitions
         and alliances;
    o    the successful identification and acquisition of products, technologies
         or businesses;
    o    effective integration and operation of the acquired or aligned
         products, technologies or businesses despite technical difficulties,
         geographic limitations and personnel issues; and
    o    overcoming significant competition for acquisition and alliance
         opportunities from companies that have significantly greater financial
         and management resources.

STRATEGIC ALLIANCE WITH ALLSCRIPTS HEALTHCARE SOLUTIONS. In 2001, IDX entered
into a ten-year strategic alliance with Allscripts Healthcare Solutions, Inc. to
cooperatively develop, market and sell integrated clinical and practice
management products.

During the term of the alliance, IDX is prohibited from cooperating with direct
competitors of Allscripts to develop or provide any products similar to or in
competition with Allscripts products in the practice management systems market.
If the strategic alliance is not successful, or the restrictions placed on IDX
during the term of the strategic alliance prohibit IDX from successfully
marketing and selling certain products and services, IDX's operating results may
suffer. Additionally, if Allscripts breaches the strategic alliance, it may also
leave the Company without critical clinical components for its information
systems offerings in the physician group practice markets.

BUSINESS RELATIONSHIP WITH COMPAQ. Compaq Computer Corporation has announced a
proposed merger with Hewlett-Packard Company. Compaq is a leading provider of
hardware and operating system software used by a majority of the applications
offered by the Company. To the extent the merger impacts the product lines that
IDX uses in its product offering, or the development activities of the merged
Compaq/Hewlett-Packard entity, it may adversely affect IDX's ability to continue
to offer its products on the historical hardware platforms. As a result, such
merger could have a material adverse effect upon the business of IDX.

RESTRICTIONS ON LIQUIDATION OF INVESTMENT IN ALLSCRIPTS HEALTHCARE SOLUTIONS. In
January 2001, IDX received approximately 7.5 million shares of common stock of
Allscripts Healthcare Solutions, Inc. in connection with the acquisition by
Allscripts of IDX's majority owned subsidiary, ChannelHealth Incorporated. IDX
entered into a stock rights and restrictions agreement with Allscripts, pursuant
to which, among other things, IDX agreed to restrictions on the sale of its
shares of Allscripts common stock. In general, IDX is prohibited from selling
any shares for one year after the date of Allscripts' acquisition of
ChannelHealth, and after one year, IDX is prohibited from selling more than 25%

                                 Page 24 of 29
<PAGE>

of it shares of Allscripts common stock in any one year, and 16.67% in any one
month. The restrictions on IDX's ability to sell shares of Allscripts common
stock may make it difficult for IDX to liquidate its investment in Allscripts
and may adversely affect the value of such investment.

ANTI-TAKEOVER DEFENSES. IDX's Second Amended and Restated Articles of
Incorporation and Second Amended and Restated Bylaws contain certain
anti-takeover provisions, which could deter an unsolicited offer to acquire IDX.
For example, IDX's board of directors is divided into three classes, only one of
which will be elected at each annual meeting. These provisions may delay or
prevent a change in control of IDX.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

IDX does not currently use derivative financial instruments. The Company
generally places its securities available-for-sale investments in high credit
quality instruments primarily U.S. Government and Federal Agency obligations,
tax-exempt municipal obligations and corporate obligations with contractual
maturities of a year or less. We do not expect any material loss from our
marketable security investments.
Internationally, IDX invoices customers in United States currency. The Company
is exposed to minimal foreign exchange rate fluctuations and does not enter into
foreign currency hedge transactions. Through March 31, 2002, foreign currency
fluctuations have not had a material impact on our financial position or results
of operations.

Investments in both fixed rate and floating rate interest earning instruments
carry a degree of interest rate risk. Fixed rate securities may have their fair
market value adversely impacted due to a rise in interest rates, while floating
rate securities may produce less income than expected if interest rates fall.
Due in part to these factors, our future investment income may fall short of
expectations due to changes in interest rates or we may suffer losses in
principal if forced to sell securities that may experience a decline in market
value due to changes in interest rates. A hypothetical 10% increase or decrease
in interest rates, however, would not have a material adverse effect on our
financial condition.

Interest rates on short term borrowings with floating rates carry a degree of
interest rate risk. Our future interest expense may increase if interest rates
fluctuate. Interest expense was immaterial in 2001 and 2000, and in 1999
amounted to $866,000 related to EDiX's pre-acquisition financing.

Interest income on the Company's investments is included in "Other Income." The
Company accounts for cash equivalents and securities available-for-sale in
accordance with Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities." Cash equivalents are
short-term highly liquid investments with original maturity dates of three
months or less. Cash equivalents are carried at cost, which approximates fair
market value. The Company's investments are classified as securities
available-for-sale and are recorded at fair value with any unrealized gain or
loss recorded as an element of stockholders' equity.

                                 Page 25 of 29
<PAGE>


PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On January 18, 2001, the Company commenced a lawsuit against Epic Systems
Corporation, a competitor of the Company, the University of Wisconsin Medical
Foundation (the Foundation), and two individuals, claiming, among other things,
that trade secrets of the Company involving its IDXtend medical group practice
system were wrongfully disclosed to, and misappropriated by, Epic, in a series
of meetings that took place in 1998 and 1999. The defendants deny the Company's
claims. The Company's lawsuit seeks damages and injunctive relief and was
brought in the United States District Court for the Western District of
Wisconsin and is entitled, IDX Systems Corporation v. Epic Systems Corporation,
et al. The Foundation brought a counterclaim against the Company claiming that
its lawsuit interferes with a contract between the Foundation and Epic, and that
the confidentiality provisions in IDX's contracts with the Foundation are
invalid. The counterclaim seeks damages and declaratory judgment. The Company
denies the counterclaim.

Subsequently, Epic filed an Answer denying the essential elements of the
Company's claims, and asserted counterclaims against the Company. Epic alleges
that the Company's claims asserting its trade secret rights were brought in bad
faith, with an intent to injure Epic competitively, and thereby violated
Sections 1 and 2 of the Sherman Act because the Company allegedly possesses
monopoly power in the U.S. market for medical practice information systems. Epic
also claims that this same alleged conduct constitutes intentional interference
with its contract with the Foundation. The counterclaim seeks treble damages.
The Company denies the counterclaims. On July 31, 2001, the Company's lawsuit
against Epic, the Foundation and the individuals was dismissed and the
counterclaims of Epic and the Foundation were dismissed. The Company appealed
the dismissal of its lawsuit to the United States Court of Appeals, and on April
1, 2002, that appellate court affirmed the District Court's dismissal of the
trade secret claim, but reversed and remanded the other related claims of the
Company, including breach of contract and tortious interference claims against
the defendants. The Company intends to vigorously pursue such remanded claims at
the District Court. It has resumed its discovery efforts in anticipation of
trial, which has been scheduled to begin in September.

In April 2000, the Company commenced a lawsuit for damages caused by wrongful
cancellation and material breach of contract by St. John Health System (SJHS),
in the United States District Court for Eastern District of Michigan, entitled
IDX Systems Corporation v. St. John Health System. Subsequently, SJHS commenced
a lawsuit against the Company in the Circuit Court of Wayne County, Michigan,
claiming unspecified damages against the Company for anticipatory repudiation,
breach of contract, tort and fraud. On motion of the Company, SJHS's lawsuit was
removed to and consolidated in the federal court. In its answer to the Company's
lawsuit, SJHS asserted the same claims previously asserted in its state court
action. In September 2001, SJHS specified damage claims of approximately $77
million in allegedly lost savings, and in January 2002 raised another theory of
alleged unspecified damages for "cover". The Company believes the claims of SJHS
are without merit and continues to vigorously defend itself and prosecute its
own claims for damages, which the Company believes may exceed approximately $9
million. The lawsuit is in the trial preparation stage and the parties are
awaiting scheduling of the trial by the court.

From time to time, the Company is a party to or may be threatened with other
litigation in the ordinary course of its business. The Company regularly
analyzes current information including, as applicable, the Company's defenses
and insurance coverage and as necessary, provides accruals for probable and
estimable liabilities for the eventual disposition of these matters. The
ultimate outcome of these matters is not expected to materially affect the
Company's business, financial condition or results of operations.

                                 Page 26 of 29

<PAGE>



ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

           None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

           Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            None.

ITEM 5.  OTHER INFORMATION

         Shareholder's Proposal for 2003 Annual Meeting.

         As set forth in the Company's Proxy Statement for its 2002 Annual
         Meeting of Stockholders, proposals of stockholders intended to be
         included in the Company's proxy statement for the 2003 Annual Meeting
         of Stockholders must be received by the Company at its principal office
         in South Burlington, Vermont not later than December 23, 2002.

         Stockholders who wish to make a proposal at the 2003 Annual
         Meeting--other than one that will be included in the Company's proxy
         materials--must notify the Company no later than March 8, 2003. If a
         stockholder who wishes to present a proposal fails to notify the
         Company by this date, the proxies that management solicits for the
         meeting will have discretionary authority to vote on the stockholder's
         proposal if it is properly brought before the meeting.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  The exhibits filed as part of this Form 10-Q are listed on the Exhibit
     Index immediately preceding such exhibits, which Exhibit Index is
     incorporated herein by reference:

(b)  There were no Forms 8-K filed during the first quarter of 2002.




                                 Page 27 of 29



<PAGE>



                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                    IDX SYSTEMS CORPORATION



                                        /S/ JOHN A. KANE
Date:  May 10, 2002                By:  ____________________________________
                                        John A. Kane,
                                        Sr. Vice President, Finance and
                                        Administration, Chief Financial
                                        Officer and Treasurer
                                        (Principal Financial and
                                        Accounting Officer)




                                 Page 28 of 29
<PAGE>



                                  EXHIBIT INDEX

         The following exhibits are filed as part of this Quarterly Report on
Form 10-Q:
<TABLE>
<CAPTION>

Exhibit No.       Description                                        Page
-----------       -----------                                        ----
<S>               <C>                                                <C>

10.1 *            Employment, Noncompetition and Nondisclosure       30
                  Agreement by And between IDX Systems Coporation
                  and Thomas Butts dated January 14, 2002.


10.2              2002 Stock Incentive Plan for Non-Employee         46
                  Directors.


</TABLE>



*                 Confidential treatment requested as to certain portions, which
                  are omitted and filed separately with the Securities and
                  Exchange Commission.


                                 Page 29 of 29

<PAGE>





CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.  ASTERISKS DENOTE OMISSIONS.


                                   [IDX LOGO]

             EMPLOYMENT, NONCOMPETITION AND NONDISCLOSURE AGREEMENT


                  THIS AGREEMENT is made by and between IDX SYSTEMS CORPORATION,
a Vermont corporation ("the Company") and the undersigned (the "Employee") as of
the date of  acceptance  hereof by the  Company in its  offices  in  Burlington,
Vermont,  and it shall be effective on, and the Employee  will begin  employment
on, January 14, 2002 (the  "Effective  Date").  References to the Employee using
the masculine  gender in this Agreement  shall be deemed to include the feminine
gender and vice versa.

                                  BACKGROUND

                  The Employee desires to become employed by the
           Company. The Company desires to employ the Employee, and the
           Employee is willing to accept such employment, upon the terms
           and conditions hereinafter set forth.

                  The Employee acknowledges that in the course of
           rendering services to the Company, he may have and will become
           acquainted with information about the business and financial
           affairs of the Company, and may have contributed or may in the
           future contribute to such information. The Employee recognizes
           that in order to protect the legitimate interests of the
           Company it is necessary for the Company to protect all such
           information by keeping it secret or confidential.

                  IN CONSIDERATION of the premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

                  1.       EMPLOYMENT

                           1.1 Employment at Will The Company hereby offers the
                               ------------------
Employee,  and Employee hereby accepts,  employment or continued employment upon
the terms and  conditions  hereinafter  set forth.  Employment by the Company is
terminable  at any time,  for any reason,  at the will of either the Employee or
the Company.  No statement of policy or procedure,  whether  written or oral, or
set forth in any manual or guide,  shall be a promise by the Company to continue
employment  for any  definite  term,  nor  shall any such  statement,  policy or
procedure  require  the  Company  to  follow  any  special  procedure,  such  as
progressive discipline, before terminating employment.

                           1.2 Location The Employee will work at the Company's
                               --------
offices in Boston, Massachusetts.

                           1.3 Exclusive  Employment The Employee shall devote
                               ---------------------
his/her full-time efforts exclusively for the benefit of the Company as required
hereunder,  and shall perform no services for, and shall not become  employed or
engaged by any other person,  firm or entity while employed by the Company.  The
foregoing  shall not  prevent  Employee  from  participating  in  activities  in
association with professional associations as approved by the Company.

                           1.4 Duties The  Employee,  shall have such duties as
                               ------
are typically performed by a division President of a company of similar size and
type  as  the  Company,  which  shall  be as  assigned  by  the  Company  in its
discretion,  and at all times  he/she  shall be  subject  to the  direction  and

<PAGE>

control of the officers and the Board of Directors of the Company. The duties of
the  Employee  as of the date of this  Agreement  shall  be as set  forth on the
official job description attached hereto as Exhibit I for the position indicated
below the Employee's signature line at the end of this Agreement.

                  2.       COMPENSATION

                           As the only and the  full  compensation  for all of
the services to be provided by the Employee to the Company,  the Company  agrees
to pay, and the Employee agrees to and does accept, the following:

                           2.1  Salary  The  Company  shall  pay to the
                                ------
Employee an annual base Salary of $275,000 per year (the "Salary"), which may be
increased  by the  Company on an annual  basis in a manner  consistent  with its
annual  compensation  review but may not be decreased.  The Salary shall be paid
semi-monthly on the fifteenth (15th) and last days of each month, in arrears, or
on such other  legal basis as the Company  shall  generally  follow from time to
time,  net of all taxes  and other  legally  permissible  withholdings.  In this
regard,  the  Employee  hereby  authorizes  the Company to withhold  from Salary
payments  any amounts  owed to the Company by  Employee  hereunder  or any other
amounts  as may be agreed to  subsequently,  including  but not  limited to over
payments, 401k contributions, and loan payments.

                           2.2 Benefits The Employee  shall be entitled to the
                               --------
benefits,  such as health,  insurance,  paid and unpaid leave as the Company may
from time to time  offer to other  similarly  situated  employees  as a standard
benefit.  Benefits  are  subject  to  change  at any time  with  such  notice to
employees  as may be  required by  applicable  employee  benefit  plans and laws
governing them. No special or different terms shall apply to Employee unless set
forth in writing and signed by an authorized  executive  officer of the Company.
In addition,  Employee shall be entitled to five weeks (200 hours) paid vacation
per calendar year.

                           2.3 Bonuses The Employee shall receive a $75,000
                               -------
one-time sign-on bonus (the "Sign-On Bonus"),  which shall be paid in a lump sum
to the Employee on January 31, 2002.  In addition the Employee  shall receive an
annual  incentive  bonus (the  "Incentive  Bonus") based upon the  attainment of
performance  goals set forth in a performance  plan to be mutually  agreed to by
the Company and the Employee  within 90 days of the  beginning of each  calendar
year.  Notwithstanding  the forgoing,  the performance  goals for 2002, 2003 and
2004 are set forth on Schedule A attached hereto.  Except as otherwise  provided
herein,  the Sign-On Bonus and the Incentive  Bonus shall not be payable  unless
the Employee is actually  employed by the Company and is in good standing on the
date of actual  distribution.  The Incentive Bonus shall be paid to the Employee
not later than February 28 of the year  following the  applicable  bonus year in
which the Incentive Bonus is earned.

                           2.4  Authorization  to Deduct from Wages If at
                                -----------------------------------
separation of employment (a) the Company has advanced paid leave to the Employee
before the Employee has accrued such leave, (b) the Employee has failed to repay
any  money  the  Company  has  loaned  to the  Employee  during  the  course  of
employment,  or (c) the Employee is required  pursuant to a written agreement to
reimburse the Company for relocation and moving costs,  the Employee  authorizes
the Company to deduct from the Employee's  wages  sufficient funds to repay such
advances,  loans, or relocation/moving  costs, subject to applicable federal and
state wage laws.

                           2.5 Equity  Awards The  Employee  shall be granted
                               --------------
the  number of  options  to  purchase  common  stock as set forth on  Schedule B
attached  hereto,  under and subject to all of the terms and  conditions  of the
Company's 1995 Stock Option Plan or its successor, Schedule B, and the Company's
form of Stock  Option  Agreement.  Such  issuances  and grants  will not be made
unless the Employee is actually  employed by the Company and is in good standing
on the date of grant or issuance, as applicable.

                                  Page 2 of 16

<PAGE>

                           2.6  Supplemental  Retirement  Benefit The Employee
                                ---------------------------------
will be among  the  executives  of the  Company  entitled  to the  benefit  of a
Supplemental  Retirement  Benefit  Plan,  if and when  adopted  by the  Company.
Additionally,  the Company shall provide certain  assurances with respect to the
accumulated  equity value in the options of common stock granted to the Employee
as described in Schedule D attached hereto.

                  3.       DEFINITION OF PROPRIETARY INFORMATION

                           For purposes of this Agreement the term "Proprietary
Information"  means all of the following  materials and  information in whatever
form or medium  (even if not  patentable,  or not  protectable  or  protected by
copyright  laws) which the  Employee  receives  access to,  creates,  authors or
develops,  in whole or in part, in the course of and within the scope of his/her
employment  with  the  Company  or  through  the  use of  any  of the  Company's
facilities or resources:

                           3.1 Computer Software  Computer  programs,  in any
                               -----------------
form,  and all elements  thereof,  including all source and object  codes,  flow
charts,  algorithms,  coding sheets,  compilers,  assemblers,  programmer notes,
design documents, and routines.

                           3.2 Research  Discoveries,  concepts and ideas,
                               --------
whether or not  patentable  or  protectable  by  copyright,  including,  without
limitation,  the nature and  results of  research  and  development  activities,
technical  information  on  product  or  program  performance  and  reliability,
processes, formulas, techniques, and "know-how."

                           3.3  Marketing  and Customer  Information  Price
                                ------------------------------------
lists, pricing policies, quoting procedures, financial information, customer and
prospect  names and  requirements,  customer  data,  customer site  information,
propsect and call lists, telephone directories and calendars.

                           3.4  Business  Information   Production  development
                                ---------------------
processes,   marketing  techniques,   mailing  lists,   purchasing  information,
financial statements, management reports and business plans.

                           3.5 Other Any other  materials or  information
                               -----
related to the business or  activities  of the Company  which are not  generally
known to others engaged in similar business or activities.

                           Failure to mark any of the Proprietary  Information
as  confidential  shall  not  affect  its  status  as  part  of the  Proprietary
Information under the terms of this Agreement.

                  4.       DISCLOSURE OF INFORMATION, WORKS AND MATERIALS

                           The Employee  recognizes  that he/she will be exposed
to the Company's  confidential  information  including  without  limitation  the
Company's trade secrets, and confidential business information.  The Employee is
hereby notified that such information  includes all computer programs  developed
by the Company and the documentation for them.  Further,  this includes business
information,  such as price lists, customer lists and databases, business plans,
sales   projections  and  product   development   plans.  The  Employee  further
acknowledges  that any  information  and materials  received by the Company from
third  parties in  confidence  must be  treated  confidentially.  This  includes
patient information. Employee covenants and agrees that he/she shall not, except
with the prior written consent of the Company,  or as required by law or a court
of  competent  jurisdiction,  or unless the Employee is acting as an employee of
the  Company  solely for the  benefit  of the  Company  in  connection  with the
Company's  business and in accordance with the Company's  business practices and
employee  policies,  at any  time  during  or  following  the  term  of  his/her
employment with the Company,  directly or indirectly  divulge,  reveal,  report,
publish,  transfer  or  disclose,  for  any  purpose  whatsoever,  any  of  such

                                  Page 3 of 16

<PAGE>

confidential information which has been obtained by or disclosed to him/her as a
result of his/her employment with the Company,  including,  without  limitation,
any Proprietary Information, as defined in Section 3 hereof.

                  5.       OWNERSHIP OF INFORMATION, WORKS AND RIGHTS THEREIN

                           5.1 Title The Employee  hereby  assigns and
                               -----
transfers  to the Company and agrees that the Company  shall be the owner of all
inventions,    discoveries,   work,   computer   software   program   or   other
computer-related equipment or technology,  conceived,  developed, or made by the
Employee,  either  alone  or with  others,  in  whole  or in  part,  during  the
Employee's  employment  by the  Company,  which are  useful in, or  directly  or
indirectly  related  to the  Company's  business  or  which  relate  to,  or are
conceived,  developed,  or made in the course of, the  Employee's  employment or
which are  developed or made from, or by reason of knowledge  gained from,  such
employment . If any one or more of the  aforementioned are deemed to fall within
the  definition of "work made for hire," within the meaning of the Copyright Act
of 1976,  as amended,  such work shall be  considered  "work made for hire," the
copyright of which shall be exclusively  owned by and vested in the Company.  If
any  of the  aforementioned  are  considered  to be  work  not  included  in the
categories of work covered by the "work made for hire"  definition  contained in
the Copyright Act, such work shall be, and it hereby is, assigned or transferred
completely and  exclusively to the Company.  The Employee  agrees to execute any
instruments and to do all other things reasonably requested by the Company (both
during and after the Employee's  employment  with the Company) in order to fully
vest and  perfect in the  Company all  ownership  rights in those  items  hereby
transferred  by the Employee to the  Company.  The  Employee  further  agrees to
disclose  immediately to the Company all  Proprietary  Information  conceived or
developed in whole or in part by him/her  during the term of his/her  employment
with the  Company  and to assign to the  Company  any right,  title or  interest
he/she may have in such Proprietary Information.

                           5.2 Employee's  Works The Employee  hereby
                               -----------------
represents and warrants that the Employee has fully disclosed to the Company and
attached hereto a description of any computer program or other  computer-related
technology not covered in Section 5.1 above which,  prior to his/her  employment
with the Company, the Employee conceived of or developed, wholly or in part, but
which has not been published or filed with the United States Patent or Copyright
Offices.

                           5.3 Works and Interests of Others  Employee  hereby
                               -----------------------------
represents  and  warrants  that  employment  by the Company will not violate any
agreement or promise of employee to any other person, and that Employee will not
use any property or  confidential  information of others in his/her work for the
Company.

                  6.       RECORDS AND TANGIBLE MATERIALS

                           All notes, data, tapes, reference materials,
sketches,  drawings,  memoranda  and  records in any way  relating to any of the
information  referred  to in  Section  3,  4 and 5  hereof  (including,  without
limitation,  any Proprietary  Information) or otherwise  prepared by Employee in
the  course  of  his/her  employment,  and  all  copies  thereof,  shall  belong
exclusively to the Company, and the Employee agrees to deliver to the Company on
request all copies of such materials in his/her possession or then under his/her
control. In the absence of such a request,  Employee shall deliver such items to
the Company upon the  termination  for any reason of the  Employee's  employment
with the Company.

                  7.       PROTECTION OF INFORMATION AND GOODWILL

                           7.1 Nature of Business  Employee  and the Company
                               ------------------
recognize  that Employee  will acquire  knowledge as a result of working for the
Company,  and that such knowledge will include not only general knowledge of the
medical  information  systems business,  but specific knowledge of the Company's
business,  secrets, products and customers,  including Confidential Information.

                                  Page 4 of 16

<PAGE>

Employee and the Company  recognize  that upon  termination of employment by the
Company,  Employee  could use such  specific  knowledge and  information  to the
detriment  of  the  Company  by  disclosing  it to  competitors,  customers  and
prospects,  and using it to obtain or win  business.  Employee  and the  Company
recognize that proof of such disclosure would be difficult,  yet the harm caused
thereby could be significant to the Company. Therefore, Employee and the Company
are  willing  to  agree  that  Confidential  Information  will be  disclosed  to
Employee,  and, to protect Employer,  its relationship  with its customers,  its
competitive  position,  and  its  goodwill,   Employee  will  not  engage  in  a
competitive  venture for a reasonable time after  employment by the Company,  as
set forth below.

                           7.2  Competitive  Ventures  The  Company is engaged
                                ---------------------
throughout  the United States in the  development  and marketing of  information
systems,  including  computer  software  and related  services,  for  hospitals,
physician  groups,  laboratories,   and  clinics,  and  also  for  providers  of
information  services to such groups  (such  activities,  products  and services
being  referred  to  herein  as the  "Medical  Information  Systems  Business").
Employee recognizes that the Company's medical information systems work together
and are designed to share common  files,  architectures,  a "look and feel," and
other  elements.  In the  event  of the  termination  of  Employee's  employment
hereunder for any reason,  the Employee  agrees that for a period of twelve (12)
months from the date of such termination (the "Prohibition Period"), he/she will
not:

                                    7.2.1 Engage directly for  himself/herself,
or jointly  with or on behalf of any person,  entity or venture  involved in the
Medical Information Systems Business, or any other business in which the Company
was engaged at the time of such termination of employment, and

                                    7.2.2 Work for or become  employed by or
associated with any person, entity or venture engaged in the Medical Information
Systems  Business,  including,  by way of example  and without  limitation,  the
entities  listed in  Schedule C attached  hereto and made a part  hereof  (which
entities  together with their successors and assigns,  are referred to herein as
the  "Designated  Entities"),  where  either (i) the  Employee's  duties will be
substantially  similar to those he/she has performed for the Company  hereunder,
or (ii) the Employee's duties would be likely to involve,  or require,  or would
involve or require,  disclosure or use of Proprietary Information.  For example,
and without limiting the generality of the foregoing, if Employee is employed by
the Company as a computer  programmer  working on medical  information  systems,
he/she shall not, during the Prohibition  Period,  work as a computer programmer
on medical  information  systems. As another example, if Employee is employed by
the Company as a salesperson  selling  medical  instruments  or Systems,  he/she
shall not work  during the  Prohibition  Period as a salesman  or a marketer  of
medical information systems.

                           7.3  Geographical  Limitations  The  Employee's
                                -------------------------
obligations under this Section 7 shall extend to all geographical areas in which
the  Company,  or  any of its  related  companies,  is  offering  its  products'
services,  either directly or indirectly  through licenses or otherwise,  during
the Prohibition Period.

                           7.4  Non-Solicitation  The Employee  further agrees
                                ----------------
that for a period of twelve (12) months from the date of  termination of his/her
employment,  he/she  will not,  on behalf of  himself/herself  or any  person or
entity of the Company,  (i) compete for, or engage in  competitive  solicitation
of, any customer of the Company, or any person or entity that he/she has, during
the twelve (12) months  immediately  preceding  such  termination,  solicited or
serviced on behalf of the  Company or that has been so  solicited  or  serviced,
during such period, by any person under the Employee's supervision, or (ii) hire
or engage or attempt to hire or engage any individual who was an employee of the
Company at any time  during the twelve  (12)  months  immediately  prior to such
termination.

                           THE EMPLOYEE  REPRESENTS  AND  WARRANTS  THAT THE
KNOWLEDGE,  SKILLS AND  ABILITIES  HE/SHE  POSSESSES  ARE  SUFFICIENT  TO PERMIT
HIM/HER,  IN THE EVENT OF  TERMINATION OF HIS/HER  EMPLOYMENT  HEREUNDER FOR ANY

                                  Page 5 of 16
<PAGE>

REASON,  TO EARN A LIVELIHOOD  SATISFACTORY  TO HIM/HER  WITHOUT  VIOLATING  ANY
PROVISION OF SECTION 7 HEREOF.

                  8.       INJUNCTIVE RELIEF

                           The Employee understands and agrees that the Company
will probably suffer  irreparable harm if Proprietary  Information is disclosed,
and that monetary  damages will be inadequate to compensate the Company for such
breach.  Accordingly,  the  Employee  agrees  that,  in the event of a breach or
threatened  breach by the Employee of Section 4 of this Agreement,  the Company,
in addition to and not in limitation  of any other  rights,  remedies or damages
available to the Company at law or in equity,  will be entitled to, and Employee
hereby  consents to, an  injunction  in order to prevent or to restrain any such
breach by the Employee, or by the Employee's partners, agents,  representatives,
servants, employers, employees and/or any and all persons directly or indirectly
acting for or with him/her.

                  9.       REASONABLENESS OF RESTRICTIONS

                           The Employee has carefully read and considered the
provisions  of Sections 1 through 9 hereof and,  having done so, agrees that the
restrictions  set  forth  therein  are fair and  reasonable  and are  reasonably
required for the  protection  of the  interests of the  Company,  its  officers,
directors, stockholders and employees.

                  10.      SUCCESSORS AND ASSIGNS

                           This Agreement shall inure to the benefit of and be
binding upon the Employee,  his/her legal  representative or representatives and
testate or intestate distributees, and this Agreement shall inure to the benefit
of and be  binding  upon the  Company,  its  successors  and  assigns.  The term
"Company" as used herein  shall  include  such  successors  and assigns and also
shall include any corporation which is at any time the parent or a subsidiary of
the Company,  or any  corporation or entity which is an affiliate of the Company
by  virtue of  common  (although  not  identical)  ownership,  and for which the
Employee is providing  services in any form during his/her  employment  with the
Company or any such other corporation or entity. The term successors and assigns
as used herein shall  include a  corporation  or other entity  acquiring  all or
substantially  all of the assets and  business  of the Company  (including  this
Agreement) whether by operation of law or otherwise.

                  11.      NOTICES

                           Any notice required or permitted by this Agreement
shall be given by  registered  or  certified  mail,  return  receipt  requested,
addressed  to the Company at its then  principal  office,  or to the Employee at
his/her then current address set forth in the payroll records of the Company, or
to either  party  hereto at such other  address or addresses as he/she or it may
from time to time specify for the purpose in a notice similarly given.

                  12.      ENFORCEABILITY AND SCOPE

                           If any provision of this Agreement is  subsequently
determined by a court of competent  jurisdiction to be void or unenforceable for
any reason,  that  provision  shall be deemed  stricken and the remainder of the
Agreement  shall not be affected  thereby and shall be binding  upon the parties
hereto insofar as it remains a workable  instrument to accomplish the intent and
purposes of the parties.  The parties shall  negotiate the severed  provision to
bring the same within the applicable legal  requirements to the extent possible.
Employee  agrees  to take any and all  actions,  including  without  limitation,
execution and delivery of any and all  instruments  and  documents  necessary or
advisable to complete, perfect, evidence or otherwise confirm any of the matters
set forth herein.

                                  Page 6 of 16

<PAGE>

                  13.      TERM AND OTHER CONDITIONS

                           13.1 Terms This  Agreement  shall remain in full
                                -----
force and effect until the Employee's  employment by the Company terminates,  or
until  superseded by another  written  employment  agreement based upon good and
proper  consideration  and executed by the  Employee and the Company,  whichever
first occurs.  Notwithstanding the foregoing, in the event of the termination of
this Agreement by reason of the termination of the Employee's employment,  those
provisions  hereof  which by their terms  extend in  accordance  with such terms
shall survive.  No amendment or modification of the terms and conditions  hereof
shall be effective unless set forth in a written document signed by the Employee
and the Company. As used in the Agreement,  words of the masculine shall, as the
context required, include the feminine.

                           13.2  Termination of Employment by the Company
                                 ----------------------------------------

                                 13.2.1  Notwithstanding  anything  in  this
Agreement to the contrary,  in the event the Company  terminates  the Employee's
employment other than for Cause (as defined below),  or the Employee  terminates
employment  pursuant  to Section  13.3  hereinbelow  for Good Reason (as defined
below), the Employee shall be entitled to receive:

                                         (a) all amounts fully earned  pursuant
to the  terms  of this  Agreement,  but  unpaid  hereunder  through  the date of
termination,  if any, in respect of Salary,  Sign-On  Bonus,  any vested amounts
under any pension or similar  benefit plan, and accrued but unused  vacation and
unreimbursed expenses (the "Accrued Obligations");

                                         (b) all  outstanding  and  unvested
options  granted to the Employee prior to the date of termination  that by their
terms would become exercisable within the twelve month period following the date
of  termination  shall become  vested and  immediately  exercisable  (and,  with
respect to all such options and previously vested but unexercised  options,  the
exercise  period  shall be  extended  to the  first  anniversary  of the date of
termination);

                                         (c) in the event the Employee's
termination  of  employment  occurs  within the  twenty-four  (24) month  period
following the Effective  Date, the Company shall pay the Employee's  base Salary
for  twenty-four  (24) months in a lump sum within 30 days following the date of
termination at the rate in effect immediately prior to the date of termination;

                                         (d)  in the  event  the  Employee's
termination occurs after the twenty-four (24) month anniversary of the Effective
Date, the Company shall (A) pay the Employee's base Salary for twelve(12) months
in a lump sum within 30 days  following the date of  termination  at the rate in
effect  on the  date  immediately  prior  to the  date of  termination,  and (B)
notwithstanding  Section  2.3  herein,  the  Company  shall pay the  Employee  a
pro-rata  Incentive Bonus for the year in which termination  occurs,  based upon
(i) the ratio of the number of days  worked  from  January 1 through the date of
termination,  to 365, and (ii) the actual performance  incentive bonus earned by
the Employee for the year prior to the year in which the  termination  occurred;
and

                                         (e) the Company  shall make  available
health care coverage  under COBRA as required by law, and  contribute for twelve
(12)  months,  a monthly  amount  toward that  coverage  equal to the  Company's
contribution  for an  employee  selecting  such  coverage,  and,  to the  extent
allowable  under  its  employee  insurance  programs,  make  available,  at  the
Employee's expense,  coverage under such programs, and the Company shall provide
outplacement  program  services  to the  Employee  (up  to an  amount  equal  to
$10,000).

                                 13.2.2 The Employee  acknowledges  that the
foregoing  payments  shall  satisfy  any and all claims of any kind and  nature,
including  without  limitation  claims  for  compensation  to  which  he  may be

                                  Page 7 of 16
<PAGE>

entitled,  in the event the Company  terminates the Employee's  employment other
than for Cause, and agrees to execute and deliver a full and complete release of
claims simultaneously with the receipt of any such payments.

                                 13.2.3 For purposes of this  Agreement,
"Cause" shall mean and shall be strictly  limited to (i) the Employee's  willful
and continued  failure to substantially  perform his reasonably  assigned duties
(other than any such failure resulting from incapacity due to physical or mental
illness or any failure after the Employee gives notice of  termination  for Good
Reason),  which  failure is not cured  within  thirty  (90) days after a written
demand  for  substantial  performance  is  received  by the  Employee  from  the
President and COO of the Company  which  specifically  identifies  the manner in
which the President and COO believe the Employee has not substantially performed
the  Employee's  duties;  or (ii) the Employee's  willful  engagement in illegal
conduct or gross misconduct  which is materially and  demonstrably  injurious to
the Company.

                           For purposes of this Section 13.2.3, no act or
failure to act by the Employee shall be considered  "willful" unless it is done,
or omitted  to be done,  in bad faith and  without  reasonable  belief  that the
Employee's action or omission was in the best interests of the Company.

                           13.3  Termination  by Employee for Good Reason This
                                 ----------------------------------------
Agreement may be terminated by the Employee for "Good  Reason".  For purposes of
this Agreement,  "Good Reason" shall mean and shall be strictly limited to (i) a
breach by the Company of any of its material  obligations  under this Agreement,
provided Employee gives the Company written notice specifying the means in which
he believes the Company has breached  this  Agreement and the Company has ninety
(90) days from  receipt of such  notice to cure such  breach,  or in the case of
other than a non-payment of money breach,  if such breach cannot be cured within
ninety (90) days, to commence a good faith effort to cure which shall effectuate
a cure within an additional ninety (90) day period,  (ii) a material  diminution
in the Employee's title,  position,  authority,  duties or responsibilities,  or
(iii) a change by the Company in the location at which the Employee performs his
principal duties to a new location that is more than thirty-five (35) miles from
that existing location or (iv) a reduction in the Employee's Salary.

                           13.4  Resignation by the Employee  Notwithstanding
                                 ---------------------------
anything in this  Agreement to the contrary,  in the event the Employee  resigns
his  employment  prior to the fourth  anniversary  of the date of this Agreement
other than for Good Reason,  all outstanding  but  unexercised or  unexercisable
options granted prior to the date of such resignation shall expire in accordance
with the terms of their  respective  option  agreements.  In the event  that the
Employee's  employment is terminated due to the Employee's  resignation from the
Company  other than for Good Reason,  the Company  shall pay to the Employee the
Accrued Obligations.

                           13.5  Death or Disability  In the event that the
                                 -------------------
Employee's  employment is terminated due to the Employee's  death or disability,
the Company  shall pay to the Employee  (or his estate,  as the case may be) the
Accrued  Obligations,  and any payment  earned by the  Employee  pursuant to the
incentive bonus plan described on Schedule A.

                           13.6  Cause  In the event that the Employee's
                                 -----
employment  is terminated  for Cause,  the Company shall pay to the Employee the
Accrued Obligations.

                  14.      ARBITRATION

                           Any dispute between the Company and the Employee
arising out of or in any manner  connected with employment
or employment practices, including but not limited to claims of discrimination
of any kind and wrongful discharge, under state, federal or local law, shall be
submitted to binding arbitration in accordance with the rules of the American
Arbitration Association, to be conducted in Burlington, Vermont, except however,
any dispute arising under Sections 4, 5, 6 and 7 of the Agreement, which, at the
Company's option, may be litigated as set forth in Section 15 below.

                                  Page 8 of 16

<PAGE>


                  15.      GOVERNING LAW AND FORUM; LEGAL FEES

                           Employee  acknowledges  that IDX has employees
located in various states, and that it is important to have consistent  policies
and laws apply to them insofar as matters  relating to employment are concerned.
Employee  acknowledges  that  consistency  in  employment  policy is  beneficial
because results will be predictable  and all employees will be treated  equally.
Therefore,  Employee and the Company agree that this Agreement shall be governed
by and construed in  accordance  with the internal laws of the State of Vermont,
and any legal  proceeding  regarding the  interpretation  or enforcement of this
Agreement  shall be  instituted  in a court of  competent  jurisdiction  located
within the State of  Vermont.  The  Company  will  reimburse  the  Employee  for
reasonable legal fees incurred by him in connection with the initial  employment
contract review.

                  16.      ENTIRE AGREEMENT

                           This instrument  contains the entire agreement of the
parties  relating to the subject matter  hereof,  and it supersedes any prior or
contemporaneous oral or written  understandings of any kind or nature.  Employee
represents  that  he/she is not  relying  on any  agreement,  representation  or
warranty pertaining to the subject matter hereof that is not expressly set forth
herein.  The waiver or breach of any term or condition of this  Agreement  shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition.

                           EXECUTED on the date(s) indicated below.


WITNESS/ATTEST:                       IDX SYSTEMS CORPORATION:


/S/ BONITA L. STEWART                 By: /S/ JAMES H. CROOK, JR.
-----------------------                  ---------------------------------------
                                         James H. Crook, Jr.
                                         President

                                         Date:   01/14/02
                                           -------------------------------------



WITNESS/ATTEST:                       EMPLOYEE:


/S/ NANETTE W. O'LEARY                   By: /S/ THOMAS W. BUTTS
------------------------                 ---------------------------------------
                                         Thomas Butts
                                         President/General Manager
                                         Enterprise Solutions Division


                                      Date:   1-14-2002
                                           -------------------------------------



                                  Page 9 of 16

<PAGE>


                                   SCHEDULE A

                             INCENTIVE BONUS TARGET

The incentive bonus target (representing approximately 40% of the Employee's
Salary) will be $110,000 and the maximum potential bonus (representing
approximately 70% of the Employee's Salary) will be $190,000. The components of
Employee's incentive bonus plan are:

1)       $17,000 (approximately 15% of the incentive bonus target) based upon
         quarterly attainment of ESD revenue - $4,250 per quarter.
2)       $9,000 (approximately 8% of the incentive bonus target) based upon
         quarterly attainment of accounts receivable in terms of days sales
         outstanding (dso) for ESD customers - to be determined.
3)       $48,000 (approximately 44% of the incentive bonus target) based upon
         annual attainment of ESD operating profit objective.
4)       $36,000 (approximately 33% of the incentive bonus target) based upon
         IDX achieving its profit objectives.  This bonus will be earned if IDX
         exceeds $[*] in operating profit. For every $[*] of operating
         profit over $[*], Employee will receive $1,000.
5)       An additional amount based upon exceeding the ESD operating profit
         objective, calculated in accordance with the "Excess Calculation
         Formula" as outlined below. The ESD profit objective for:
                  2002 is a $[*] profit
                  2003 is a $[*] profit
                  2004 is a $[*] profit
         Excess Calculation Formula - for excess ESD operating profit of:
                  $[*] - $[*], Employee will receive 2%
                  $[*] - $[*], Employee will receive 4%
                  $[*]+, Employee will receive 6%

The Company shall guarantee  $55,000 of the above described incentive bonus for
2002 .



                                 Page 10 of 16

<PAGE>


                                   SCHEDULE B

                               STOCK OPTION AWARDS



                           1. As of the Effective  Date,  the Employee will
receive a stock option grant to purchase  100,000  shares of the common stock of
the Company , with an exercise  price equal to the average  market  price on the
Effective Date.  This grant will vest and become  exercisable at a rate equal to
25% per year over four years.

                          2. On  February  1,  2003  and  continuing  annually
thereafter,  Employee will be eligible to receive additional stock option grants
to purchase  the common  stock of the  Company  based upon the  previous  year's
financial performance for the Company's Enterprise Solution Division ("ESD"). If
the operating profit of ESD is:

        1) 90% of target, the Employee will receive a stock option to purchase
           20,000 IDX shares of Company common stock
        2) 100% of target, the Employee will receive stock option to purchase
           30,000 shares of Company common stock
        3) 110% of target, the Employee will receive a stock option to purchase
           35,000 shares of Company common stock
        4) 120% of target, the Employee will receive a stock option to purchase
           40,000 shares of Company common stock

                           These option grants described in paragraph 2 above
will be granted with an exercise  price equal to the average market price on the
date of grant, and such options will vest and become exercisable at a rate equal
to 25% per year over four years.


                                 Page 11 of 16

<PAGE>


                                   SCHEDULE C


                       NON-EXCLUSIVE LIST OF COMPETITORS

                  The following, though not all-inclusive, is a listing of
companies that are examples of competitors of IDX Systems Corporation on the
Effective Date, and, from time to time at its discretion, the Company may update
this list and the Employee shall be bound by such updated listing:

                  ADVANTA
                  AIH
                  Ameritech Information Systems
                  CSC Health Care
                  Cerner Corporation
                  Compucare (including affiliate HSII)
                  Compuware
                  Cycare Systems, Inc.
                  Discorp
                  Epic Systems Corporation
                  HBO & Company (including affiliates, such as Clinicom,
                  Advanced Laboratory, First Data)
                  Health Data Sciences Corporation
                  Medic Computer Systems
                  MedicaLogic Medical Manager
                  Meditech
                  Oasys
                  PCN
                  Reynolds & Reynolds
                  RIMS
                  SDK
                  SMS (Shared Medical Systems Corporation)
                  3 Net Systems, Inc.
                  3M Health Information Systems




                                 Page 12 of 16


<PAGE>


                                   SCHEDULE D

                    POTENTIAL SUPPLEMENTAL RETIREMENT PAYMENT



              If as of the fifth anniversary of the Effective Date the
         accumulated net value in all vested options granted by the Company to
         the Employee is less than $3 million, including all exercised and
         unexercised shares, the Company will provide Employee with supplemental
         retirement payment equal to $70,000 per year for 25 years. Monthly
         payments hereunder shall be payable to the Employee, beginning on the
         first day of the month coincident with or next following the date on
         which the Employee attains age 60.

              Notwithstanding the foregoing, it is understood and agreed that
         the Employee must be employed by the Company on January 14, 2012 to
         receive the supplemental retirement payment of $70,000 per year. . If
         Employee's employment with the Company is terminated after January 14,
         2007 and before January 14, 2012, the Employee shall be entitled to a
         pro-rata supplemental retirement payment according to the following
         schedule:
<TABLE>
<CAPTION>

              Date of Termination             Annual Benefit beginning at age 60
              -------------------             ----------------------------------
              <S>                             <C>

              After January 14, 2007          $14,000
              ----------------------          -------
              After January 14, 2008          $28,000
              ----------------------          -------
              After January 14, 2009          $42,000
              ----------------------          -------
              After January 14, 2010          $56,000
              ----------------------          -------
</TABLE>

                  On or After January 14, 2012   $70,000




                                 Page 13 of 16

<PAGE>


                                    EXHIBIT I

                                 JOB DESCRIPTION












            PRESIDENT/GENERAL MANAGER - ENTERPRISE SOLUTIONS DIVISION




Founded in 1969, IDX Systems Corporation (www.idx.com) provides complete
healthcare information solutions for academic medical centers and integrated
delivery networks, hospitals, physician group practices and management service
organizations. To connect systems and sites across the enterprise, IDX offers a
comprehensive set of products and services to align physicians and hospitals,
streamline patient flow, enhance quality and reduce costs. Annual revenues are
over $350 million

The company's major product lines are organized along healthcare industry sector
lines. The two largest divisions are:

o    Integrated Solutions - focussing on large to mid-sized hospitals and
     integrated delivery systems, with an emphasis on clinical information
     systems.
o    Enterprise Solutions - focussing on medical groups and physician
     organizations.

IDX  is used by or is under contract to be used by more than 118,000 physicians,
installed at over 2,065 client sites, including:

        - more than 265 large physician group practices (those generally with
          more than 75 physicians);
        - more than 510 physician practices which have 75 or fewer physicians;
          and
        - more than 280 IDNs, representing over 370 hospitals.

EDiX Corporation, an IDX subsidiary, offers Internet-based medical transcription
and clinical documentation services to over 130 physician group and hospital
customers. IDX subsidiary ChannelHealth brings Internet services to physicians
and patients, as well as the connectivity and e-commerce services required to
improve the physician-patient experience and support efficient healthcare
delivery.

The IDX culture is characterized by four core values that have guided the
business over the past thirty plus years. They serve to focus the organization
and are as follows:

o   customer success
o   employee opportunity
o   growth
o   profit


                                 Page 14 of 16

<PAGE>

IDX believes in creating an environment where there is respect for the
individuality, autonomy and creativity of its people. Its people make it
possible for the company to create and provide software solutions that allow IDX
customers to achieve success by focusing on healthcare and helping people. IDX
is committed to creating better futures for both their clients and their
employees and expects the best from its people.

The company went public in November of 1995 and the stock is traded on NASDAQ
under the symbol of IDXC. The corporate offices of IDX are located in
Burlington, Vermont. It's operating divisions, which serve national and
international markets, are based in Seattle, Boston and Burlington

POSITION SUMMARY

The President, Enterprise Solutions Division (ESD) will be located in Boston,
Massachusetts where most of the division's staff resources reside. He/she will
be responsible for all operational aspects of this critical business unit,
including systems design, program development, quality assurance, testing,
sales, implementation and customer support. ESD is a major supplier of
sophisticated, financial/administrative systems to large and midsize medical
groups. The division generates over $140 million in annual revenues and employs
over 800 people. ESD is the market leader in this sector.

There are some 300 clients served by ESD. The growth opportunities for the
division are significant as this new executive provides strategic and operating
leadership to gain greater market share of a dynamic and growing product arena.
This senior executive, reporting to the President of IDX, will be a member of
the corporate-wide operations committee. In the operations committee role,
he/she will work cooperatively with the heads of the other divisions in the
company to provide the best overall information systems solutions to the IDX
client base.

RELATIONSHIPS

                  Reports to:                    President of IDX

                  Direct Reports:                VP-Client Services
                                                 VP-Development
                                                 VP-Marketing
                                                 VP-Sales
                                                 Director-Accounting

                  Key Relationships:             Other Division Lead Executives
                                                 Corporate Executive Staff
                                                 CEO
                                                 IDX Board
                                                 IDX Clients





MAJOR RESPONSIBILITIES

o Set the strategy and articulate and clarify the direction for the division and
  the company
o Lead the execution of the strategic plan
o Bring the Boston organization together, restore and build morale and esprit
  de corps
o Focus the strategic vision and the goals and objectives from the top to the
  bottom of the organization
o Get to know the company's customers, their needs and expectations
o Drive increased revenues and profitability through an aggressive growth
  strategy


                                 Page 15 of 16
<PAGE>


o Develop communications and relationships with the other key IDX divisions
  to ensure maximization of market potential for all IDX products and
  services
o Develop new products and services to both expand current market share and
  anticipate new market opportunities

IDEAL EXPERIENCE

o Up through sales/marketing to general management position in information
  systems/software business
o Broad base of experience selling to physician groups and healthcare
  institutions and organizations is highly desirable but not mandatory
o Experience in selling service oriented products is desirable but not mandatory
o A track record in producing strong, bottom line results
o Customer orientation
  and focus is required, starting at the top of the customer's organization
o Building lasting relationships with industry leaders is essential for long
  term success
o The President of ESD should possess strong management skills and experiences,
  motivating and inspiring people

IDEAL PERSONAL PROFILE

o  Strong leadership skills
o  Inspiring and motivating
o  A relationship builder
o  Collegial; a people person
o  Sense of humor
o  Direct, to the point
o  Articulate, smart, self assured
o  Visible, open, in touch with the staff
o  Entrepreneurial
o  Unimpeachable integrity and ethics



                                 Page 16 of 16
<PAGE>


                                                                   Exhibit 10.2

                             IDX SYSTEMS CORPORATION

              2002 STOCK INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS

1.       PURPOSE

         The purpose of this 2002 Stock Incentive Plan for Non-Employee
Directors (the "Plan") of IDX Systems  Corporation,  a Vermont  corporation (the
"Company"),  is to  compensate  the Company's  non-employee  directors for their
services on the Board and to advance the interests of the Company's stockholders
by enhancing the Company's  ability to attract and retain directors who make (or
are expected to make) important  contributions  to the Company by providing such
persons with equity  ownership  opportunities  and thereby  better  aligning the
interests of such persons with those of the Company's stockholders.

2.       ELIGIBILITY

         All of the Company's non-employee directors, (each, an "Outside
Director")  are  eligible to be granted  stock or  restricted  stock  awards (an
"Award")  under the Plan.  Each  person who has been  granted an Award under the
Plan shall be deemed a "Participant".

3.       ADMINISTRATION AND DELEGATION

        (a) Administration by Board of Directors. The Plan will be administered
            ------------------------------------
by the Board of  Directors of the Company  (the  "Board").  The Board shall have
authority  to grant  Awards and to adopt,  amend and repeal such  administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board  may  correct  any  defect,  supply  any  omission  or  reconcile  any
inconsistency  in the Plan or any Award in the manner and to the extent it shall
deem  expedient to carry the Plan into effect and it shall be the sole and final
judge  of such  expediency.  All  decisions  by the  Board  shall be made in the
Board's sole  discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award.  No director or person acting
pursuant to the authority  delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.

        (b) Appointment of Committees. To the extent permitted by applicable
            -------------------------
law,  the Board may  delegate  any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board"  shall mean the Board or a Committee of the Board to the
extent that the Board's  powers or authority  under the Plan have been delegated
to such Committee.

4.       STOCK AVAILABLE FOR AWARDS

        (a) Subject to adjustment under Section 6, Awards may be made under the
Plan for up to 25,000 shares of common stock,  $0.01 par value per share, of the
Company  (the  "Common  Stock").  If any  Award is  terminated,  surrendered  or
forfeited in whole or in part (including as the result of shares of Common Stock
subject to such Award being  repurchased by the Company at the original issuance
price  pursuant to a  contractual  repurchase  right),  the unused  Common Stock
covered by such Award shall again be available for the grant of Awards under the

<PAGE>

Plan. Shares issued under the Plan may consist in whole or in part of authorized
but unissued shares or treasury shares.

        (b) Per-Participant Limit. Subject to adjustment under Section 6, the
            ---------------------
maximum  number of shares of Common  Stock with  respect to which  Awards may be
granted to any  Participant  under the Plan or under any other  stock or benefit
plan of the Company shall be 25,000 per calendar year.

5.       STOCK AWARDS

        (a) Grants. As consideration for service to the Company, each Outside
            ------
Director shall receive an award of Common Stock,  for each full or partial prior
year service, equal to the maximum number of shares issuable for such prior year
multiplied  by a fraction,  the  numerator of which is the number of meetings of
the Board (including regularly scheduled meetings and special meetings) attended
in person or by telephone during such past year, and the denominator of which is
the number of all such  meetings  held  during  such past year  (each,  a "Stock
Award").  The  maximum  number of shares  issuable  in any given  year  shall be
determined  by the  Board.  Awards  shall be made  annually,  on the date of the
Annual Meeting of Shareholders of the Company. The Board may, in its discretion,
waive any  attendance  requirements,  except  when an Outside  Director is newly
elected during a term year and has served less than a complete year. In addition
to the  foregoing,  the Board may grant Awards  entitling  recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require  forfeiture  of such shares if issued at no cost) from the  recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied  prior to the end of the  applicable  restriction  period  or  periods
established by the Board for such Award (each, a "Restricted Stock Award").

        (b) Terms and Conditions. The Board shall determine the terms and
            --------------------
conditions of any such  Restricted  Stock Award,  including the  conditions  for
repurchase (or forfeiture) and the issue price, if any.

        (c) Stock Certificates. Stock certificates issued in respect of a Stock
            ------------------
Award shall be registered in the name of, and delivered to, the Participant. Any
stock  certificates  issued in  respect of a  Restricted  Stock  Award  shall be
registered in the name of the Participant  and, unless  otherwise  determined by
the Board, deposited by the Participant, together with a stock power endorsed in
blank,  with the Company (or its designee).  At the expiration of the applicable
restriction   periods,   the  Company  (or  such  designee)  shall  deliver  the
certificates no longer subject to such restrictions to the Participant or if the
Participant has died, to the beneficiary  designated,  in a manner determined by
the Board,  by a Participant  to receive  amounts due or exercise  rights of the
Participant  in  the  event  of  the   Participant's   death  (the   "Designated
Beneficiary").  In the absence of an  effective  designation  by a  Participant,
Designated Beneficiary shall mean the Participant's estate.

                                      -2-

<PAGE>

6.       ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS

        (a) Changes in Capitalization. In the event of any stock split, reverse
            -------------------------
stock  split,   stock   dividend,   recapitalization,   combination  of  shares,
reclassification  of shares,  spin-off or other similar change in capitalization
or event,  or any  distribution  to holders of Common  Stock other than a normal
cash dividend,  (i) the number and class of securities available under this Plan
and (ii) the repurchase price per share subject to each  outstanding  Restricted
Stock Award  shall be  appropriately  adjusted  by the  Company (or  substituted
Awards may be made, if applicable) to the extent the Board shall  determine,  in
good  faith,  that  such  an  adjustment  (or  substitution)  is  necessary  and
appropriate.  If this  Section 6(a) applies and Section 6(c) also applies to any
event,  Section 6(c) shall be  applicable  to such event,  and this Section 6(a)
shall not be applicable.

        (b) Liquidation or Dissolution.  The Board may specify the effect of a
            --------------------------
liquidation or dissolution on any Restricted Stock Award granted under the Plan
at the time of the grant.

        (c)  Reorganization Events
             ---------------------

                (1) Definition. A "Reorganization Event" shall mean: (a) any
                    ----------
merger or  consolidation  of the Company with or into another entity as a result
of which all of the Common Stock of the Company is  converted  into or exchanged
for the right to receive cash,  securities or other property or (b) any exchange
of all of the Common Stock of the Company for cash, securities or other property
pursuant to a share exchange transaction.

                (2) Consequences of a Reorganization Event on Restricted Stock
                    ----------------------------------------------------------
Awards. Upon the occurrence of a Reorganization Event, the repurchase and other
------
rights of the Company under each outstanding  Restricted Stock Award shall inure
to the  benefit  of  the  Company's  successor  and  shall  apply  to the  cash,
securities  or other  property  which the  Common  Stock was  converted  into or
exchanged  for pursuant to such  Reorganization  Event in the same manner and to
the same extent as they applied to the Common Stock  subject to such  Restricted
Stock Award.

7.       GENERAL PROVISIONS APPLICABLE TO AWARDS

        (a) Transferability of Awards. Except as the Board may otherwise
            -------------------------
determine  or  provide  in  an  Award,  Awards  shall  not  be  sold,  assigned,
transferred,  pledged  or  otherwise  encumbered  by the person to whom they are
granted,  either  voluntarily or by operation of law, except by will or the laws
of descent and distribution,  and, during the life of the Participant,  shall be
exercisable only by the Participant.  References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.

        (b) Documentation. Each Award shall be evidenced in such form (written,
            -------------
electronic or otherwise) as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.

        (c) Board Discretion.  Except as otherwise provided by the Plan, each
            ----------------
Award may be made alone or in addition or in  relation to any other  Award.  The
terms of each  Award  need  not be  identical,  and the  Board  need  not  treat
Participants uniformly.


                                      -3-
<PAGE>

        (d) Termination of Status. The Board shall determine the effect on an
            ---------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in status of a Participant.

        (e) Withholding. Each Participant shall pay to the Company, or make
            -----------
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event  creating  the tax  liability.  Except  as the Board may  otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may satisfy such tax obligations in whole or in part by delivery of
shares of Common Stock,  including  shares  retained from the Award creating the
tax obligation,  valued at their Fair Market Value; provided,  however, that the
total tax withholding  where stock is being used to satisfy such tax obligations
cannot exceed the Company's minimum statutory withholding  obligations (based on
minimum  statutory  withholding  rates  for  federal  and  state  tax  purposes,
including  payroll  taxes,  that are  applicable  to such  supplemental  taxable
income).  The Company may, to the extent  permitted by law,  deduct any such tax
obligations from any payment of any kind otherwise due to a Participant.

        (f) Amendment of Award. The Board may amend, modify or terminate any
            ------------------
outstanding Award,  including but not limited to, substituting  therefor another
Award of the same or a  different  type and  changing  the date of  realization,
provided that the Participant's  consent to such action shall be required unless
the Board  determines  that the action,  taking into account any related action,
would not materially and adversely affect the Participant.

       (g) Conditions on Delivery of Stock. The Company will not be obligated to
            -------------------------------
deliver  any  shares  of  Common  Stock  pursuant  to  the  Plan  or  to  remove
restrictions  from  shares  previously  delivered  under the Plan  until (i) all
conditions  of the Award  have been met or removed  to the  satisfaction  of the
Company,  (ii) in the opinion of the Company's counsel,  all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable  securities  laws and any applicable  stock exchange or
stock market rules and  regulations,  and (iii) the Participant has executed and
delivered to the Company such  representations  or agreements as the Company may
consider  appropriate to satisfy the  requirements of any applicable laws, rules
or regulations.

        (h) Acceleration. The Board may at any time provide that any Award shall
            ------------
become  immediately  exercisable  in  full  or in  part,  free  of  some  or all
restrictions or conditions,  or otherwise  realizable in full or in part, as the
case may be.

8.       MISCELLANEOUS

        (a) No Right To Status.  No person shall have any claim or right to be
            ------------------
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to any  relationship with the Company.


                                      -4-
<PAGE>

        (b) Effective Date and Term of Plan. The Plan shall become effective on
            -------------------------------
the date on which it is adopted by the Board.  No Awards shall be granted  under
the Plan after the  completion  of ten years from the date on which the Plan was
adopted by the Board, but Awards previously granted may extend beyond that date.

        (c) Amendment of Plan.  The Board may amend, suspend or terminate the
            -----------------
Plan or any portion thereof at any time.

        (d) Governing Law.  The provisions of the Plan and all Awards made
            -------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Vermont, without regard to any applicable conflicts of law.











                                      -5-