EXHIBIT 10.1


                              EMPLOYMENT AGREEMENT

     This Employment Agreement (this"Agreement") is made and entered into as of
August 28, l998, by and between PSW Technologies,  Inc., a Delaware  corporation
(the"Company"), and Timothy Webb, an individual (the"Executive").

                                    RECITALS

     WHEREAS,  the  Company  desires  to hire the  Executive  and the  Executive
desires to become employed by the Company; and

     WHEREAS,  the Company and the Executive have determined that it is in their
respective  best  interest  to  enter  into  this  Agreement  on the  terms  and
conditions as set forth herein.

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

1.       EMPLOYMENT TERMS AND DUTIES

1.1  Employment.  The Company hereby  employs the  Executive,  and the Executive
hereby  accepts  employment by the Company,  upon the terms and  conditions  set
forth in this Agreement.

1.2 Duties.  The Executive shall serve as President and Chief Executive Officer.
The Executive  shall  perform all  reasonable  duties  assigned by the Company's
Board of Directors (the"Board"). The Company agrees to nominate for election or
to appoint  Executive  to the Board at the  earliest  possible  date and at each
annual meeting of the  stockholders  during his employment.  Executive agrees to
serve on the Board.

     During the term of his employment hereunder, the Executive shall devote his
full  working  time  and  efforts  to the  performance  of his  duties  and  the
furtherance of the interests of the Company and shall not be otherwise employed.
Notwithstanding the above, Executive may serve as a director or trustee of other
organizations,  or engage in charitable,  civic, and/or governmental  activities
provided  that  such  service  and  activities  do not  prevent  Executive  from
performing his duties under this  Agreement and further  provided that Executive
obtains written  consent for all such  activities from the Board,  which consent
will not be unreasonably withheld.  Executive may engage in personal activities,
including, without limitation,  personal investments (subject to Section 3.1.1),
provided that such  activities do not interfere  with his  performance of duties
hereunder.

1.3 Term.  Subject to the  provisions of Section 1.5 below,  the initial term of
employment of the Executive  under this  Agreement  shall commence on August 28,
1998,  (the"Hire  Date") and shall  continue for a period of six (6) years (the
"Initial  Term").  This  Agreement  may be  renewed by mutual  agreement  of the
parties for additional consecutive one (1) year periods (the"Renewal Term," and
together with the Initial Term, the"Employment Term").

1.4      Compensation and Benefits.
1.4.1 Base Salary.  In  consideration  of the  services  rendered to the Company
hereunder by the Executive and the Executive's covenants hereunder,  the Company
shall, during the Employment Term, pay the Executive a salary at the annual rate
of Three Hundred  Twenty Five  Thousand  Dollars and 00/100  ($325,000.00)  (the
"Base  Salary"),   less  statutory  deductions  and  withholdings,   payable  in
accordance with the Company's regular payroll  practices.  The Base Salary shall
be increased  annually by four percent (4%). At least  annually,  the Board or a
committee thereof, will review the Base Salary and the options granted hereunder
for  competitiveness  and  appropriateness  in the  industry,  and  may  further
increase Base Salary and/or award a bonus to Executive.

1.4.2 Benefits  Package.  In addition to the Base Salary,  during the Employment
Term,  the  Executive  shall be entitled to receive such  employee  benefits and
holidays  as may be in  effect  from  time  to  time as are  afforded  to  other
executives of the Company. The Company also agrees to indemnify Executive and to
provide Executive with liability insurance in accordance with Company policy and
to the same extent that it provides  indemnification  and liability insurance to
comparable directors and/or officers.

1.4.3 Vacation. The Executive shall be entitled to four (4) weeks' vacation each
fiscal year.

1.4.4 Expenses. The Company shall, upon receipt from the Executive of supporting
receipts to the extent  required by applicable  income tax  regulations  and the
Company's reimbursement policies,  reimburse the Executive for all out-of-pocket
business  expenses  reasonably  incurred by the Executive in connection with his
employment hereunder.

1.5      Stock Option.

1.5.1 On the Hire Date the Company shall grant to Executive,  in accordance with
the terms of the PSW  Technologies,  Inc. 1996 Stock Issuance Plan (the"Plan"),
an option to purchase a total of Five Hundred  Thousand  (500,000) shares of the
Company's common stock (the"Option").  The Option shall vest over six (6) years
in accordance  with the following  vesting  schedule:  (i) One Hundred  Thousand
(100,000) shares upon Executive's  completion of six (6) months' employment with
the Company;  (ii) an  additional  One Hundred  Thousand  (100,000)  shares upon
Executive's  completion of two (2) years' employment with the Company;  (iii) an
additional One Hundred Thousand (100,000) shares upon Executive's  completion of
three (3) years'  employment  with the Company;  (iv) an additional  Twenty Five
Thousand  (25,000)  shares  upon  Executive's  completion  of  four  (4)  years'
employment with the Company;  (v) an additional  Seventy Five Thousand  (75,000)
shares  upon  Executive's  completion  of five (5)  years'  employment  with the
Company;  and (vi) an  additional  One Hundred  Thousand  (100,000)  shares upon
Executive's completion of six (6) years' employment with the Company. The Option
granted to Executive  under this Section  shall be an Incentive  Stock Option as
defined under  Section-422 of the Internal Revenue Code of 1986, as amended,  up
to the  permitted  limitation  as of the  Hire  Date  and any  balance  shall be
reflected in a non-qualified option.

1.5.2 All or a portion  of the  Option  may be  immediately  exercisable  at the
discretion of Executive upon the delivery of cash equal to the exercise price of
those shares being exercised, subject to the limitations on exercising incentive
stock options,  which will be exercisable to the maximum extent  allowable as of
the Hire Date over the term of the vesting schedule.  All exercised shares shall
be  subject  to  repurchase  rights in favor of the  Company  until the  options
pursuant to which the shares were issued have otherwise  vested  pursuant to the
terms of Section  1.5.1.  Subject  to  Section-1.7.2,  in the event  Executive's
employment  is  terminated,  with or without  cause,  other  than a  termination
arising  out of a  Change  in  Control  as  defined  in  Section  1.5.3  of this
Agreement,  the  Company  shall  have  fifteen  (15) days after the last date of
Executive's  employment  to notify  Executive  of its  intention  to  repurchase
Executive's unvested shares.  Executive shall deliver all of the unvested shares
purchased by the Company,  free of all encumbrances,  within thirty (30) days of
receipt of notice of the Company's  intention to repurchase the unvested shares.
The Company shall pay Executive the exercise price  (subject to adjustments  for
stock splits, reclassifications and the like) for the unvested shares.

1.5.3 In the event the  Company  is  acquired  by merger or asset  sale or there
should be certain  other  changes in control or ownership  of the  Company,  the
following  provisions shall govern any accelerated  vesting of the Option either
at the time of such  acquisition  or change in  control  or upon the  subsequent
termination of Executive's employment under certain circumstances.

(i) To the extent that Option is, in connection with a Change in Control,  to be
assumed or replaced with a comparable  option,  the Option shall not  accelerate
(and  repurchase  rights will not lapse) upon the  occurrence  of that Change in
Control, and the Option shall accordingly  continue,  over Executive's period of
Service after the Change in Control, to become exercisable for the Option Shares
in  one  or  more  installments  in  accordance  with  Section  1.5.1.  However,
immediately  upon an Involuntary  Termination of Executive's  employment  within
twelve  (12)  months  following  such  Change in  Control,  the  Option  (or any
replacement  grant),  to the extent  outstanding  at the time but not  otherwise
fully vested, shall automatically  accelerate and become immediately exercisable
(or repurchase  rights shall lapse)  according to the vesting schedule set forth
in Section-1.5.1 to the same extent as if Executive had remained  employed under
the  Agreement  for  three  (3)  years  following  the  date of the  Involuntary
Termination.  The Option shall remain  exercisable  until the earlier of (a) the
Option Term or (b) the  expiration of the one (1) year period  measured from the
date of such Involuntary Termination.  The determination of option comparability
shall be made by the Plan  Administrator,  and its determination shall be final,
binding, and conclusive.

(ii) To the extent  the Option is not  assumed  or  replaced  with a  comparable
option in connection  with a Change in Control,  all vesting of the Option shall
be deemed to have accelerated and all repurchase rights for unvested,  exercised
shares shall be deemed to have lapsed in full  immediately  prior to such Change
in Control.  (iii) For purposes of this Section, the following definitions shall
be in effect:

(a) An Involuntary Termination shall mean the termination of Executive's Service
by reason of:

1.   Involuntary  dismissal or discharge by the Company (or Parent or Subsidiary
     employing Executive) for reasons other than for Cause, or

2.   Executive's  voluntary  resignation  following (a) a change in  Executive's
     position  with the Company (or Parent or  Subsidiary  employing  Executive)
     which  materially  reduces  Executive's  level  of  responsibility,  (b)  a
     reduction in  Executive's  level of  compensation  (including  base salary,
     fringe benefits and participation in any corporate-performance  based bonus
     or  incentive  programs)  or  (c) a  relocation  of  Executive's  place  of
     employment by more than fifty (50) miles, provided and only if such change,
     reduction  or  relocation  is effected by the Company  without  Executive's
     consent, and

(b) a Change  in  Control  shall be  deemed to occur in the event of a change in
ownership  or control  of the  Company  effected  through  any of the  following
transactions:
                                                     
1.   the acquisition,  directly or indirectly, by any person or related group of
     persons  (other than the Company or a person  that  directly or  indirectly
     controls,  or is  controlled  by,  or is under  common  control  with,  the
     Company) of beneficial  ownership  (within the meaning of Rule 13d-3 of the
     Securities Exchange Act of 1934, as amended) of securities  possessing more
     than  fifty  percent  (50%)  of the  total  combined  voting  power  of the
     Company's  outstanding  securities  pursuant to a tender or exchange  offer
     made directly to the Company's stockholders; or

2.   the sale,  transfer or other disposition of all or substantially all of the
     Company's assets; or

3.   a change in the  composition of the Board over a period of thirty-six  (36)
     consecutive  months  or less  such that a  majority  of the  Board  members
     ceases, by reason of one or more contested  elections for Board membership,
     to be  comprised  of  individuals  who either  (i) have been Board  members
     continuously  since the  beginning of such period or (ii) have been elected
     or nominated for election as Board members during such period by at least a
     majority  of the Board  members  described  in clause (i) who were still in
     office at the time such election or  nomination  was approved by the Board;
     or

4.   the  consummation of a merger or  consolidation of the Company with or into
     another entity or any other  corporate  reorganization,  if more than fifty
     percent (50%) of the combined  voting power of the  continuing or surviving
     entity's   securities   outstanding    immediately   after   such   merger,
     consolidation  or other  reorganization  is owned by  persons  who were not
     stockholders of the Company immediately prior to such merger, consolidation
     or other reorganization.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's  incorporation  or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

(iv) The  provisions of Section  1.5.3(i)  shall govern the period for which the
Option  is to  remain  exercisable  following  the  Involuntary  Termination  of
Executive's  Service  within  twelve (12)  months  after a Change in Control and
shall supersede any provisions to the contrary in the Plan.

1.6  Termination.  The  Executive's  employment  and this  Agreement  (except as
otherwise provided  hereunder) shall terminate upon the occurrence of any of the
following, at the time set forth therefor (the"Termination Date"):

1.6.1 Death or  Disability.  Immediately  upon the death of the Executive or the
determination  by the Board that the  Executive has ceased to be able to perform
the essential functions of his duties, with or without reasonable accommodation,
for a period of not less than  ninety  (90)  days,  due to a mental or  physical
illness or incapacity ("Disability") (termination pursuant to this Section 1.6.1
being referred to herein as termination for"Death or Disability"); or

1.6.2 Voluntary Termination.  Thirty (30) days following the Executive's written
notice to the Company of termination of employment;  provided, however, that the
Company  may  waive  all or a  portion  of the  thirty  (30)  days'  notice  and
accelerate the effective date of such  termination  (and the  Termination  Date)
(termination  pursuant  to this  Section  1.6.2  being  referred  to  herein  as
"Voluntary" termination); or

1.6.3  Termination For Cause.  Immediately  following  notice of termination for
"Cause"  (as  defined  below),  specifying  such  Cause,  given  by the  Company
(termination  pursuant  to this  Section  1.6.3  being  referred  to  herein  as
termination for"Cause"). As used herein,"Cause" means termination based on (i)
the  Executive's  material  breach of this  Agreement  after  receiving  written
notification  from the Board and  following a reasonable  cure period,  (ii)-the
Executive's  conviction  or plea of "guilty"  or"no  contest" to (x) any crime
constituting  a felony in the  jurisdiction  in which  committed,  (y) any crime
involving moral turpitude (whether or not a felony),  or (z) any other violation
of criminal law  involving  dishonesty  or willful  misconduct  that  materially
injures the  Company  (whether or not a felony),  (iii)  substance  abuse by the
Executive that in any manner  materially  interferes with the performance of his
duties  under this  Agreement,  (iv) the failure or refusal of the  Executive to
follow the lawful and proper  directives  of the Board that are within the scope
of thc  Executive's  duties  set  forth in  Section  1.2  above  and that is not
corrected  within  fifteen (15) days after written  notice from the Board to the
Executive  identifying such failure or refusal, (v) willful malfeasance or gross
misconduct by the Executive  that  discredits or damages the Company  including,
without  limitation,  any breach of his obligations under Section 2 or Section 3
below,  (vi)  indictment of the Executive for a felony  violation of the federal
securities laws or (vii) the  Executive's  chronic absence from work for reasons
other than illness; or

1.6.4  Termination   Without  Cause.   Thirty  (30)  days  following  notice  of
termination without Cause given by the Company;  provided,  however, that during
any such  thirty  (30) day notice  period,  the  Company  may  suspend,  with no
reduction in pay or benefits,  the Executive from his duties as set forth herein
(including, without limitation, the Executive's position as a representative and
agent of the Company) (termination pursuant to this Section 1.6.4 being referred
to herein as termination "Without  Cause").  1.6.5 Other Remedies.  Termination
pursuant to Section 1.6.3 above shall be in addition to and without prejudice to
any other  right or  remedy to which the  Company  may be  entitled  at law,  in
equity, or under this Agreement.

1.7      Severance and Termination.

1.7.1 Voluntary  Termination,  Termination  for Cause,  Termination for Death or
Disability. In the case of a termination of Executive's employment hereunder for
Death or  Disability  in accordance  with Section  1.6.1 above,  or  Executive's
Voluntary  termination of employment  hereunder in accordance with Section 1.6.2
above,  or a termination of the  Executive's  employment  hereunder for Cause in
accordance with Section 1.6.3 above,  (i) the Executive shall not be entitled to
receive  payment  of, and the  Company  shall  have no  obligation  to pay,  any
severance or similar compensation  attributable to such termination,  other than
Base Salary earned but unpaid, accrued but unused vacation to the extent allowed
by the Company's policies,  vested benefits under any employee benefit plan, and
any  unreimbursed  expenses  pursuant to Section  1.4.5  hereof  incurred by the
Executive as of the termination  date, and (ii) the Company's  obligations under
this Agreement shall immediately cease.

1.7.2 Termination Without Cause. In the case of a termination of the Executive's
employment  hereunder  Without Cause in accordance with Section 1.6.4 above, the
Company  shall pay the  Executive  (i) an amount  equal to twelve  (12)  months'
salary if the  termination  occurs during the first  eighteen (18) months of the
Initial  Term;  (ii)  an  amount  equal  to  three  (3)  months'  salary  if the
termination  occurs after the first eighteen (18) months of employment but prior
to the expiration of the Initial Term (hereinafter the"Severance Payment"),  in
each case payable at the times and subject to the tax  withholding  specified in
Section 1.4.1 above; and (iii)-unvested shares due to vest on the next scheduled
vesting date shall  accelerate  and shall become fully vested and any repurchase
rights in such shares (up to the next vesting date),  shall immediately lapse in
full. The Company shall provide Executive with health and welfare benefits equal
to and  under  the same  terms  as such  benefits  were  provided  to  Executive
immediately  prior to the  Termination  Date,  or pay premiums for such benefits
required of  Executive  under  COBRA,  29 U.S.C.  S 1161,  et seq.  (hereinafter
"Benefit  Continuation"),  throughout  any  period in which  Executive  receives
Severance  Payment  under this Section or until  Executive  receives  comparable
benefits from any other source, whichever occurs first. Nothing contained herein
shall interfere with Executive's right to purchase  continuation  coverage under
COBRA. In the event of an Involuntary Termination under Section 1.5.3(iii)(a) of
this Agreement, Executive shall be entitled to the Severance Payment and Benefit
Continuation set forth in this paragraph in addition to the accelerated  vesting
described  in  Section  1.5.3(i).  The  Company's  obligation  to  pay  and  the
Executive's  right to receive the Severance  Payment shall cease in the event of
the Executive's breach of his obligations under Section 2 or Section 3 below.

1.7.3  Offset  Against  Severance.  During the period in which the  Executive is
receiving  Severance  Payments from the Company (the"Severance  Period"),  such
Severance  Payments  to be  provided  to the  Executive  shall be  reduced  on a
dollar-for-dollar  basis by any wages or other compensation actually received by
the Executive during the Severance  Period,  regardless of whether such wages or
compensation are from employment,  consulting, or other gainful activities.  The
Executive  promises and agrees to promptly  advise the Company of the amount and
source of any wages or other  compensation  received  by him,  from any  source,
during the Severance Period. 1.8 Location.  Unless Executive  otherwise consents
in writing,  the principle  place of employment of Executive will be the Austin,
Texas  metropolitan  area  ("Austin")  in  office  space to be  provided  by the
Company.  The  Executive's  failure to relocate  shall  constitute a termination
Without Cause as defined in  Section-1.6.4  hereof and entitle  Executive to the
Severance Pay and vesting as described in Section-1.7.2.

2.       CONFIDENTIAL INFORMATION - NON-DISCLOSURE

2.1 Recognition of the Company's Rights:  Nondisclosure.  Executive  understands
that the Company possesses Proprietary Information.

2.1.1 "Proprietary  Information"  shall mean  Information (as defined below) of
value to the Company that is created, invented, developed,  prepared, conceived,
reduced to practice,  made, suggested,  discovered,  received, or learned by the
Company including,  for example, but not limited to, any trade secret, know-how,
show-how  and other  proprietary  information,  irrespective  of (a)  whether in
tangible or non-tangible  form, (b) whether patentable or copyrighted or subject
to  confidentiality,  (c) its media,  (d)  whether  solely or  jointly  created,
invented, developed,  prepared, conceived, reduced to practice, made, suggested,
discovered,  received, or learned by Executive and/or one or more other persons,
or (e) whether created, invented,  developed,  prepared,  conceived,  reduced to
practice, made, suggested,  discovered,  received, or learned before, during, or
after  the term of this  Agreement.  Proprietary  Information  does not  include
Information (as defined below) that Executive  develops entirely on his own time
without  using  the  Company's  equipment,  supplies,  facilities,   Proprietary
Information, or trade secret information except for such Information that either
relates at the time of conception or reduction to practice of the Information to
the  Company's  business,  or actual or  demonstrably  anticipated  research  or
development of the Company,  or results from any work performed by the Executive
for the Company.

2.1.2 "Information"  shall  mean  any  list,  schematic,   diagram,  circuitry,
technology, inventory, invention, idea, discovery, improvement, design, concept,
technique,   algorithm,  formula,  method,  process,   configuration,   tooling,
mechanism,  manufacture,  assembly,  installation,  model,  apparatus,  product,
device, system,  network, data, plan, library, work of authorship,  file, media,
record,  report, copy, pictorial work, graphic work, audiovisual work, hardware,
firmware,   computer  interface  (including  for  example  but  not  limited  to
programming interfaces), computer language, computer protocol, computer software
program or  application  (irrespective  of whether  source code or object code),
flow chart,  blueprint,  drawing,  photograph,  chart,  graph,  notebook,  book,
computer disk, tape, storage media, printout, sound recording, note, memorandum,
specification,  paper, document  (irrespective of whether printed,  typewritten,
handwritten  or  otherwise),  information,  material,  account,  business  plan,
business  operation,  business method,  business  practice,  business  strategy,
research,  development,  marketing,  revenue, sale, forecast,  budget,  finance,
license, price, cost, salary, compensation, knowledge about suppliers, knowledge
about available skills, and knowledge about actual and/or prospective employees,
clients, and/or customers (including for example but not limited to their names,
addresses,  and telephone  numbers).  2.1.3"Non-party  Information"  shall mean
Information  discovered,  received,  or learned by the Company from  non-parties
with   respect  to  which  the   Company  is  subject  to  a  duty  to  maintain
confidentiality or to use only for certain limited purposes.

2.2 The Executive Covenant. In consideration of the Company's entering into this
Agreement,  and providing the Base Salary and other  benefits to the  Executive,
the receipt and  sufficiency of which is hereby  acknowledged  by the Executive,
the Executive covenants as follows:

2.2.1 Non-Disclosure of Proprietary  Information and Non-Party  Information.  At
all times during the term of this  Agreement  and for three (3) years  following
the  Termination  Date,  Executive  shall hold all  Proprietary  Information and
Non-party  Information  in  strictest  trust and  confidence  and shall  neither
disclose (to anyone other than the Company  personnel having a need to know such
Information in connection with their activities for the Company) nor use (except
insofar  as  required  by  Executive's  activities  for the  Company  under this
Agreement) any Proprietary Information or any Non-party Information, unless: (a)
Executive  is  expressly  authorized  in  writing  to  the  contrary  by a  duly
authorized  officer of the  Company;  (b)  absent  breach or  violation  of this
Agreement,  such  Information  is or  becomes  generally  known to the public or
available to the public, as evidenced by a printed  publication or other equally
conclusive  evidence;  (c) absent  breach or violation of this  Agreement,  such
Information  is rightfully  received  absent any  confidentiality  obligation by
Executive from a non-party  outside of the Company,  as evidenced by a dated and
witnessed  writing  prepared in the normal  course of business or other  equally
conclusive  evidence;  or (d) is  required to be  disclosed  pursuant to a valid
order  by a court or  other  governmental  body or  otherwise  required  by law,
provided that Executive informs the Company immediately upon Executive's receipt
of notice, in any form, that disclosure pursuant to this section may be required
so that the  Company  may oppose any  compelled  disclosure  of its  Proprietary
Information.   Executive   further  agrees  not  to  disclose  any   Proprietary
Information  pursuant to this section  unless and until he is informed  that the
Company will not oppose such disclosure or that the Company's  attempt to oppose
such disclosure has been denied.

2.2.2 Trade Secrets. All trade secrets of the Company will be entitled to all of
the protection and benefits under all applicable federal and state trade secrets
law. If any information  that the Company deems to be a trade secret is found by
a court of competent  jurisdiction not to be a trade secret for purposes of this
Agreement,  such  information  will,  nevertheless,  be  considered  Proprietary
Information  for purposes of this  Agreement.  The  Executive  hereby waives any
requirement  that the Company  submit proof of the  economic  value of any trade
secret or post a bond or other security.

2.3      Assignment of Inventions.

2.3.1    Definitions.

(i)"Moral  Rights" shall mean (a) any right of paternity or integrity,  (b) any
right to claim authorship or require authorship identification, (c) any right to
object to distortion,  mutilation, or other modification of, or other derogatory
action in relation to, a work of authorship,  and (d) any similar right existing
under judicial or statutory law of any country or under any treaty, irrespective
of whether such right is generally referred to as a"moral right."

(ii)"Proprietary  Right" shall mean any patent,  trade secret,  confidentiality
protection,  know-how right,  show-how right, mask work right,  copyright (e.g.,
including  but not  limited  to any Moral  Right),  and any  other  intellectual
property protection and intangible  interests and legal rights of exclusion,  of
any and all countries, including for example but not limited to (a) any person's
publicity or privacy right, (b) any utility model or application  therefor,  (c)
any industrial model or application  therefor,  (d) any certificate of invention
or application therefor, (e) any application for patent, including, for example,
but not limited  to, any  provisional,  divisional,  reissue,  reexamination  or
continuation application,  (f) any substitute,  renewal or extension of any such
application, and (g) any right of priority resulting from the filing of any such
application.

(iii) "The  Company   Inventions"  shall  mean  (a)  any  and  all  Proprietary
Information that is created, invented,  developed,  prepared, conceived, reduced
to practice,  made,  suggested,  discovered,  received, or learned by Executive,
either alone or jointly with one or more other persons,  during the term of this
Agreement,  and (b) any and all Proprietary Rights that may be available in such
Proprietary  Information or result therefrom.  (iv) Executive may develop and/or
review  business  plans,  provided  (a) he does so  entirely on his own time and
without  using  the  Company's  equipment,  supplies,  facilities,   Proprietary
Information,  or trade secret information,  and (b) that any such business plans
do not conflict with any of  Executive's  obligations  under Section 3. Business
plans  developed  or  reviewed by  Executive  in a manner  consistent  with this
Section shall be excluded from the definition of Company Inventions.

2.3.2  Executive's  Covenant.   Executive  does  hereby,   without  reservation,
irrevocably:

(i) sell, assign, grant,  transfer, and convey to the Company (and the Company's
successors and assigns):  Executive's entire right, title, and interest (present
and future and throughout the world) in and to all Company Inventions;  provided
however  that,  to the  extent  that any one or more of the  Company  Inventions
includes a work of  authorship  created  by  Executive  (solely or jointly  with
others),  each  such  work of  authorship  shall  automatically  be deemed to be
created as a"work made for hire" (as that term is defined in the United  States
Copyright Act (17 U.S.C. Section S-101)) that is owned solely by the Company (as
between Executive and the Company);


(ii)  acknowledge and agree that, as between the Company and Executive,  (i) all
the Company  Inventions shall be the sole and exclusive property of the Company,
its  successors  and assigns,  and (ii) the Company,  its successors and assigns
shall be the sole and exclusive owner of all the Company  Inventions  throughout
the world;

(iii) waive and  quitclaim  to the  Company  any and all  claims,  of any nature
whatsoever,  that  Executive has now or may hereafter have for  infringement  or
violation of any one or more of the Company Inventions;  

(iv)  consent  to any and all use of  names,  likenesses,  voices,  and  similar
aspects of all the Company  Inventions or related to or associated  with all the
Company Inventions;

(v)   authorize   the   Company   (and  its   successors,   assigns,   nominees,
representatives, and designees) to apply (in the Company's own name) for any and
all patents  (and similar  non-U.S.  rights) that may be available in (or result
from) all the  Company  Inventions,  and to claim any and all rights of priority
without further  authorization  from Executive so that such patents issue in the
name of the Company (or its successors or assigns);

(vi)  represent,  warrant,  and covenant that  Executive  shall never assert any
Moral Right in any one or more of the Company Inventions;
(vii)  forever  waive  all  Moral  Rights  in  the  Company  Inventions;  (viii)
represent,  warrant,  and covenant that  Executive  shall  disclose and deliver,
fully and in writing, to the Company,  each and every Company Invention promptly
after  such  Company  Invention  is  created,  invented,  developed,   prepared,
conceived,  reduced to  practice,  made,  suggested,  discovered,  received,  or
learned by Executive; and

(ix)  represent,  warrant,  and covenant that Executive shall (at the request of
the Company, or any of its successors,  assigns, nominees,  representatives,  or
designees) in every proper way  cooperate  and do  everything  (at the Company's
sole expense for Executive's  reasonable  actual costs,  but without  additional
charge to the Company)  that the Company (or any one or more of its  successors,
assigns,  nominees,  representatives,  or  designees)  may  reasonably  consider
necessary or  appropriate  to assist the Company (and its  successors,  assigns,
nominees, representatives, and designees) to prepare and make filings in any and
all countries to apply for, prosecute, register, evidence, defend, obtain, hold,
secure, vest title to, protect, perfect,  maintain,  uphold, and enforce any and
all  Proprietary  Rights that may be  available  in (or result from) the Company
Inventions,  including  for example but not  limited  to:  communicating  to the
Company (and its successors, assigns, nominees, representatives,  and designees)
any  Information  relating to conception or reduction to practice or prosecution
of any one or more of such Proprietary  Rights;  testifying and rendering prompt
assistance and cooperation in any and all legal proceedings (e.g., including but
not limited to any opposition, cancellation proceeding, interference proceeding,
priority contest,  public use proceeding,  reexamination  proceeding,  and court
proceeding) involving any one or more of such Proprietary Rights; and executing,
verifying and delivering any and all assignments, oaths, declarations, powers of
attorney, and other instruments and documents.  If Executive fails or refuses to
execute any such assignment, oath, declaration,  power of attorney,  instrument,
or  document,  Executive  hereby  designates  and  appoints the Company (and its
successors   and   assigns)   as   Executive's   true  and   lawful   agent  and
attorney-in-fact  (such  agency  and  power of  attorney  being  irrevocable  by
Executive  and  coupled  with  an  interest  in  favor  of the  Company  and its
successors and assigns),  with full power of substitution,  to act for Executive
and in Executive's behalf to do any lawfully permitted act in furtherance of the
purposes of the immediately preceding sentence (e.g.,  including but not limited
to  executing,  verifying,  and filing such  assignments,  oaths,  declarations,
powers of attorney, and other instruments and documents) in Executive's name and
stead and on behalf of and for the benefit of the Company and its successors and
assigns,  with the same legal force and effect as if  Executive  performed  such
act,  irrespective  of  whether in  Executive's  name or the  Company's  name or
otherwise.

3.       NON-COMPETITION AND NON-INTERFERENCE

3.1 Covenant of the Executive.  In consideration of the Company's  entering into
this Agreement, and providing the Base Salary, Option, and other benefits to the
Executive,  and in consideration of the Executive's  receipt of and/or continued
exposure to the Company's Proprietary  Information,  and the Executive's receipt
of  specialized  training,  the  receipt  and  sufficiency  of which are  hereby
acknowledged by Executive, the Executive covenants as follows:

3.1.1  Non-Competition.  Executive hereby agrees that during the Employment Term
and for a period of one (1) year following the Termination Date, for any reason,
Executive will not, directly or indirectly  (i)-engage in Restricted  Activities
in the  State of Texas or in any other  State of the  United  States,  or in any
other country in the world,  where the Company engages in business,  or proposes
to engage in  business  on the  Termination  Date,  or (ii)  participate  in the
ownership, management, operation, financing, or control of, or be employed by or
consult for or otherwise  render services to, a Restricted  Business  located in
the State of Texas or in any other  State of the  United  States or in any other
country in the world, where the Company conducts or proposes to conduct business
on the Termination Date.  Notwithstanding the foregoing,  Executive is permitted
to own up to 5% of any class of securities of any corporation which is traded on
a national securities exchange or through Nasdaq.

          (i)  Restricted  Activities  shall mean shall mean  (A)-the  Company's
               business  as of the  date of  termination  and/or  (B)-designing,
               developing,  manufacturing,  marketing,  or selling  products  or
               services which directly  compete with business,  products  and/or
               services  of  the  Company  and/or  its  subsidiaries  as of  the
               Termination Date.

          (ii) Restricted  Business  shall mean any person,  corporation,  firm,
               company   (or  a  division   or  group   thereof),   partnership,
               proprietorship, or other business entity which designs, develops,
               manufactures,  markets,  or  sells  products  or  services  which
               directly compete with the business,  products, and/or services of
               the Company and/or its subsidiaries as of the Termination Date.

3.1.2 No Diversion of Others. During the Employment Term and for a period of two
(2) years  following the Termination  Date, for any reason,  the Executive shall
not,  either for himself or for any other person,  firm,  corporation,  or other
entity, directly or indirectly, or by action in concert with others:

          (i)  individually or on behalf of any other person, corporation, firm,
               or other entity, solicit or encourage any employee of the Company
               or any subsidiary or affiliate of the Company to terminate his or
               her employment  with the Company or such subsidiary or affiliate,
               without  the  express  prior  written   consent  of  the  Company
               (Executive's  employment  by  a  company  or  other  entity  that
               recruits  and/or hires Company  employees  will not  constitute a
               breach of this Section  provided (a)  Executive's  employment  is
               permitted under Section 3.1.1,  (b) Executive does not breach the
               obligations  set  forth in this  Section,  and (c)  Executive  is
               completely  sealed off from and has no involvement  whatsoever in
               the recruitment or hiring process); or

          (ii) take away or  attempt  to take  away,  or  solicit  or attempt to
               solicit,  any existing or Potential  Customer  (defined below) of
               the Company  (whether or not such customer is actually a customer
               of  the  Company  as  of  the  date  hereof,   including  without
               limitation  any  customer  solicited  by the  Executive  or which
               became known by the Executive  prior to the date hereof) with the
               purpose of obtaining such person as an employee or customer for a
               business competitive with the Company's business. For purposes of
               this  Section,  Potential  Customer  means any  company or entity
               actually solicited by the Company as of the Termination Date.
                                   

For purposes of this Agreement, "affiliate"  shall mean a corporation or other
legal entity in common control with the Company.

3.1.3  Organizing  Competitive  Business.  Without  limiting  any of  the  other
provisions  contained  in this  Section 3,  during the  Employment  Term and any
period  during which  Executive  receives any Severance  Payment,  the Executive
shall not  undertake  planning  for or  organization  of any  business  activity
competitive  with  the  business  of  the  Company,  or  conspire  with  agents,
employees,  consultants, or other representatives of the Company for the purpose
of organizing any such competitive business activity.

4.       INJUNCTIVE RELIEF AND ADDITIONAL REMEDY

The Executive acknowledges and agrees that any breach of the terms of Sections 2
or 3 above  would  result in  irreparable  injury and damage to the  Company for
which the Company would have no adequate remedy at law; the Executive  therefore
also  acknowledges  and agrees that in the event of such breach or any threat of
breach, the Company shall be entitled to an immediate injunction and restraining
order to prevent such breach and/or threatened breach and/or continued breach by
the Executive  and/or any and all persons and/or entities acting for and/or with
the  Executive,  without  having  to prove  damages,  in  addition  to any other
remedies to which the Company may be entitled at law or in equity.  The terms of
this paragraph  shall not prevent the Company from pursuing any other  available
remedies for any breach or threatened  breach hereof,  including but not limited
to the recovery of damages from the Executive.

5.       REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE

The Executive  represents and warrants to the Company that (i) this Agreement is
valid and binding upon and enforceable against him in accordance with its terms,
(ii) the  Executive  is not  bound by or  subject  to any  contractual  or other
obligation  that would be  violated  by his  execution  or  performance  of this
Agreement,   including,  but  not  limited  to,  any  non-competition  agreement
presently in effect,  and (iii) the  Executive is not subject to any pending or,
to the Executive's  knowledge,  threatened claim,  action,  judgment,  order, or
investigation that could adversely affect his ability to perform his obligations
under this Agreement or the business reputation of the Company.

6.       SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS

Sections 1.7, 2 and 3 above shall survive any  termination of this Agreement and
continue in full force and effect as is necessary or  appropriate to enforce the
covenants and  agreements of each party.  The existence of any claim or cause of
action  by the  Executive  against  the  Company,  whether  predicated  on  this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants and agreements of Sections 2 and 3 above.

7.       CHANGE IN CONTROL BENEFIT LIMIT

7.1 Benefit  Limit.  The aggregate  Present Value  (measured as of the Change in
Control)  of the  benefits  to  which  Executive  becomes  entitled  under  this
Agreement  either  at the time of the  Change in  Control  or at the time of his
subsequent  termination of employment (namely, the salary continuation  payments
under  Section  1.6  and  the  Option  Parachute  Payment  attributable  to  his
accelerated  options)  will in all events be limited to the amount (the"Benefit
Limit") which yields  Executive  the greatest  after-tax  amount  payable to him
under this  Agreement  after taking into account the excise tax (if any) imposed
under Code  Section  4999 ) on the  payments  and  benefits  which are  provided
Executive under this Agreement or which constitute Other Parachute Payments.

7.2  Definitions  For purposes of applying Code Sections 280(G) and 4999 and the
Treasury  Regulations  thereunder to determine the Benefit Limit in effect under
this Section 7.1, the following definitions shall be in effect:

Code means the Internal Revenue Code of 1986, as amended from time to time.

Option  Parachute  Payment  means,  with respect to any of  Executive's  options
accelerated pursuant to this Agreement,  the portion of that option deemed to be
a parachute payment under Code Section 280G and the Treasury  Regulations issued
thereunder.  The  portion  of such  Option  which is  categorized  as an  Option
Parachute Payment will be calculated in accordance with the valuation provisions
established under Code Section 280G and the applicable Treasury  Regulations and
will  include  an  appropriate   dollar  adjustment  to  reflect  the  lapse  of
Executive's  obligation to remain in the Company's  employ as a condition to the
vesting of the accelerated  installment.  In no event,  however, will the Option
Parachute  Payment  attributable  to  any  accelerated  option  (or  accelerated
installment)  exceed  the spread  (the  excess of the fair  market  value of the
accelerated  option  shares  over the option  exercise  price  payable for those
shares) existing at the time of acceleration.

Other Parachute  Payment means any payment in the nature of compensation  (other
than the benefits to which  Executive  becomes  entitled  under this  Agreement)
which  are made to him in  connection  with the  Change  in  Control  and  which
accordingly  qualify as  parachute  payments  within the meaning of Code Section
280G(b)(2) and the Treasury Regulations issued thereunder.

Parachute  Payment means any payment or benefit  provided  Executive  under this
Agreement  (other  than  the  Option  Parachute  Payment)  which  is  deemed  to
constitute a parachute payment within the meaning of Code Section 280G(b)(2) and
the Treasury Regulations issued thereunder.

Present  Value  means  the  value,  determined  as of the date of the  Change in
Control, of any payment in the nature of compensation to which Executive becomes
entitled in connection with the Change in Control or the subsequent  termination
of his employment,  including (without  limitation) the Option Parachute Payment
attributable  to the  accelerated  vesting  of his  options  and any  additional
benefits to which Executive  becomes entitled under this Agreement.  The Present
Value of each such payment shall be determined in accordance with the provisions
of Code  Section  280G(d)(4),  utilizing  a discount  rate equal to one  hundred
twenty percent  (120%) of the  applicable  Federal rate in effect at the time of
such determination, compounded semi-annually to the effective date of the Change
in Control.

7.3  Resolution  Procedure.  In the  event  there  is any  disagreement  between
Executive and the Company as to whether one or more payments to which  Executive
becomes  entitled  in  connection  with  either  the  Change in  Control  or his
subsequent  termination  of employment  constitute  Parachute  Payments,  Option
Parachute Payments or Other Parachute Payments or as to the determination of the
Present Value thereof, such dispute will be resolved as follows:

          (i)  In the event temporary, proposed or final Treasury Regulations in
               effect  at the  time  under  Code  Section  280G  (or  applicable
               judicial decisions)  specifically  address the status of any such
               payment or the method of valuation therefor, the characterization
               afforded to such payment by the  Regulations  (or such decisions)
               will,  together with the  applicable  valuation  methodology,  be
               controlling.

          (ii) In  the  event  Treasury   Regulations  (or  applicable  judicial
               decisions)  do not  address the status of any payment in dispute,
               the matter will be  submitted  for  resolution  to the  Company's
               independent  auditors  ("Independent  Auditors").  The resolution
               reached   by  the   Independent   Auditors   will  be  final  and
               controlling.   All  expenses  incurred  in  connection  with  the
               retention  of the  Independent  Auditors  to resolve  the dispute
               shall be shared equally by Executive and the Company.

          (iii)In  the  event  Treasury   Regulations  (or  applicable  judicial
               decisions) do not address the appropriate  valuation  methodology
               for any payment in dispute,  the Present  Value  thereof will, at
               the  Independent  Auditor's  election,  be determined  through an
               independent  third-party appraisal,  and the expenses incurred in
               obtaining such appraisal shall be shared equally by Executive and
               the Company. 

7.4 Status of Benefits.

          (i)  No salary  continuation  payments will be made to Executive under
               this  Agreement  and none of his  options  shall  vest and become
               exercisable on an accelerated basis hereunder,  until the Present
               Value  of  the  Option  Parachute  Payment  attributable  to  the
               accelerated  vesting of such options has been  determined and the
               status of any payments in dispute  under  Paragraph  7.3 has been
               resolved in accordance therewith.  The post-termination  exercise
               period for any options which cannot be exercised by reason of the
               foregoing  limitation shall automatically be stayed and shall not
               be  deemed  to run  during  any  period  the  option  remains  so
               unexercisable.

          (ii) Once the requisite  determinations  under Paragraph 7.3 have been
               made, then to the extent the aggregate Present Value, measured as
               of the Change in  Control,  of (1) the Option  Parachute  Payment
               attributable to the accelerated options (or installments thereof)
               plus (2) the Parachute  Payment  attributable  to the Executive's
               salary  continuation  benefits under this Agreement  would,  when
               added  to the  Present  Value  of all  of the  Executive's  Other
               Parachute  Payments,  exceed the Benefit Limit,  the  Executive's
               salary  continuation  payments will first be reduced and then the
               number of option shares subject to  accelerated  vesting shall be
               reduced  (based on their  Option  Parachute  Value) to the extent
               necessary  to  assure  the  Benefit  Limit  is not  exceeded.  8.
               MISCELLANEOUS

8.1 Notices. All notices,  requests, and other communications  hereunder must be
in  writing  and will be  deemed  to have  been  duly  given  only if  delivered
personally against written receipt or by facsimile transmission with answer back
confirmation or mailed (postage prepaid by certified or registered mail,  return
receipt  requested)  or by  overnight  courier to the  parties at the  following
addresses or facsimile numbers:

                  If to the Executive, to:

                           Mr. Timothy Webb
                           7012 Quill Leaf Cove
                           Austin, Texas  78750
                           Facsimile No:  (512) 795-8432

                  If to the Company, to:

                           PSW Technologies, Inc.
                           Attention: Chairman of the Board
                           6300 Bridgepoint Parkway, Bldg. 3, Suite 200
                           Austin, Texas 78730
                           Facsimile No: (512) 342-3200

All such  notices,  requests  and  other  communications  will (i) if  delivered
personally  to the address as provided in this Section 7.1, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided  in this  Section  7.1,  be deemed  given  upon  receipt,  and (iii) if
delivered  by mail in the manner  described  above to the address as provided in
this  Section  7.1, be deemed  given upon  receipt (in each case  regardless  of
whether such notice,  request,  or other  communication is received by any other
Person to whom a copy of such notice,  request or other  communication  is to be
delivered pursuant to this Section).  Any party from time to time may change its
address,  facsimile  number,  or other information for the purpose of notices to
that parry by giving written notice  specifying such change to the other parties
hereto.

8.2 Entire  Agreement.  This  Agreement  supersedes  all prior  discussions  and
agreements  among the  parties  with  respect to the subject  matter  hereof and
contain the sole and entire  agreement  between the parties  hereto with respect
thereto.

8.3 Waiver. Any term or condition of this Agreement may be waived at any time by
the party that is entitled to the benefit  thereof,  but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party  waiving such term or  condition.  No waiver by any party hereto of
any term or condition of this Agreement, in any one or more instances,  shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this  Agreement  on any future  occasion.  All  remedies,  either  under this
Agreement  or  by  law  or  otherwise  afforded,  will  be  cumulative  and  not
alternative.  8.4  Amendment.  This Agreement may be amended,  supplemented,  or
modified  only by a written  instrument  duly  executed  by or on behalf of each
party hereto. 8.5 No Third Party  Beneficiary.  The terms and provisions of this
Agreement  are  intended  solely for the  benefit  of each party  hereto and the
Company's  successors or assigns,  and it is not the intention of the parties to
confer third-party  beneficiary rights upon any other Person. 8.6 No Assignment;
Binding  Effect.  This Agreement shall inure to the benefit of any successors or
assigns  of the  Company.  The  Executive  shall not be  entitled  to assign his
obligations  under this  Agreement.  8.7  Headings.  The  headings  used in this
Agreement have been inserted for convenience of reference only and do not define
or limit the provisions hereof. 8.8 Severability.  The Company and the Executive
intend all  provisions  of this  Agreement to be enforced to the fullest  extent
permitted by law. Accordingly,  if a court of competent jurisdiction  determines
that the scope and/or  operation of any provision of this Agreement is too broad
to be enforced as written,  the Company and the Executive  intend that the court
should  reform such  provision to such  narrower  scope  and/or  operation as it
determines to be enforceable.  If,  however,  any provision of this Agreement is
held to be illegal,  invalid,  or unenforceable under present or future law, and
not subject to reformation,  then (i) such provision  shall be fully  severable,
(ii) this  Agreement  shall be construed  and enforced as if such  provision was
never a part of this  Agreement,  and (iii)  the  remaining  provisions  of this
Agreement  shall  remain in full force and effect and shall not be  affected  by
illegal,  invalid,  or  unenforceable  provisions  or by  their  severance.  8.9
Governing Law. This  Agreement  shall be governed by and construed in accordance
with  the laws of the  State  of Texas  applicable  to  contracts  executed  and
performed in such State without  giving effect to conflicts of laws  principles.
8.10 Jurisdiction. With respect to any suit, action, or other proceeding arising
from (or  relating  to) this  Agreement,  the Company and the  Executive  hereby
irrevocably  agree to the non-exclusive  personal  jurisdiction and venue of the
United States  District  Court for the Western  District of Texas (and any Texas
State Court within Travis County, Texas). 8.11 Counterparts.  This Agreement may
be executed in any number of counterparts  and by facsimile,  each of which will
be deemed an original,  but all of which  together will  constitute  one and the
same  instrument.  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused this
Agreement to be executed on the date first written above.



                               [SIGNATURE PAGE TO EMPLOYMENT AGREEMENT FOLLOWS]


                                             "COMPANY"

                                               PSW TECHNOLOGIES, INC.
                                               a Delaware corporation



                                               By:      /s/ Keith Thatcher

                                               Name:    Keith Thatcher

                                               Title:   Chief Financial Officer


                                              "EXECUTIVE"

                                                TIMOTHY WEBB



                                                /s/ Timothy Webb
                                                Timothy Webb