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                                                                   EXHIBIT 10.17


                              EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into by and between Gregory
P. Dougherty ("Employee") and SDL, Inc. (the "Company"), and is effective as of
the 1st day of October, 1998 and supercedes any/all previous employment
agreements. The parties hereby AGREE AS FOLLOWS:

1. Period of Employment

The Company will employ Employee to render services to the Company in the
position and with the duties and responsibilities described in Section 2, for
the compensation specified in Sections 3 and 4 and for the period commencing on
the effective date of this Agreement and ending on termination as provided in
Section 5.

2. Position and Duties

Employee accepts employment with the Company as its Chief Operating Officer. As
such, Employee shall have the responsibilities for the management and operations
of the Company established for him from time to time by the Board of Directors.

3. Compensation

(a) Base Salary. Employee shall receive a base salary of $209,204 per year,
payable in equal installments in accordance with the Company's current practices
or as they may be amended. The foregoing base salary shall be subject to annual
reviews each year during the term of the Agreement, as determined by the Board
of Directors in its sole discretion.

(b) Annual Bonuses. The Board of Directors shall approve an annual operating
plan for the Company. Employee shall receive cash bonuses in connection with
each audit of the Company's results of operations conducted by the Company's
independent certified public accountants. Such audits shall be conducted at
least annually. Employee's bonuses shall be computed as provided in the matrix
attached to this agreement as Exhibit A or other such criteria as determined by
the SDL Board of Directors, provided that such bonuses shall be adjusted pro
rata to reflect any audit period less than twelve (12) months. The Company's
results of operations shall be determined by the Company's independent certified
public accountants in accordance with generally accepted accounting principles
applied consistent with the practice for prior periods and shall be accompanied
by an audit report of such accountants, which shall be reasonably acceptable to
the Company's Board of Directors. Such bonuses shall be calculated and paid
within thirty (30) days following delivery of the audit report. Bonuses shall be
deemed earned with respect to each fiscal year (or portion thereto) during which
Employee has been employed hereunder as of the end of the fiscal period covered
by the audit; such bonuses shall thereafter be paid on the dates set forth
above, subject only to the determination of the Company's results of operations.

(e) Option Appreciation Guarantee. Offer letter dated February 21, 1997 states:
"If at the end of your second complete year with SDL the options that you have
been granted do not yield you $200,000 appreciation, SDL will make up the
difference in cash. That is, if the options are below water SDL

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will pay $200,000 in cash less taxes. If the options are above water but their
value is less than $200,000 above the exercise price, SDL will pay you the
difference in cash less taxes. SDL will calculate the appreciation on the second
anniversary of your option grant date based on a 3 day average of the last trade
price as reported in the Wall Street Journal; day before, anniversary date, and
day after." This agreement amends the above paragraph by adding the following
sentence: Any such payout will actually occur on your tenth anniversary or
termination from the Company for any reason, whichever comes first.

4. Benefits

(a) Employee will continue to receive benefits made generally available to
employees of the Company. In addition, Employee shall receive in the future
benefits generally made available to the Company's executives at a similar
reporting level. The foregoing shall include stock option plan grants, with the
number of shares, if any, covered by such grants determined by the Board of
Directors in its sole discretion. The Company shall reimburse Employee for
reasonable travel and other business expenses incurred by him in the performance
of his duties hereunder in accordance with the Company's policies in this
regard.

(b) During the term of this Agreement and for a period of six (6) months
thereafter, the Company will maintain an insurance policy on Employee's life in
an amount equal to his then-current base salary. The proceeds of the foregoing
insurance policy shall be payable to such beneficiaries as Employee may
designate from time to time or, in the absence of a designation, to his estate.

(c) New Loan. In the event Employee sells the Property and purchases a new
residence, the Company agrees to enter into a new housing assistance loan (the
"New Loan"), the terms of which will be the same in all material respects to the
terms of Housing Assistance Loan, including but not limited to the terms related
to the on-going loan repayment obligations of Employee and the repayment
obligations of Employee in the event of termination by the Company, provided,
however, that (i) at the time of the close of escrow for the new residence, the
Employee must be currently employed at the Company, (ii) the amount of the New
Loan will be equal to the price of the new residence minus $228,000, but in no
event shall it exceed the amount outstanding under the Note at the time such
amount became due and payable and (iii) the New Loan will be due and payable on
the tenth anniversary of the date of the Note.

(d) See attached "Addendum, Terms of Employment Offer" Section 1)(d)(iii) under
"Relocation Package" in the attached "Addendum, Terms of Employment Offer" dated
February 21, 1997 is amended to read as follows: Dollar forgiveness on the
anniversary of your employment date

<TABLE>
                  <S>       <C>         <C>     <C>
                  1999      $40,000      -      2nd Anniversary
                  2000      $40,000      -      3rd Anniversary
                  2001      $40,000      -      4th Anniversary
                  2002      $80,000      -      5th Anniversary
                  2003      $40,000      -      6th Anniversary
                  2004      $40,000      -      7th Anniversary
                  2005      $40,000      -      8th Anniversary
                  2006      $40,000      -      9th Anniversary
                  2007      $40,000      -     10th Anniversary
</TABLE>

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5. Termination In addition to the terms of termination defined in the "Addendum,
Terms of Employment Offer" (see attached) the following will apply.

(a) Employee's employment by the Company hereunder shall be TERMINABLE BY EITHER
EMPLOYEE OR the Company at any time and for any reason, with or without cause,
effective upon written notice to the other party. Upon termination of employment
the employee shall be deemed to have resigned from all offices and directorships
then held with the Company or any affiliate.

(b) In the event the Company terminates Employee's employment pursuant to
subsection (a) above other than for cause (as defined below), or the Employee
resigns following a reduction in base pay and bonus when said reduction is not
in conjunction with similar reductions in base pay and bonus with other Senior
Executives or employee is no longer in the role of Chief Operating Officer or at
least equivalent position, Employee shall be entitled to the following benefits:

(i) An amount, payable monthly for six (6) months, commencing on the effective
date of termination of the Employee's employment equal to his then current
monthly base salary;

(ii) Accelerated vesting, for six (6) additional months from the effective date
of termination, under all outstanding stock options then held by Employee; and

(iii) An amount, payable monthly for six (6) months commencing on the effective
date of termination of Employee's employment equal to 4.1667% of his then
current annual base salary

(iv) For a period of six (6) months following the termination of Employee's
employment pursuant to this Agreement, the Company will pay the cost to maintain
medical benefits under COBRA, provided that Employee will continue to pay the
amount he paid for medical insurance prior to such termination and provided the
employee adheres to the terms of COBRA.

(v) $200,000 of "Housing Assistance Loan" described in the Terms of Offer dated
February 21, 1997 will be forgiven if termination occurs during the first 5
years of employment at SDL and the balance of the loan is due upon close of
escrow on the house repurchase or within 1 year which ever comes first,

(vi) At your option, SDL can repurchase your CA house, within 1 year of your
termination date, at the higher of original purchase price or appraised value at
the time of termination or you will need to pay the balance of the loan within
1 year.

(c) If Employee terminates his employment pursuant to this Agreement in
accordance with Section 5 (a), or if the Company terminates Employee's
employment pursuant to Section 5(a) for cause (defined as willful breach of duty
in the course of employment or habitual neglect of duty or continued inability
to perform it), continued inability to perform it shall not include performance
results, unwillingness to move (more than 100 miles)/accept transfer or
unwillingness to accept excessive travel or any reasons/circumstances resulting
from illness in family or child care, the following shall apply:

(i) No further salary shall be payable to Employee, except for amounts accruing
prior to the termination date;

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(ii) No further vesting of Employee's stock options or stock purchase, or
similar rights shall occur; and

(iii) No further bonuses shall be payable pursuant to Section 3(b).

(iv) No forgiveness of the $200,000 "Housing Assistance Loan" will be provided,

(v) "Housing Assistance Loan" balance in full is payable with 1 year, or upon
sale of house whichever occurs first.

(d) Subsequent to the termination of Employee's employment hereunder, the
payments and benefits provided for in Sections 4(b) and subsections 5 (b) (i),
(ii), (iii) and (iv) shall terminate at such time, if any, as Employee commences
employment.

(e) This Agreement shall terminate upon Employee's death or permanent
disability. In such event, Employee (or his estate) shall be entitle to receive
the benefits provided for under Section 5(b).

6. Miscellaneous

(a) Notices under this Agreement shall be in writing and shall be deemed given
when delivered in person or three (3) days after deposit in the United States
Mail, postage prepaid, certified or return receipt requested, and addressed as
follows:

             If to Employee:       NAME
                                   STREET ADDRESS
                                   CITY, STATE, ZIP
             If to the Company:    80 Rose Orchard Way
                                   San Jose, California 95134
                                   Attention: Corporate Secretary

The foregoing addresses may be CHANGED BY NOTICE IN ACCORDANCE WITH THIS
SUBSECTION (a).

(b) The prevailing party in any action to enforce the terms of this Agreement
shall be entitled to reimbursement from the other party for its costs and
expenses (including reasonable attorneys' fees) in connection therewith.

(c) The terms of this Agreement are intended by the parties to be the final
expression of their agreement with respect to the employment of Employee by the
Company and may not be contradicted by evidence of any prior or contemporaneous
agreement. The parties further intend that this Agreement shall constitute the
complete and exclusive statement of its terms and that no extrinsic evidence
whatsoever may be produced in any legal proceeding involving this Agreement.
This Agreement may be amended, and the observance of any of its terms may be
waived, only by a writing signed by the party to be charged with such amendment
or waiver.

(d) If any provision of this Agreement, or the application thereof to any
person, place or circumstance, shall be held by a court of competent
jurisdiction to be invalid, unenforceable or void, the remainder of this
Agreement and such provisions as applied to other persons, places and

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circumstances shall remain in full force and effect.

(e) The validity, interpretation, enforceability and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of California, without regard to its rules regarding conflicts of laws.

(f) Employee agrees THAT ALL DISPUTES between him and the Company (including all
affiliates, shareholders, directors, officers, employees, consultants, agents,
successors and assigns), which arise during Employee's employment or after, will
be resolved by arbitration. The arbitration will be conducted by a single
arbitrator. The arbitrator will be selected and the arbitration conducted
pursuant to the Employment Dispute Resolution rules of the American Arbitration
Association (AAA). The arbitration agreement covers all disputes arising from
Employee's employment, including (1) claims for wages, benefits or compensation,
(2) all tort and contract claims of any kind, including disputes concerning this
Agreement, and (3) claims based on any federal or state law, including
discrimination, harassment or retaliation laws. For example, this arbitration
agreement includes claims arising under Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act, the Americans with Disabilities
Act, and the California Fair Employment and Housing Act. The only claims not
covered by this arbitration agreement are workers' compensation and unemployment
compensation claims, and the Company may, at its option, seek injunctive relief,
equitable relief and damages in court for any breach of this Invention and
Proprietary Information Agreement, any other agreement, or any federal or state
law, concerning Proprietary Information or Inventions. Except as provided in the
previous sentence, arbitration is the exclusive remedy for all disputes covered
by this arbitration agreement, including whether a particular dispute is covered
by this agreement, and shall be final and binding on both parties, which means
that BOTH EMPLOYEE AND THE COMPANY WAIVE ANY RIGHT TO A JURY TRIAL. Either
Employee or the Company may bring an action in court to compel arbitration and
to enforce an arbitration award. Otherwise, neither party shall initiate or
prosecute any lawsuit or administrative action in any way related to any dispute
covered by the arbitration agreement. The Federal Arbitration Act shall govern
the interpretation and enforcement of this arbitration agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first set forth above.

     EMPLOYEE                                SDL, INC.
     By /s/ Gregory P. Dougherty             By /s/ Donald R. Scifres

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Mr. Gregory P. Dougherty
Addendum, Terms of Employment Offer
February 21, 1997


Stock Options:

1)      A second grant approximately 2 years after the initial grant (exact date
        to be concurrent with appropriate quarterly reload schedule) of 14,000
        options in accordance with the terms of SDL's stock option plan, as long
        as:

            i)   You are still employed with SDL and,

            ii)  SDL's option plan is still in effect

Relocation Package:

1)      "Housing Assistance Loan: secured 2nd mortgage on house:

        a)  The amount of this loan is equivalent to the price of California
            house less $228,000 not exceed $700,000

        b)  Term: 10 years

        c)  Interest rate 0%

        d)  On-going loan repayment:

            i)   100 % of net after tax proceeds of any payment made under
                 option appreciation guarantee, see Employment Offer Letter.

            ii)  50% of net after tax proceeds of all bonus payments, see
                 Employment Offer Letter.

            iii) $200,000 of loan will be forgiven after 5 years and an
                 additional $200,000 of loan will be forgiven after 10 years of
                 SDL service and any remaining loan balance will be due and
                 payable at end of term of the loan.

        e)  Repayment in the event of termination:

            i)   Voluntarily termination - balance in full within 1 year.

            ii)  Termination due to death or disability - balance in full due
                 upon close of escrow on the house repurchase.

            iii) Involuntarily termination - $200,000 of loan will be forgiven
                 if termination occurs during the first 5 years of employment,
                 balance is due upon close of escrow on the house repurchase.

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        f)  In the event of involuntary termination or termination due to death
            or disability, SDL will give you the option of SDL repurchasing your
            CA house within 1 year at the higher of original purchase price or
            appraised value at the time of termination or pay the balance of the
            loan with 1 year.

        g)  SDL is advised that there is no imputed interest on this loan, if
            that advice is incorrect, SDL will reimburse the federal and state
            income tax on any imputed interest if it is due under present tax
            law.

2)      Relocation Assistance:

        a)  Pennsylvania house - SDL will contract with a relocation assistance
            firm to purchase the PA house for $228,000. SDL will reimburse you
            for any Federal and State income taxes which you pay as a result of
            this transaction.

        b)  Lump sum payment:

            I)   Total lump sum payment for relocation is $200,000 which will be
                 split between current compensation and a "Relocation Loan".

            II)  Loan:

                 i) Loan amount equal to the price of the California house minus
                 amount of first mortgage obtained by employee (which will not
                 exceed the amount of the 1st mortgage on the Pennsylvania
                 house) minus amount of housing assistance loan per Relocation
                 Package Section 1a).

                 ii) Repayment of "Relocation Loan" - 20% of the loan portion of
                 the $200,000 amount will be forgiven annually for 5 years on
                 the loan anniversary date if employment continues, iii) In the
                 event of involuntary termination or termination for any reason
                 after 12 months of continuous employment with SDL this loan
                 will be forgiven completely.

            III) Non-loan amount equal to $200,000 minus loan amount per
                 Relocation Package Section 2b) II) which will be paid
                 concurrent with signing the loan agreements.

            IV)  Should you voluntarily terminate your employment with SDL
                 during the first 12 months of your employment, you will be
                 required to repay SDL on a pro rata basis for the lump sum
                 payment.

Vacation:

1)      20 days of vacation will be credited to your account on your hire date
        for your use in 1997.

2)      Additional vacation will accrue at the rate of 20 days per year.

Indemnification of Legal Costs

1)      In the event that Lucent Technologies brings suit against you, not
        related to a violation of law or breach of contract by you, SDL will
        provide a legal defense on your behalf.