Document:

<PAGE>   1
                                                                   EXHIBIT 10.13

                              EMPLOYMENT AGREEMENT

        THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into by and between
Don Scifres ("Scifres") and Spectra Diode Laboratories, Inc. (the "Company"),
and is effective as of the 17th day of July, 1992.
        The parties hereby agree as follows:

        1.     Period of Employment.

               The company will employ Scifres 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.

               Scifres accepts employment with the Company as its President,
Chief Executive Officer and Chairman of the Board of Directors. As such, Scifres
shall have overall responsibility for the management and operations of the
Company, subject to the supervision and responsibilities of the Board of
Directors. In addition, Scifres shall have the duties and responsibilities of
the foregoing positions as set forth in the Bylaws of the Company. Any change in
Scifres' position and/or duties hereunder or a change in the location at which
he is to perform services hereunder which results in a commute for Scifres from
his current residence in excess of 25 miles shall constitute a termination of
this Agreement by the Company. Scifres shall report directly to the Board of
Directors.

<PAGE>   2

        3.     Compensation.

               (a)    Base Salary. Scifres shall receive a base salary of
                      $170,684 per year, payable in equal installments in
                      accordance with the Company's current practices. The
                      foregoing base salary shall be subject to annual increases
                      on January 1 of each year during the term of this
                      Agreement, as determined by the Board of Directors in its
                      sole discretion.

               (b)    Bonuses. The Board of Directors shall approve an annual
                      operating plan for the Company. Scifres 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. Scifres' bonuses
                      shall be computed as follows, adjusted pro rata to reflect
                      any audit period less than twelve (12) months (provided
                      that the first audit conducted after the effective date of
                      this Agreement shall be deemed to exclude the period
                      October 1, 1991 0 December 31, 1991):

                      (i)    18.75% of Scifres' then-current base salary if the
                             Company achieves at least 100% of the revenues
                             specified in the operating plan(s) for the fiscal
                             period covered by the audit;

<PAGE>   3

                      (ii)   18.75% of his then-current base salary if the
                             Company achieves at least 100% of the operating
                             income before interest and taxes (excluding
                             extraordinary items) specified in the operating
                             plan(s) for the fiscal period covered by the audit;

                      (iii)  12.5% of his then-current base salary in the sole
                             discretion of the Board of Directors. 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. If the Company achieves revenues
                             and/or net income before taxes (excluding
                             extraordinary items) of at least 70% of the levels
                             specified in the operating plan(s) for the fiscal
                             period covered by the audit, the foregoing bonuses
                             shall be paid, reduced on a straight-line basis to
                             a zero bonus at 70% of plan. Bonuses shall be
                             deemed earned with respect to each fiscal year (or
                             portion thereof) during which Scifres 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, whether or not employment
                             hereunder has terminated.

<PAGE>   4

               (c)    Stock Option Grants. Scifres will be granted stock options
under the Company's 1992 Stock Option Plan as follows: options for 183,550
shares of Common Stock vesting in equal monthly installments over one year from
the date of consummation of the transaction described in Section 5(d); and
options for 100,000 shares of Common Stock vesting in equal monthly installments
over four years from such date; provided, however, that the number or four-year
options shall be increased, in the event all one-year options budgeted by the
Company (487,320 shares) are not awarded, by an amount (rounded to the nearest
whole share) equal to 24.61% of the one-year options not awarded, up to a
maximum of 22,500 additional shares. The foregoing options will have an exercise
price of an exercise price of $1.75 per share and will otherwise have the terms
and conditions prescribed under the Company's 1992 Stock Option Plan.

        4.     Benefits.

               (a)    General. Scifres will continue to receive all employee
benefits to which he is currently entitled, consisting of (i) those benefits
made generally available to the Company's employees, and (ii) the benefits
described in the attachments to the letter dated January 3, 1991 from Scifres to
Frank Squires (a copy of which is attached hereto). In addition, Scifres shall
receive in the future any and all benefits generally made available to the
Company's executive personnel. The foregoing shall include, without limitation,
stock purchase and 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 Scifres 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)    Life Insurance. During the term of this Agreement and for
a period of twenty-four (24) months thereafter (subject to reduction as provided
in section 5), the Company will maintain an insurance policy on Scifres' life in
an

<PAGE>   5

amount equal to two (2) times his then-current base salary. The proceeds of the
foregoing insurance policy shall be payable to such beneficiaries as Scifres may
designate from time to time or, in the absence of a designation, to his estate.

               (c)    Board Seat. During the term of Scifres' employment
hereunder, Scifres shall be entitled to serve as a member of the Company's Board
of Directors pursuant to the terms of the Voting Agreement of even date
herewith.

               (d)    Post-Termination. For a period of twenty-four (24) months
(subject to reduction as provided in Section 5) following the termination of
Scifres' employment pursuant to this Agreement: (i) during the COBRA period, the
Company will reimburse Scifres (including a gross-up to compensate Scifres for
any taxes payable with respect to such reimbursement) for all amounts payable by
Scifres to retain medical benefits under COBRA, provided that during the COBRA
period Scifres will (as defined below), Scifres shall be entitled to the
following benefits (subject to reduction as provided below):

<PAGE>   6

                      (i)    A lump sum payment (payable within thirty (30) days
of termination) of twenty-four (24) months' salary based on his then-current
base salary;

                      (ii)   Acceleration of vesting, by twenty-four (24)
additional months from such date of termination, under all outstanding stock
options and stock purchase, stock appreciation and similar rights then held by
Scifres; and

                      (iii)  An amount, payable for twenty-four (24) months
commencing on the effective date of termination of Scifres' employment, equal to
4.1666% of his then-current base salary.

               For each full month occurring after the effective date of this
Agreement and prior to the first anniversary thereof, the time periods in
clauses (i), (ii) and (iii) above and in Sections 4(b) and 4(d) shall each be
reduced by one (1) month. As a result of this Agreement, the time periods in
clauses (i), (ii) and (iii) above and in Sections 4(b) and 4(d) shall be reduced
to twelve (12) months. The reduction in the time periods set forth in the
preceding sentence to twelve (12) months shall also come effect as of the
closing of the Company's initial underwritten offering of shares of its Common
Stock to the general public.

               (c)    Subsequent to the termination of Scifres' employment
thereunder, the payments and benefits provided for in

<PAGE>   7

Sections 4 (b) and 4 (d) and subsection 5 (b) (iii) shall terminate at such
time, if any, as Scifres commences full-time employment whereby he can obtain
group health and disability benefits (including coverage for preexisting
conditions) and life insurance benefits comparable to those to which he is
entitled hereunder. The Company's obligations and Scifres' rights under
subsections 5 (b) (i) and 5 (b) (ii) shall not be affected by Scifres'
commencement of new employment.

               (d)    In the event the Company terminates Scifres' employment
pursuant to subsection (a) above for cause, the Company's repurchase rights
under the stock option (183,550 shares) with a one-year vesting period
referenced in Section 3 (c) shall lapse in full. "Cause" shall be limited solely
to (i) Scifres' gross abdication of his duties hereunder (other than due to
illness or personal family problems), which conduct remains uncured for a period
of at least 30 days following written notice thereof to Scifres.

               (e)    This Agreement shall terminate upon Scifres' death or
permanent disability. In such event, and in addition to all other benefits to
which Scifres is then entitled under this Agreement or the Company's benefits
plans, Scifres (or his estate) shall be entitled to receive the benefits
provided for under Section 5 (b).

<PAGE>   8
               (f)    In  the event there is a "change of control" of the
Company, and if Scifres shall thereafter terminate this Agreement, Scifres shall
be entitled to receive the benefits provided for under Section 5 (b). For
purposes of this Section 5 (d), a "change of control" of the Company shall be
deemed to have occurred if, after the effective date of this Agreement, any
person or entity, including a "group" as defined in Section 13 (d) (3) of the
Securities Exchange Act of 1934, as amended, becomes the beneficial owner of
more than 50% of the securities of the Company having the right to vote for the
election of directors. Neither (a) the acquisition by Sprout Group and/or
Brinson Partnars, Inc., or their affiliates or entities managed or advised by
them (the "Investors"), of securities of the Company in accordance with the
Letter of Intent dated June 22, 1992, nor (b) the transfer of such shares to the
limited or general partners or shareholders, as applicable, of any of the
Investors shall be deemed to be a "change of control" of the Company. The
provisions of this section 5 (f) shall terminate on the closing of the Company's
initial underwritten offering of shares of its Common Stock to the general
public.

6.  Miscellaneous.

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

<PAGE>   9

           If to Scifres:      XXXXXXXXXXX

           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 Scifres by the Company and may not be contradicted by evidence
             of any prior or contemporaneous agreement. The offer letter dated
             June 13, 1983 is superseded by this Agreement and shall be of no
             further force or effect. The parties further intend that this
             Agreement shall constitute the complete and exclusive statement of
             its terms (except that Scifres shall be bound by his Invention and
             Confidential Information Agreement with the Company in accordance
             with 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.

<PAGE>   10

        (d)  If any prevision 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 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.

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

EMPLOYEE                                SPECTRA DIODE LABORATORIES, INC.

By   /S/ Don Scifres                    By    /S/ John Melton
   ---------------------------             ------------------------------

<PAGE>   11

                                    AMENDMENT

                                       TO

                              EMPLOYMENT AGREEMENT

               THIS AMENDMENT ("Amendment") is entered into with respect to the
Employment Agreement by and between Don Scifres and Spectra Diode Laboratories,
Inc., dated as of July 17, 1992 (the "Agreement").

        The parties hereby agree as follows:

        A.  Amendment. There is added to Section 3 (c) of the Agreement the
            following:

                  "In the event that the accelerated venting of Scifres' option
                  shares in connection with a change in the control of the
                  company (as defined in Section 5 (f) below), results in the
                  imposition of excise taxes on Scifres under Section 4999 of
                  the Internal Revenue Code ("Code") (and corresponding
                  provisions of applicable state tax law), the Company agrees to
                  pay Scifres a cash bonus calculated as follows: (a) if more
                  than 75% of the voting power of all outstanding stock of the
                  Company is held, as of the record date on which the approval
                  of the Company's shareholders is solicited with respect to
                  such transaction, by the Investors (as defined in Section 5
                  (f) below), then the cash bonus shall equal the excise taxes
                  imposed on Scifres under Section 4999 of Code (and
                  corresponding provisions of applicable state tax law) as a
                  result of the accelerated vesting of the option shares and
                  other "parachute payments" (as that term is defined by Code
                  Section 280G (b) (2)) received by Scifres in connection with
                  such change in control (including, without limitation, the
                  bonus provided for in this Section 3 (c)), or (b) if the
                  Investors hold 75% or less of the voting powers of all
                  outstanding stock of the company at that time, then the cash
                  bonus shall equal the lesser of (i) the amount determined
                  under clauses (a), or (ii) $100,000.

        2.  Continuing Effect. Except as provide in this Amendment, the
Agreement shall continue in full force and effect in accordance with its terms.

<PAGE>   12

               IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of February 17, 1993.

                                        SPECTRA DIODE LABORATORIES, INC.

                                        By:  /s/ John P. Melton
                                             -----------------------------------

                                             /s/ Don Scifres
                                        ----------------------------------------
                                                 Don Scifres

<PAGE>   13

                                SECOND AMENDMENT

                                       TO

                              EMPLOYMENT AGREEMENT

THIS SECOND AMENDMENT ("Amendment") is entered into with respect to the
Employment Agreement by and between Don Scifres and SDL, Inc., dated as of July
17, 1992, as amended as of February 1993 (as amended, the "Agreement").

        The parties hereby agree as follows:

        1.  Amendment. Section 3(b) of the Agreement is amended to read in its
            entirety as follows:

            "Bonuses. The Board of Directors shall approve an annual operating
            plan for the Company. Scifres has 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. Scifres' bonuses
            shall be computed as provided in the matrix attached to this
            Amendment as Exhibit A, provided that (i) such bonuses shall be
            adjusted pro rata to reflect any audit period less than twelve (12)
            months, and (ii) with respect to Note 3 of Exhibit A, Scifres' bonus
            will be 50% of his then current base salary times the matrix factor.
            The Company's results of operations shall be determined by the
            Company's independent certified public accountants in accordance
            with general 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 thereof) during which Scifres 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, whether or not employment hereunder has terminated."

        2.  Effectiveness. The foregoing amendment of the Agreement shall be
            effective as of January 1, 1994.

<PAGE>   14

        3.  Continuing Effect. Except as provided in this Amendment, the
            Agreement shall continue in full force and effect in accordance with
            its terms.

           IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of July 29, 1994.

                                    SDL, INC.

                                    BY     /S/  John P. Melton
                                        ----------------------------------

                                    Don Scifres

                                           /S/ Don Scifres
                                    --------------------------------------

<PAGE>   15

<TABLE>
<S>      <C>   <C>   <C>    <C>   <C>   <C>    <C>   <C>   <C>    <C>   <C>   <C>    <C>
------------------------------------------------------------------------------------------
         80    84    88     92    96    100    104   108   112    116   120   124    128
------------------------------------------------------------------------------------------
70       0     0.1   0.2    0.3   0.4   0.5    0.6   0.7   0.7    0.7   0.7   0.7    0.7
------------------------------------------------------------------------------------------
76       0.1   0.2   0.3    0.4   0.5   0.6    0.7   0.8   0.9    0.9   0.9   0.9    0.9
------------------------------------------------------------------------------------------
82       0.2   0.3   0.4    0.5   0.6   0.7    0.8   0.9   1.0    1.1   1.1   1.1    1.1
------------------------------------------------------------------------------------------
88       0.3   0.4   0.5    0.6   0.7   0.8    0.9   1.0   1.1    1.2   1.3   1.3    1.3
------------------------------------------------------------------------------------------
94       0.4   0.5   0.6    0.7   0.8   0.9    1.0   1.1   1.2    1.3   1.4   1.5    1.6
------------------------------------------------------------------------------------------
100      0.5   0.6   0.7    0.8   0.9   1.0    1.1   1.2   1.3    1.4   1.5   1.6    1.7
------------------------------------------------------------------------------------------
106      0.6   0.7   0.8    0.9   1.0   1.1    1.2   1.3   1.4    1.5   1.6   1.7    1.8
------------------------------------------------------------------------------------------
112      0.7   0.8   0.9    1.0   1.1   1.2    1.3   1.4   1.5    1.6   1.7   1.8    1.9
------------------------------------------------------------------------------------------
118      0.7   0.9   1.0    1.1   1.2   1.3    1.4   1.5   1.6    1.7   1.8   1.9    2.0
------------------------------------------------------------------------------------------
124      0.7   0.9   1.1    1.2   1.3   1.4    1.5   1.6   1.7    1.8   1.9   2.0    2.1
------------------------------------------------------------------------------------------
130      0.7   0.9   1.1    1.3   1.4   1.5    1.6   1.7   1.8    1.9   2.0   2.1    2.2
------------------------------------------------------------------------------------------
136      0.7   0.9   1.1    1.3   1.5   1.6    1.7   1.8   1.9    2.0   2.1   2.2    2.3
------------------------------------------------------------------------------------------
142      0.7   0.9   1.1    1.3   1.5   1.7    1.8   1.9   2.0    2.1   2.2   2.3    2.4
------------------------------------------------------------------------------------------
148      0.7   0.9   1.1    1.3   1.5   1.7    1.9   2.0   2.1    2.2   2.3   2.4    2.5
------------------------------------------------------------------------------------------
154      0.7   0.9   1.1    1.5   1.5   1.7    1.9   2.1   2.2    2.3   2.4   2.5    2.6
------------------------------------------------------------------------------------------
</TABLE>

NOTE

1.  Payments will be made on a continuous linear scale between points to avoid
    trying to meet arbitrary increments in the above matrix.

2.  Operating income is defined as "Income Before Interest and Taxes" as Greg
    Lindholm has provided in the past (excluding non-operating expense, e.g.,
    stock option extension, comp. expense).

3.  Vice Presidents' bonus will be 15% of salary times the matrix factor and up
    to 10% of salary at the discretion of the Board.<PAGE>   1
                                                                   Exhibit 10.14

                                    SDL, INC.

                           CHANGE OF CONTROL AGREEMENT

        This Agreement, dated as of February 10, 2000, is entered into between
SDL, Inc., a corporation organized under the laws of the State of Delaware
("SDL") and Don Scifres (the "Executive").

        WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereafter defined) exists and
that the threat of the occurrence of a Change in Control can result in
significant distractions to its key management personnel because of the
uncertainties inherent in such a situation;

        WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and

        WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
supplement the terms of the employment agreement between the Company and the
Executive, dated July 17, 1992, and to provide the Executive with certain
benefits in the event that the Executive's employment is terminated as a result
of, or in connection with, a Change in Control.

        NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:

        1. TERM OF AGREEMENT. This Agreement shall commence as of February 10,
2000 (the "Effective Date") and shall continue in effect until the third
anniversary of the Effective Date, provided, that commencing on the second
anniversary of the Effective Date and on each subsequent anniversary thereof,
the term of this Agreement shall be automatically extended for one (1) year
unless either the Company or Executive shall have given written notice to the
other at least ninety (90) days prior thereto that the term of this Agreement
shall not be so extended; and provided, further, that notwithstanding any such
notice by the

<PAGE>   2

Company not to extend, the term of this Agreement shall not expire prior to the
expiration of four (4) years after the occurrence of a Change in Control.

        2. DEFINITIONS.

a.  ACCRUED COMPENSATION. For purposes of this Agreement, "Accrued Compensation"
    shall mean an amount which shall include all amounts earned or accrued
    through the "Termination Date" (as hereinafter defined) but not paid as of
    the Termination Date, including (i) base salary, (ii) reimbursement for
    reasonable and necessary expenses incurred by the Executive on behalf of the
    Company during the period ending on the Termination Date, (iii) vacation pay
    and (iv) bonuses and incentive compensation.

b.  BASE AMOUNT. For purposes of this Agreement, "Base Amount" shall mean
    Executive's annual base salary at the rate in effect on the Termination
    date, including all amounts of base salary that are deferred under the
    employee benefit plans of the Company or any other agreement or arrangement.

c.  BONUS AMOUNT. For purposes of this Agreement, "Bonus Amount" shall mean the
    average of the annual bonuses paid or payable to the Executive under the
    Company's cash bonus incentive plan during the two (2) full fiscal years
    ended prior to the fiscal year during which the Termination Date occurred.

d.  EMPLOYMENT AGREEMENT. For purposes of this Agreement, "Employment Agreement"
    shall mean the employment agreement executed between the Company and
    Executive, dated July 17, 1992, and the amendments to that agreement dated
    February 19, 1993 and July 29, 1994.

e.  CAUSE. For purposes of this Agreement, "Cause" shall mean Executive's (i)
    conviction of a felony involving moral turpitude (from which no further
    appeals have been or can be taken), or (ii) gross abdication of his duties
    as an employee and office of the Company (other than due to Executive's
    illness or personal family problems), which conduct remains uncured by
    Executive for a period of at least 30 days following written notice thereof
    to Executive by the Company, in each case as determined in good faith by the
    Company.

f.  CHANGE IN CONTROL. For purposes of this Agreement, a "Change in Control"
    shall mean any of the following events:

(i)     An acquisition (other than directly from the Company) of any voting
    securities of the Company (the "Voting Securities") by any "Person" (as the
    term is used for purposes of Section 13(d) or 14(d) of the Securities
    Exchange Act of 1934, as amended (the "1934 Act")) immediately after which
    such

<PAGE>   3

    Person has `Beneficial Ownership" (within the meaning of Rule 13d-3
    promulgated under the 1934 Act), directly or indirectly, of securities of
    the Company representing fifty percent (50%) or more of the combined voting
    power of the Company's then outstanding Voting Securities;

(ii)    The individuals who are members of the Board as of the date this
    Agreement is approved by the Board (the "Incumbent Board") cease for any
    reason to constitute at least a majority of the Board; PROVIDED, HOWEVER,
    that if the appointment, election or nomination for election by the
    Company's stockholders, of any new director is approved by a vote of at
    least two-thirds of the Incumbent Board, such new director shall, for
    purposes of this Agreement, be considered a member of the Incumbent Board;
    PROVIDED, FURTHER, HOWEVER, that no individual shall be considered a member
    of the Incumbent Board if such individual initially assumed office as a
    result of either an actual or threatened "Election Contest" (as described in
    Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened
    solicitation of proxies or consents by or on behalf of a Person other than
    the Board (a "Proxy Contest") including by reason of any agreement intended
    to avoid or settle any Election Contest or Proxy Contest;

(iii)   Approval by stockholders of the Company of a merger, consolidation or
    reorganization involving the Company, unless such merger, consolidation or
    reorganization would result in the voting securities of the Company
    outstanding immediately prior thereto continuing to represent (either by
    remaining outstanding or by being converted into voting securities of the
    surviving entity) more than fifty percent (50%) of the total voting power
    represented by the voting securities of the Company or such surviving entity
    outstanding immediately after such merger, consolidation, or reorganization;

(iv)    A complete liquidation or dissolution of the Company, or

(v)     An agreement for the sale or other disposition of all or substantially
    all of the assets of the Company to any Person (other than a transfer to a
    Subsidiary).

g.  COMPANY. For purposes of this Agreement, the "Company" shall mean SDL, Inc.
    and its Subsidiaries and shall include SDL's "Successors and Assigns" (as
    hereinafter defined).

h.  DISABILITY. For purposes of this Agreement, "Disability" shall mean a
    physical or mental infirmity which impairs the Executive's ability to
    substantially perform the Executive's duties with the Company for a period
    of one hundred eighty (180) consecutive days and the Executive has not
    returned to full time employment prior to the Termination Date as stated in
    the "Notice

<PAGE>   4

    of Termination".

i.  GOOD REASON. For purposes of this Agreement, "Good Reason" shall mean the
    occurrence after a Change in Control of any events or conditions described
    in subsections (i) through (vi) below, PROVIDED, HOWEVER, that the Executive
    gives the Company thirty (30) days Notice Termination (as defined below)
    (during which time the Company will have an opportunity to correct the
    condition constituting "Good Reason"), and PROVIDED, FURTHER, that such
    notice is submitted by Executive no later than six (6) months after the
    occurrence of the event that is the basis for "Good Reason";

(i)     a change in the Executive's status, title, position or responsibilities
    which represents a material and adverse change from the Executive's status,
    title, position or responsibilities as in effect immediately prior to such
    change; the assignment to the Executive of any duties or responsibilities
    which are substantially inconsistent with the Executive's status, title,
    position or responsibilities as in effect immediately prior to such
    assignment; or any removal of the Executive from or failure to reappoint or
    reelect the Executive to any of such offices or positions, except in
    connection with the termination of the Executive's employment for
    Disability, Cause, as a result of the Executive's death or by the Executive
    other than for Good Reason;

(ii)    a reduction in the Executive's base salary;

(iii)   the Company's requiring the Executive to be based at any place which
    results in Executive having to commute more than 25 miles from his
    residence, except for reasonably required travel on the Company's
    business which is not materially greater than such travel requirements prior
    to the Change in Control;

(iv)    a material reduction by the Company in the kind or level of employee
    benefits (other than salary) to which the Executive is entitled at any time
    within ninety (90) days preceding the date of a Change in Control or at any
    time thereafter, (other than any such reduction which is part of, and
    generally consistent with, a general reduction applicable to officers of the
    Company);

(v)     any material breach by the Company of any provision of this Agreement
    or the Employment Agreement between Company and Executive;

(vi)    the failure of the Company to obtain an agreement from any Successors
    and Assigns to assume and agree to perform this Agreement, as contemplated
    in Section 6 hereof.

j.  NOTICE OF TERMINATION. For purposes of this Agreement, following a Change in
    Control, "Notice of Termination" shall mean a written notice of

<PAGE>   5

    termination of the Executive's employment from the Company, which notice
    indicates the Termination Date (as defined below), the specific termination
    provision in this Agreement relied upon and which sets forth in reasonable
    detail the facts and circumstances claimed to provide a basis for
    termination of the Executive's employment under the provision so indicated.

k.  SUCCESSORS AND ASSIGNS. For purpose of this Agreement, "Successors and
    Assigns" shall mean a corporation or other entity acquiring all or
    substantially all of the assets and business of the Company (including this
    Agreement) whether by operation of law or otherwise.

l.  TERMINATION DATE. For purposes of this Agreement, "Termination Date" shall
    mean, in the case of the Executive's death the Executive's date of death, in
    the case of Good Reason, the last day of the Executive's employment (which
    shall be no sooner than thirty (30) days after Executive submits his Notice
    of Termination), and, in all other cases, the date specified in the Notice
    of Termination; PROVIDED, HOWEVER, that if the Executive's employment is
    terminated by the Company due to Disability, the date specified in the
    Notice of Termination shall be at least 30 days from the date the Notice of
    Termination is given to the Executive, provided that, in the case of
    Disability, the Executive shall not have returned to the full-time
    performance of the Executive's duties during such period of at least 30
    days.

<PAGE>   6

3.  TERMINATION OF EMPLOYMENT

a.  If, during the term of this Agreement, the Executive's employment with the
    Company shall be terminated within four (4) years following a Change in
    Control, the Executive shall bc entitled to the following compensation and
    benefits:

(i)     If the Executive's employment with the Company shall be terminated
    (1) by thc Company for Cause or Disability, (2) by reason of the Executive's
    death or (3) by the Executive other than for Good Reason, the Company shall
    pay to the Executive the Accrued Compensation. Additionally, the Company
    shall reimburse Executive for any amounts paid by Executive to retain
    medical insurance coverage under COBRA and shall provide Executive with
    disability insurance benefits for a period of twelve (12) months following
    the Termination Date, pursuant to the provisions of paragraph 4 (c) of the
    Employment Agreement. If such termination is other than by reason of
    Executive's death, the Company also shall continue to maintain a life
    insurance policy on Executive's life for a period of twelve (12) months
    following the Termination Date, subject to the provisions of paragraph 4(b)
    of the Employment Agreement. In the event Executive's employment is
    terminated by reason of Executive's death or Disability, Executive (or his
    estate) also shall be entitled to receive the severance benefits set forth
    in paragraph 5(b) of the Employment Agreement. However, the life and
    disability insurance benefits and/or payments provided to Executive for
    purposes of retaining medical insurance coverage under COBRA under this
    paragraph 3(a)(i) shall terminate at such time, if any, Executive commences
    employment whereby he can obtain comparable benefits.

(ii)    If the Executive's employment with the Company shall be terminated for
    any reason other than as specified in Section 3(a)(i), the Executive shall
    be entitled to the following:

                 (1)  the Company shall pay the Executive all Accrued
                      Compensation;

                 (2)  the Company shall pay the Executive as severance pay and
                      in lieu of any further compensation for periods subsequent
                      to the Termination Date, in a single payment, an amount in
                      cash equal to two (2) times the sum of (A) the Base
                      Amount, and the greater of (B) the Bonus Amount, or (C)
                      the amount equivalent to twelve (12) times the sum of 5%
                      of Executive's then-current annual base salary;

<PAGE>   7

                 (3)  for a number of months equal to twenty-four (24) months
                      (the "Continuation Period"), the Company shall, at its
                      expense, continue on behalf of the Executive and the
                      Executive's dependants and beneficiaries the life
                      insurance, disability, medical, dental and hospitalization
                      benefits provided (A) to the Executive at any time during
                      the 90-day period prior to the Change in Control at any
                      time thereafter or (B) to other similarly situated
                      executives who continue in the employ of the Company
                      during the Continuation Period. The coverage and benefits
                      (including deductibles and costs) provided in this Section
                      3(a)(ii)(3) during the Continuation Period shall be no
                      less favorable to the Executive and the Executive's
                      dependents and beneficiaries, than the most favorable of
                      such coverage and benefits during any of the periods
                      referred to in clauses (A) and (B) above. The Company's
                      obligation hereunder with respect to the foregoing
                      benefits shall be limited to the extent that the Executive
                      obtains any such benefits pursuant to a subsequent
                      employer's benefit plans, in which case the Company may
                      reduce the coverage of any benefits it is required to
                      provide the Executive hereunder as long as the aggregate
                      coverage and benefits of the combined benefit plans are no
                      less favorable to the Executive than the coverage and
                      benefits required to bc provided hereunder. This
                      subsection (3) shall not be interpreted so as to limit any
                      benefits to which the Executive or the Executive's
                      dependents or beneficiaries may be entitled under any of
                      the Company's employee benefit plans, programs or
                      practices following the Executive's termination of
                      employment, including without limitation, retiree medical
                      and life insurance benefits;

                 (4)  the restrictions on any outstanding equity incentive
                      awards, including stock options and restricted stock,
                      granted to the Executive under the Company's stock option
                      and other stock incentive plans, or under any other
                      incentive plan or arrangement shall lapse and such
                      incentive award shall become 100% vested and, in the case
                      of stock options, immediately exercisable;

b.  The amounts provided for in Sections 3(a)(1) and (2) shall be paid in a
    single lump sum cash payment within forty five (45) days after the
    Executive's Termination Date (or earlier, if required by applicable law).

<PAGE>   8

c.  The Executive shall not be required to mitigate the amount of any payment
    provided for in this Agreement by seeking other employment or otherwise, and
    no such payment shall be offset or reduced by the amount of any compensation
    or benefits provided to the Executive in any subsequent employment except as
    provided in Sections 3(a)(i) and (a)(ii)(3).

d.  The severance pay and benefits provided for in this Section 3 shall br in
    lieu of any other severance or termination pay to which the Executive may be
    entitled under any employment agreement (including the Employment
    Agreement). Nothing in this Agreement shall prevent or limit Executive's
    continuing or future participation in any benefit, bonus, incentive, or
    other plan or program provided by the Company (except for any severance or
    termination policies, plans, programs or practices) and for which Executive
    may quality, nor shall anything herein limit or reduce such rights as
    Executive may have under any other agreements with the Company (except for
    any severance or termination agreement). Executive's entitlement to amounts
    which are vested benefits or any other compensation or benefits (including
    but not limited to any deferred compensation distributions) shall be
    determined in accordance with the Company's employee benefit plans and other
    applicable programs, policies and practices then in effect, except as
    explicitly modified by this Agreement.

4.  NOTICE OF TERMINATION. Following a Change in Control, any purported
    termination of the Executive's employment shall be communicated by Notice of
    Termination to the Executive. For purposes of this Agreement, no such
    purported termination shall be effective without such Notice of Termination.

5.  LIMITATION ON PAYMENTS.

a.  In the event that the severance and other benefits provided for in this
    Agreement to the Executive (i) constitute "parachute payments" within the
    meaning of Section 280G of the Internal Revenue Code of 1986, as amended
    (the "Code") and (ii) but for this Section, would be subject to the excise
    tax imposed by Section 4999 of the Code (the "Excise Tax"), then the
    Executive's severance benefits under Sections 3(a)(ii)(1)-(4) (the
    "Payments") shall be payable either:

(i)     in full, or

(ii)    as to such lesser amount which would result in no portion of such
    severance benefits being subject to excise tax under Section 4999 of the
    Code (the "Limited Payment Amount"),

<PAGE>   9

        whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Executive on an after-tax basis of the
greatest amount of severance benefits under Sections 3(a)(ii)(1)-(4),
notwithstanding that all or some portion of such severance benefits may be
taxable under Section 4999 of the Code. Unless Executive shall have given prior
written notice specifying a different order to the Company to effectuate the
Limited Payment Amount, the Company shall reduce or eliminate the Payments by
(i) first reducing or eliminating those payments or benefits which are payable
in cash and then (ii) by reducing or eliminating non-cash payments or benefits,
in each case in reverse order beginning with payments or benefits which are to
he paid the farthest in time from the Determination (as hereinafter defined).
Any notice given by Executive pursuant to the preceding sentence shall take
precedent over the provisions of any other plan, arrangement or agreement
governing Executive's rights and entitlements to any benefits or compensation.

b.  An initial determination as to whether the Payments shall be reduced to the
    Limited Payment Amount and the amount of such Limited Payment Amount shall
    be made at the Company's expense, by the accounting firm that is the
    Company's independent accounting firm as of the date of the Change of
    Control (the "Accounting Firm"). Thc Accounting Firm shall provide its
    determination (the "Determination"), together with detailed supporting
    calculations and documentation, to the Company and Executive within ten (10)
    days of the Termination Date, if applicable, or such other time as requested
    by the Company or by Executive (provided Executive reasonably believes that
    any of the Payments may be subject to the Excise Tax) and, if the Accounting
    Firm determines that no Excise Tax is payable by Executive with respect to a
    Payment or Payments, it shall furnish Executive with an opinion reasonably
    acceptable to Executive that no Excise Tax will he imposed with respect to
    any such Payment or Payments. Within ten (10) days of the delivery of the
    Determination to Executive, Executive shall have the right to dispute the
    Determination (the "Dispute"). If there is no Dispute, the Determination
    shall be binding, final and conclusive upon the Company and Executive,
    subject to the application of Section 5(c) below.

<PAGE>   10

c.  As a result of the uncertainty in the application of Sections 4999 and 280G
    of the Code, it is possible that the Payments to be made to, or provided for
    the benefit of, Executive either will be greater (an "Excess Payment") or
    less (an "Underpayment") than the amounts provided for by the limitations
    contained in Section 5(a). If it is established, pursuant to a final
    determination of a court of an Internal Revenue Service (the "IRS")
    proceeding which has been finally and conclusively received, than an Excess
    Payment has been made, such Excess Payment shall be deemed for all purposes
    to be a loan to Executive made on the date Executive received the Excess
    Payment, which loan Executive must repay to thc Company together with
    interest at the applicable federal rate under Code Section 7872(f)(2);
    provided that no loan shall be deemed to have been made and no amount will
    be payable by Executive to the Company unless, and only to the extent that,
    the deemed loan and payment would either reduce the amount on which
    Executive is subject to tax under Code Section 4999 or generate a refund of
    tax imposed under Code Section 4999. In the event that it is determined, by
    (i) the Accounting Firm, the Company (which shall include the position taken
    by the Company, or together with its consolidated group, on its federal
    income tax return) or the IRS, (ii) pursuant to a determination by a court,
    or (iii) upon the resolution to Executive's satisfaction of the Dispute,
    that an underpayment has occurred, the Company shall pay an amount equal to
    the Underpayment to Executive within ten (10) days of such determination or
    resolution, together with interest on such amount at the applicable federal
    rate under Code Section 7872(f)(2) from the date such amount would have been
    paid to Executive until the date of payment.

6.  EMPLOYMENT TAXES. All payments made pursuant to this Agreement will be
    subject to applicable withholdings of income and employment taxes.

7.  SUCCESSORS: BINDING AGREEMENT. This Agreement shall be binding upon and
    shall inure to the benefit of the Company, its Successors and Assigns and
    the Company shall require any Successors and Assigns to expressly assume and
    agree to perform this Agreement in the sama manner and to the same extent
    that the Company would be required to perform if no such succession or
    assignment had taken place. Neither this Agreement nor any right or interest
    hereunder shall be assignable or transferable by the Executive or the
    Executive's beneficiaries or legal representatives, except by will or by the
    laws of descent and distribution. This Agreement shall inure to the benefit
    of and be enforceable by the Executive's legal representative.

8.  NOTICE. For the purposes of this Agreement, notices and all other
    communications provided for in the Agreement (including the Notice of
    Termination) shall be in writing and shall be deemed to have been duty given
    when personally delivered or sent by certified mail, return receipt
    requested,

<PAGE>   11

    postage prepaid, addressed to the respective addresses last given by each
    party to the other, provided that all notices to the Company shall bc
    directed to the attention of the Board with a copy to the Secretary of the
    Company. All notices and communications shall be denied to have been
    received on the date of delivery thereof or on the third business day after
    the mailing thereof, except that notice of change of address shall be
    effective only upon receipt.

9.  NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit
    the Executive's continuing or future participation in any benefit, bonus,
    incentive or other plan or program provided by the Company (except for any
    severance or termination policies, plans, programs or practices) and for
    which the Executive may qualify, nor shall anything herein limit or reduce
    such rights as the Executive may have under any other agreements with the
    Company (except for any severance or termination agreement). Amounts which
    are vested benefits or which the Executive is otherwise entitled to receive
    under any plan or program of the Company shall be payable in accordance with
    such plan or program, except as modified by this Agreement.

10. NO IMPLIED EMPLOYEE RIGHTS. Nothing in this Agreement shall alter
    Executive's status as an "at will" employee of the Company or bc construed
    to imply that Executive's employment is guaranteed for any period of time
    except as otherwise agreed in a written agreement signed by a duly
    authorized officer of the Company.

11. MISCELLANEOUS. No provision of this agreement may be modified, waived or
    discharged, unless such waiver, modification or discharge is agreed to in
    writing and signed by the Executive and the Company. No waiver by either
    party hereto at any time of any breach by the other party hereto, or
    compliance with any condition or provision of this Agreement to be performed
    by the other party shall be deemed a waiver of similar or dissimilar
    provisions or conditions at the or at any prior or subsequent time. No
    agreement or representation, oral or otherwise, express or implied, with
    respect to the subject matter hereof have been made by either party which
    are not expressly set forth in this Agreement.

12. GOVERNING LAW. This Agreement shall be governed by and construed and
    enforced in accordance with the laws of the State of California without
    giving effect to the conflict of laws principles thereof.

13. ARBITRATION. Any dispute or controversy arising under or in conjunction with
    the subject matter, the interpretation, the application, or alleged breach
    of this Agreement ("Arbitrable Claims") shall be resolved by binding
    arbitration in the County of Santa Clara, California, in accordance with the
    then-current

<PAGE>   12

    National Rules for the Resolution of Employment Disputes of the American
    Arbitration Association. Arbitration shall be final and binding upon the
    parties and shall be the exclusive remedy for all Arbitration Claims.
    Notwithstanding the foregoing, either party may bring an action in court to
    compel arbitration under this Agreement to enforce an arbitration award, or
    to seek injunctive relief pursuant to section 1281.8 of the California Code
    of Civil Procedure. THE PARTIES WAIVE ANY RIGHT TO JURY TRIAL AS TO
    ARBITRABLE CLAIMS.

14. LEGAL FEES AND EXPENSES. The parties shall each bear their own expenses,
    legal fees and other fees incurred in connection with this Agreement.

15. SEVERABILITY. The provisions of this Agreement shall be deemed severable and
    the invalidity or unenforceability of any provision shall not affect the
    validity or enforceability of the other provisions hereof.

16. ENTIRE AGREEMENT. The parties agree that the terms of this Agreement are
    intended to be the final expression of their agreement with respect to the
    subject matter of this Agreement and may not be contradicted by evidence of
    any prior or contemporaneous Agreement, except to the extent that the
    provisions of any such agreement (i.e., the Employment Agreement) have been
    expressly referred to in this Agreement as having continued effect.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer and the Executive has executed this Agreement as of the
day and year first above written.

               SDL, INC.

               By:       /s/ Don Scifres
                      ------------------------

               Title:
                      ------------------------

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