<PAGE>

                                                                   EXHIBIT 10.25

                               INDEMNITY AGREEMENT


         This Indemnity Agreement, dated as of January 1, 1999, is made by and
between PSW Technologies, Inc., a Delaware corporation (the "Company"), and
[First_Last] (the "Indemnitee").

                                    RECITALS
                                    --------

         A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors, officers or agents of corporations
unless they are protected by comprehensive liability insurance or
indemnification, due to increased exposure to litigation costs and risks
resulting from their service to such corporations, and due to the fact that the
exposure frequently bears no reasonable relationship to the compensation of such
directors, officers and other agents.

         B. The statutes and judicial decisions regarding the duties of
directors and officers are often difficult to apply, ambiguous, or conflicting,
and therefore fail to provide such directors, officers and agents with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take.

         C. Plaintiffs often seek damages in such large amounts and the costs of
litigation may be so enormous (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is often beyond the personal
resources of directors, officers and other agents.

         D. The Company believes that it is unfair for its directors, officers
and agents and the directors, officers and agents of its subsidiaries to assume
the risk of huge judgments and other expenses which may occur in cases in which
the director, officer or agent received no personal profit and in cases where
the director, officer or agent was not culpable.

         E. The Company recognizes that the issues in controversy in litigation
against a director, officer or agent of a corporation such as the Company or its
subsidiaries are often related to the knowledge, motives and intent of such
director, officer or agent, that he is usually the only witness with knowledge
of the essential facts and exculpating circumstances regarding such matters, and
that the long period of time which usually elapses before the trial or other
disposition of such litigation often extends beyond the time that the director,
officer or agent can reasonably recall such matters; and may extend beyond the
normal time for retirement for such director, officer or agent with the result
that he, after retirement or in the event of his death, his spouse, heirs,
executors or administrators, may be faced with limited ability and undue
hardship in maintaining an adequate defense, which may discourage such a
director, officer or agent from serving in that position.

         F. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
talented and experienced individuals to serve as directors, officers and agents
of the Company and its subsidiaries and to

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encourage such individuals to take the business risks necessary for the success
of the Company and its subsidiaries, it is necessary for the Company to
contractually indemnify its directors, officers and agents and the directors,
officers and agents of its subsidiaries, and to assume for itself maximum
liability for expenses and damages in connection with claims against such
directors, officers and agents in connection with their service to the Company
and its subsidiaries, and has further concluded that the failure to provide such
contractual indemnification could result in great harm to the Company and its
subsidiaries and the Company's stockholders.

         G. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized ("Section 145"), empowers the Company to indemnify its
directors, officers, employees and agents by agreement and to indemnify persons
who serve, at the request of the Company, as the directors, officers, employees
or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive.

         H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director, officer or agent of the Company and/or one or
more subsidiaries of the Company free from undue concern for claims for damages
arising out of or related to such services to the Company and/or one or more
subsidiaries of the Company.

          I. Indemnitee is willing to serve, or to continue to serve, the
Company and/or one or more subsidiaries of the Company, provided that he is
furnished the indemnity provided for herein.


                                    AGREEMENT
                                    ---------

          NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

          1.  Definitions.
              -----------

              (a)    Agent. For the purposes of this Agreement, "agent" of the
                     -----
Company means any person who is or was a director, officer, employee or other
agent of the Company or a subsidiary of the Company; or is or was serving at the
request of, for the convenience of, or to represent the interests of the Company
or a subsidiary of the Company as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise; or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director, officer, employee or agent of
another enterprise at the request of, for the convenience of, or to represent
the interests of such predecessor corporation.

              (b)    Expenses. For purposes of this Agreement, "expenses"
                     --------
include all out-of-pocket costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements), actually and
reasonably incurred by the Indemnitee in

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connection with either the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification under this Agreement or
Section 145 or otherwise; provided, however, that "expenses" shall not include
any judgments, fines, ERISA excise taxes or penalties, or amounts paid in
settlement of a proceeding.

              (c)   Proceeding. For the purposes of this Agreement, "proceeding"
                    ----------
means any threatened, pending, or completed action, suit or other proceeding,
whether civil, criminal, administrative, or investigative.

              (d)   Subsidiary. For purposes of this Agreement, "subsidiary"
                    ----------
means any corporation of which more than 50% of the outstanding voting
securities is owned directly or indirectly by the Company, by the Company and
one or more other subsidiaries, or by one or more other subsidiaries.

          2.  Agreement to Serve. The Indemnitee agrees to serve and/or continue
              ------------------
to serve as agent of the Company, at its will (or under separate agreement, if
such agreement exists), in the capacity Indemnitee currently serves as an agent
of the Company, so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the Company or any
subsidiary of the Company or until such time as he tenders his resignation in
writing; provided, however, that nothing contained in this Agreement is intended
to create any right to continued employment by Indemnitee.

          3.  Liability Insurance.
              -------------------

              (a)   Maintenance of D&O Insurance. The Company hereby covenants
                    ----------------------------
and agrees that, so long as the Indemnitee shall continue to serve as an agent
of the Company and thereafter so long as the Indemnitee shall be subject to any
possible proceeding by reason of the fact that the Indemnitee was an agent of
the Company, the Company, subject to Section 3(c), shall promptly obtain and
maintain in full force and effect directors' and officers' liability insurance
("D&O Insurance") in reasonable amounts from established and reputable insurers.

              (b)   Rights and Benefits. In all policies of D&O Insurance, the
                    -------------------
Indemnitee shall be named as an insured in such a manner as to provide the
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if the Indemnitee is a director; or of the
Company's officers, if the Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if the Indemnitee is not a director
or officer but is a key employee.

              (c)   Limitation on Required Maintenance of D&O Insurance.
                    ---------------------------------------------------
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain D&O Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or the Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company.

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          4.  Mandatory Indemnification. Subject to Section 9 below, the Company
              -------------------------
shall indemnify the Indemnitee as follows:

              (a)   Successful Defense. To the extent the Indemnitee has been
                    ------------------
successful on the merits or otherwise in defense of any proceeding (including,
without limitation, an action by or in the right of the Company) to which the
Indemnitee was a party by reason of the fact that he is or was an Agent of the
Company at any time, against all expenses of any type whatsoever actually and
reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding.

              (b)   Third Party Actions. If the Indemnitee is a person who was
                    -------------------
or is a party or is threatened to be made a party to any proceeding (other than
an action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify the Indemnitee against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding, provided the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and its stockholders, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.

              (c)   Derivative Actions. If the Indemnitee is a person who was or
                    ------------------
is a party or is threatened to be made a party to any proceeding by or in the
right of the Company by reason of the fact that he is or was an agent of the
Company, or by reason of anything done or not done by him in any such capacity,
the Company shall indemnify the Indemnitee against all expenses actually and
reasonably incurred by him in connection with the investigation, defense,
settlement, or appeal of such proceeding, provided the Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and its stockholders; except that no indemnification
under this subsection 4(c) shall be made in respect to any claim, issue or
matter as to which such person shall have been finally adjudged to be liable to
the Company by a court of competent jurisdiction unless and only to the extent
that the court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the court shall deem proper.

              (d)   Actions where Indemnitee is Deceased. If the Indemnitee is a
                    ------------------------------------
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that he is or was an agent of the Company, or
by reason of anything done or not done by him in any such capacity, and if prior
to, during the pendency of after completion of such proceeding Indemnitee
becomes deceased, the Company shall indemnify the Indemnitee's heirs, executors
and administrators against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) actually and reasonably incurred
to the extent Indemnitee would have been entitled to indemnification pursuant to
Sections 4(a), 4(b), or 4(c) above were Indemnitee still alive.

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              (e)   Notwithstanding the foregoing, the Company shall not be
obligated to indemnify the Indemnitee for expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) for which payment is actually
made to or on behalf of Indemnitee under a valid and collectible insurance
policy of D&O Insurance, or under a valid and enforceable indemnity clause,
by-law or agreement.

          5.  Partial Indemnification. If the Indemnitee is entitled under any
              -----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding, but not entitled, however, to indemnification for all of
the total amount hereof, the Company shall nevertheless indemnify the Indemnitee
for such total amount except as to the portion hereof to which the Indemnitee is
not entitled.

          6.  Mandatory Advancement of Expenses. Subject to Section 8(a) below,
              ---------------------------------
the Company shall advance all expenses incurred by the Indemnitee in connection
with the investigation, defense, settlement or appeal of any proceeding to which
the Indemnitee is a party or is threatened to be made a party by reason of the
fact that the Indemnitee is or was an agent of the Company. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall be determined ultimately that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within twenty (20) days
following delivery of a written request therefor by the Indemnitee to the
Company.

          7.  Notice and Other Indemnification Procedures.
              -------------------------------------------

              (a)   Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.

              (b)   If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7(a) hereof, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.

              (c)   In the event the Company shall be obligated to pay the
expenses of any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by the Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to the Indemnitee under this Agreement for any fees
of counsel subsequently

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incurred by the Indemnitee with respect to the same proceeding, provided that
(i) the Indemnitee shall have the right to employ his counsel in any such
proceeding at the Indemnitee's expense; and (ii) if (A) the employment of
counsel by the Indemnitee has been previously authorized by the Company, (B) the
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and the Indemnitee in the conduct of any such
defense, or (C) the Company shall not, in fact, have employed counsel to assume
the defense of such proceeding, then the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company.

          8.  Exceptions. Any other provision herein to the contrary
              ----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:

              (a)   Claims Initiated by Indemnitee. To indemnify or advance
                    ------------------------------
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board, (iii) such indemnification is provided by the Company,
in its sole discretion, pursuant to the powers vested in the Company under the
General Corporation Law of Delaware or (iv) the proceeding is brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 145.

              (b)   Lack of Good Faith. To indemnify the Indemnitee for any
                    ------------------
expenses incurred by the Indemnitee with respect to any proceeding instituted by
the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or

              (c)   Unauthorized Settlements. To indemnify the Indemnitee under
                    ------------------------
this Agreement for any amounts paid in settlement of a proceeding unless the
Company consents to such settlement, which consent shall not be unreasonably
withheld.

          9.  Non-exclusivity. The provisions for indemnification and
              ---------------
advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee may have under any provision
of law, the Company's Certificate of Incorporation or Bylaws, the vote of the
Company's stockholders or disinterested directors, other agreements, or
otherwise, both as to action in his official capacity and to action in another
capacity while occupying his position as an agent of the Company, and the
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.

          10. Enforcement. Any right to indemnification or advances granted by
              -----------
this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee
in any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a

                                       6
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claim for indemnification is made under this Agreement (other than an action
brought to enforce a claim for expenses pursuant to Section 6 hereof, provided
that the required undertaking has been tendered to the Company) that Indemnitee
is not entitled to indemnification because of the limitations set forth in
Sections 4 and 8 hereof. Neither the failure of the Corporation (including its
Board of Directors or its stockholders) to have made a determination prior to
the commencement of such enforcement action that indemnification of Indemnitee
is proper in the circumstances, nor an actual determination by the Company
(including its Board of Directors or its stockholders) that such indemnification
is improper, shall be a defense to the action or create a presumption that
Indemnitee is not entitled to indemnification under this Agreement or otherwise.

          11. Subrogation. In the event of payment under this Agreement, the
              -----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.

          12. Survival of Rights.
              ------------------

              (a)   All agreements and obligations of the Company contained
herein shall continue during the period Indemnitee is an agent of the Company
and shall continue thereafter so long as Indemnitee shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal, arbitrational, administrative or investigative, by
reason of the fact that Indemnitee was serving in the capacity referred to
herein.

              (b)   The Company shall require any successor to the Company
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.

          13. Interpretation of Agreement. It is understood that the parties
              ---------------------------
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent permitted by law
including those circumstances in which indemnification would otherwise be
discretionary.

          14. Severability. If any provision or provisions of this Agreement
              ------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(i) the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 13 hereof.

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          15. Modification and Waiver. No supplement, modification or amendment
              -----------------------
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.

          16. Notice. All notices, requests, demands and other communications
              ------
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by written notice.

          17. Governing Law. This Agreement shall be governed exclusively by and
              -------------
construed according to the laws of the State of Delaware as applied to contracts
between Delaware residents entered into and to be performed entirely within
Delaware.

          The parties hereto have entered into this Indemnity Agreement
effective as of the date first above written.


                                     THE COMPANY:
                                     PSW TECHNOLOGIES, INC.


                                     By  \s\ Timothy D. Webb
                                       ---------------------------------------
                                     Title President & Chief Executive Officer
                                          ------------------------------------
                                     Address:  Bldg. 3, Suite 200
                                               6300 Bridgepoint Parkway
                                               Austin, Texas  78730
                                               Attn: General Counsel

                                     INDEMNITEE:


                                     --------------------------------------
                                                 [First_Last]
                                     Address:    [Address_1]
                                                 [Address_2]
                                                 [Address_3]
                                                 [Address_4]

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