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                                                                   Exhibit 10.34
                                                                   -------------

                              Employment Agreement

      Agreement made as of the 21st day of January 2000 (the "Effective Date"),
by and between Peritus Software Services, Inc., a Massachusetts corporation (the
"Company"), and John Giordano (the "Employee"). This Agreement supercedes all
prior Agreements.

      The Company wishes to continue to employ the Employee, and the Employee
wishes to continue to be employed by the Company. In consideration of the mutual
covenants and promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, the parties agree as follows:

I.    Titles and Reporting Responsibilities

      The Employee's titles will be President and Chief Executive Officer and
Chief Financial Officer or such other title as may be mutually agreed upon
between Employee and the Company. The Employee will report to Board of
Directors.

II.   Term of Employment

      The Company hereby agrees to continue to employ the Employee and the
Employee hereby accepts continued employment with the Company for a period (the
"Employment Period") commencing on the January 21, 2000 and ending January 21,
2003 unless earlier terminated pursuant to the provisions of Section VII below.
This Agreement shall remain in full force and effect until expiration hereof
unless earlier terminated in accordance with Section VII of this Agreement.

III.  Responsibilities of the Employee

      The Employee agrees to undertake the duties and responsibilities inherent
in the position described in Section I above and such other duties and
responsibilities as the Company or its designee shall from time to time
reasonably assign. The Employee agrees to devote his entire business time,
attention and energies to the business and interests of the Company during the
term of this Agreement. The Employee agrees to abide by the rules, regulations,
instructions, personnel practices and policies of the Company and any changes
therein which may be adopted from time to time by the Company.

IV.   Expense Reimbursement

      The Company will reimburse the Employee for all reasonable documented
travel and other business expenses incurred in furthering the business of the
Company and in accordance with the Company's then current travel and business
expense policy. Expenditures of an extraordinary nature shall require prior
written approval of the Company.

V.    Prohibitions


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      During the term of this Agreement, the Employee shall not:

      (a) be employed by or otherwise represent any other company, product,
      service or enterprise, without the prior written approval of the Company;
      or

      (b) make any representation, warranty, guarantee, or statement, orally or
      in writing, which would contravene any Company policy or compromise the
      Company's interests.

VI.   Compensation

      (a) The Employee shall be paid a base salary (the "Base Salary") and, when
      appropriate, bonuses (Bonus Compensation") as described in this Section
      VI. The Employee's initial bi-weekly Base Salary shall be $7,500 (Initial
      Base Salary), which is the equivalent of $195,000 per year. Provided
      neither party has exercised the right to terminate this Agreement under
      Section VII, performance and compensation reviews will be conducted
      annually beginning January 1, 2001.

      (b) Bonus Compensation will be paid to the Employee provided the Employee
      successfully meets the bonus criteria as approved by the Board of
      Directors of the Company, by a Committee of the Board of Directors of the
      Company established for the purpose of determining bonus compensation or
      by a designee of the Board of Directors or such Committee who has been
      granted the authority to determine bonuses. Employee's bonus rate shall be
      50% (Initial Bonus Rate) of base salary.

      (c) Except as otherwise provided, the Employee shall be entitled to
      participate in any and all benefit programs that the Company establishes
      and makes generally available to its employees for which he may be
      eligible under plan documents and applicable laws. In any case where
      contributions or benefits related to participation in a plan vary on the
      basis of compensation, "compensation" shall mean Employee's Base Salary
      only and shall not include expense reimbursements, advances or Bonus
      Compensation. The Employee shall be entitled to four weeks vacation.

      (d) Any future revisions to Base Salary or Bonus Compensation may be
      implemented by the Board of Directors of the Company, by a Committee of
      the Board of Directors of the Company established for the purpose of
      determining bonus compensation or by a designee of the Board of Directors
      or such Committee who has been granted the authority to determine bonuses
      provided however that no reduction may be made to either the Initial Base
      Salary or the Initial Bonus Rate.

VII.  Termination

      The employment of the Employee by the Company pursuant to this Agreement
shall terminate:


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      (a) By the Employee, without cause, by giving 30 days' prior written
      notice of termination to the Company or within such shorter period as is
      established by mutual agreement of the parties or upon Employee's
      commencement of employment or consulting with a third party, or by the
      Company, without cause, upon at least 30 days prior written notice of
      termination to the Employee.

      (b) Upon Change of Control of the Company including the acquisition of
      more than 50% of the equity by any person, any merger, consolidation or
      sale of substantially all of the assets of the Company.

      (c) By either party, if the other party breaches any of its obligations
      under this Agreement and fails to remedy such breach within 30 days after
      written notice of such breach is provided to such other party. Failure of
      the Employee to adequately perform the duties and responsibilities
      specified in Section III hereof shall be considered a breach of this
      Agreement provided however that the remedy period for such breach shall be
      120 days.

      (d) By the Company, effective immediately and without notice, for cause.
      For purposes of this Section VII (d), "cause" for termination shall be
      deemed to exist upon (a) dishonesty, gross negligence or misconduct, or
      (b) the conviction of the Employee of, or the entry of a pleading of
      guilty or nolo contendere by the Employee to, any crime involving moral
      turpitude or any felony.

      (e) Upon the death or disability of the Employee. As used in this
      Agreement, the term "disability" shall mean the inability of the Employee,
      due to a physical or mental disability, to perform the essential functions
      of his/her job with or without a reasonable accommodation by the Company.

VIII. Rights Following Termination

      (a) Following termination of this Agreement, pursuant to Section VII(c),
      VII(d), VII(e), or at the option of the Employee pursuant to Section
      VII(a), or upon expiration of this Agreement, the Company shall have no
      further responsibility to Employee except to pay Base Salary up to and
      including the last day of employment.

      (b) If this Agreement is terminated at the option of the Company pursuant
      to Section VII (a) or pursuant to Section VII (b), then: (1) the Company
      shall pay to the employee upon termination a severance payment equal to
      one year of his then current Base Salary; (2) the Company shall continue
      to provide normal benefits in accordance with its then current payroll
      policies until the earlier of either the date of one year following the
      termination date or the date Employee commences employment or consulting
      with a third party; (3) Employee's unvested options, if any, will vest on
      the date immediately prior to the termination date; and, (4) the period
      for the exercise of Employee's options will be extended to the date of one
      year following the termination date. The Employee shall not be eligible to
      receive the severance payment unless and until the Employee signs a
      release in the form attached hereto as Exhibit A.

      (c) In the event of termination or expiration of this Agreement, Employee
      shall, at the instruction of the Company, promptly return to the Company
      or its designee all files, letters, memoranda, reports, records, data,
      sketches, drawings, laboratory notebooks,

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      program listings, or other written, photographic, or other tangible
      material supplied by the Company to the Employee or created or maintained
      for the Company by the Employee.

      (d) Except as set forth above, neither party shall be entitled to any
      compensation or claim for goodwill or other loss, suffered by reason or
      termination of this Agreement.

      (e) The rights and obligations of the parties to this Agreement set forth
      in Section VIII and Section IX shall survive any termination or expiration
      of this Agreement. The termination or expiration of this Agreement shall
      in no case relieve either party from its obligations to pay to the other
      any monies accrued hereunder prior to such termination or expiration.

      (f) Employee shall not disclose the terms of this Agreement to any third
      party unless such third party is obligated to keep such information
      confidential.

IX.   Non-Competition

      (a)   During the Employment Period and for a period of one year after the
            termination of this Agreement pursuant to Sections VII(a), VII(b),
            VII(c), or VII(d) the Employee will not directly or indirectly:

            (i) as an individual, proprietor, partner, stockholder, officer,
      employee, director, joint venturer, investor, lender, or in any other
      capacity whatsoever (other than as the holder of not more than one percent
      (1%) of the total outstanding stock of a publicly held company), engage in
      the business of developing, producing, marketing or selling products or
      services of the kind or type developed or being developed, produced,
      marketed or sold by the Company or any subsidiary of the Company while the
      Employee was employed by the Company; or

            (ii) recruit, solicit or induce, or attempt to induce, any employee
      or employees of the Company to terminate their employment with, or
      otherwise cease their relationship with, the Company; or

            (iii) solicit, divert or take away, or attempt to divert or take
      away, the business or patronage of any of the clients, customers or
      accounts, or prospective clients, customers or accounts, of the Company
      which were contacted, solicited, served or known by the Employee while
      employed by the Company.

      (b) If any restriction set forth in this Section IX is found by any court
      of competent jurisdiction to be unenforceable because it extends for too
      long a period of time or over too great a range of activities or in too
      broad a geographic area, it shall be interpreted to extend only over the
      maximum period of time, range of activities or geographic area as to which
      it may be enforceable.

      (c) The restrictions contained in this Section IX are necessary for the
      protection of the business and goodwill of the Company and are considered
      by the Employee to be reasonable for such purpose. The Employee agrees
      that any breach of this Section IX


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      will cause the Company substantial and irrevocable damage and therefore,
      in the event of any such breach, in addition to such other remedies which
      may be available, the Company shall have the right to seek specific
      performance and injunctive relief.

X.    Other Agreements

      Employee represents that his performance of all the terms of this
Agreement and as an employee of the Company does not and will not breach any
employment agreement with any previous employer or any agreement with any
previous employer or other party to keep in confidence proprietary information,
knowledge or data acquired by him in accordance or in trust prior to his
employment with the Company or to refrain from competing, directly or
indirectly, with the business of such previous employer or any other party.
Employee has executed the Company's standard confidentiality and nondisclosure
agreement.

XI.   Notices

      All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered in person or, if mailed, when mailed by certified or registered mail,
postage prepaid, or by recorded delivery service to the parties at the addresses
set forth below their signatures to this Agreement or at such other address as
may be given in writing by either party to the other party in accordance with
this Section XI.

XII.  Assignability

      Employee acknowledges that the Company is entering into this Agreement in
reliance upon the personal reputation, qualifications and abilities of the
Employee and accordingly, the Employee may not assign his rights or obligations
under this Agreement, either voluntary or by operation of law.

XIII. Miscellaneous

      (a) This Agreement shall not be binding upon the Company until it has been
      executed by a duly authorized officer of the Company. This Agreement shall
      be binding on the parties and their respective successors and assigns.

      (b) This Agreement shall be governed by, and construed in accordance with,
      the substantive laws of The Commonwealth of Massachusetts.

      (c) This Agreement constitutes the entire understanding between the
      parties relating to the subject matter of this Agreement and supersedes
      all prior writings, negotiations or understanding with respect thereto
      except the confidentiality and nondisclosure agreement referenced in
      Section X above. No modification or addition to the Agreement shall have
      any effect unless it is set forth in writing and signed by both parties.

      (d) The waiver by the Company or the Employee of any breach of any
      provision of this Agreement shall not be construed as a continuing waiver
      of such breach or as a waiver of other breaches of the same or of other
      provisions of this Agreement.


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      (e) Should any provision of this Agreement be declared or be determined by
      any court of competent jurisdiction to be illegal or invalid, the validity
      of the remaining parts, terms, or provisions shall not be affected thereby
      and said illegal and invalid part, term or provision shall be deemed not
      to be a part of this Agreement.

      (f) The exercisability of Employee's options granted under the Company's
      1997 Stock Incentive Plan in the event of an "acquisition event" as such
      term is defined in such respective plan shall be governed by the terms of
      plan under which such options are granted and any related option
      agreements.

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

                                          Peritus Software Services, Inc.


________________________________       By: _____________________________________
Employee Signature

Address: 5 Queen Anne Road             Address: 112 Turnpike Road  Suite 111
         Hopkinton, Ma 01748                    Westborough, MA 01581-2860


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                                    EXHIBIT A
                                     RELEASE

1. Release. In consideration of the payments provided to me under a certain
employment contract between Peritus Software Services, Inc., a Massachusetts
Corporation (the "Company") and me, I hereby fully, forever, irrevocably and
unconditionally release, remise and discharge the Company, and any subsidiary or
affiliated organization of the Company or their respective current or former
officers, directors, stockholders, corporate affiliates, attorneys, agents and
employees (the "Released Parties") from any and all claims, charges, complaints,
demands, actions, causes of action, suits, rights, debts, amounts of money,
promises, doings, omissions, damages, executions, obligations, liabilities, and
expenses (including attorneys' fees and costs), of every kind and nature, known
or unknown, which I ever had or now have against the Released Parties,
including, but not limited to, all claims arising out of my employment, all
claims arising out of your separation of my employment, all claims arising from
any failure to reemploy me, all claims of race, sex, national origin, handicap,
religious, sexual orientation, benefit and age discrimination, all employment
discrimination claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C.
ss. 2000 et seq., the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et
seq., the Americans with Disabilities Act of 1990, 29 U.S.C. ss. 12101 et seq.,
The Employee Retirement Income Security Act of 1974, 29 U.S.C. ss. 1001 et seq.,
and similar state or local statutes, wrongful discharge claims, common law tort,
defamation, breach of contract and other common law claims, and any claims under
any other federal, state or local statutes or ordinances not expressly
referenced above.

2. Entire Understanding and Applicable Law. This Release contains and
constitutes my entire understanding with respect to the settlement of claims
against the Company and the Released Parties and cancels all previous oral and
written negotiations, agreements, commitments, and writings in connection
therewith. This Release shall be governed by the substantive laws of The
Commonwealth of Massachusetts to the extent not preempted by federal law.

3. Acknowledgements. I acknowledge that I have been given at least twenty-one
(21) days to consider this Release and that the Company advised me to consult
with any attorney of my own choosing prior to signing this Release. I
acknowledge that I may revoke this Release for a period of seven (7) days after
signing it, and the Release shall not be effective or enforceable until the
expiration of this seven (7) day revocation period.


Date:  __________________         Employee's Signature: ________________________

                                  Employee's Name: John Giordano


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