<PAGE>

                                   Exhibit 10.17

                                                       Date: DECEMBER 22, 1998


Attn.: Mr. Yaron Garmazi


Dear Mr. Garmazi,

Re: EMPLOYMENT WITH NOGATECH LTD.

Nogatech Ltd. (hereinafter: the "Company") was organized in order to be a
pioneer in the field of implementing image processing technologies. On behalf
of the shareholders and management of the Company, I wish to congratulate you
in your position in the Company. For form's sake, I would like to specify
hereunder the terms of your employment with the Company:

       1.     JOB DESCRIPTION

              Your position in the Company shall be: NOGATECH INC. CFO.

              The Company shall be entitled to modify your position or impose
              additional tasks on you, at its discretion.

       2.     PERIOD OF EMPLOYMENT AND TERMINATION THEREOF

              a.     This agreement shall become effective as of FEBRUARY 1,
                     1999.

              b.     The duration of your employment is indefinite
                     (hereinafter: the "Period of Employment"). Both parties
                     may terminate the employment by written notice to the
                     other given 60 days in advance.

              c.     Notwithstanding the provisions of subsection (b) above,
                     the Company shall be entitled to dismiss you without
                     prior warning in each of the following cases:

                     1)     Commitment of a criminal offense related to work
                            and/or a flagrant offense.

                     2)     Breach of your undertaking pursuant to clause 13
                            of this agreement.

                     3)     Breach of the undertaking to maintain
                            confidentially and non-competition, attached to
                            this agreement as APPENDIX A.

              d.     Please be advised that the Company may establish and/or
                     join new activities within the framework of
                     subsidiaries, sister companies and/or

<PAGE>

                                       2

                     companies in which the Company shall invest money. As
                     part of the discharge of your duties, you may be
                     requested by the Company to act in additional settings
                     too, all within the scope of this agreement.

       3.     WORKING HOURS

              a.     The working week comprises a minimum of 45 working
                     hours. Should the work needs so require, you may be
                     requested, from time to time, to stay on after normal
                     working hours and to put in more than the usual
                     workload. Working overtime requires the prior written
                     approval of your supervisor.

                     It is further clarified that in cases of business travel
                     overseas, the length of the working days shall in all
                     cases be deemed as ordinary days.

       4.     SALARY

              a.     Your gross monthly salary shall be NIS 24,000
                     (hereinafter: the "Salary").

                     The following components shall be added to the Salary:

                     1)     Convalescence pay at the maximal rate granted
                            from time to time in expansion orders as in
                            effect in the labor market at the time being.

                            The convalescence pay shall be divided into
                            monthly payments to be added to your Salary each
                            month.

                            At the time hereof, this component amounts to NIS
                            _______ per month.

                            This refund is subject to the filing of a
                            monthly/periodical report in the form to be used
                            by the Company from time to time.

              b.     The Company shall deduct tax and other lawful payments
                     from your Salary.

              c.     The Salary shall be linked to the cost of living
                     increments payable in the labor market from time to
                     time, without a ceiling, and shall be updated
                     accordingly.

       5.     ANNUAL VACATION

              a.     During the first two years of the Period of your
                     Employment, you shall be entitled to an annual vacation
                     of 20 days. Thereafter, the length of the annual
                     vacation shall be extended according to the Company's

<PAGE>

                                       3

                     policy, as in effect from time to time, but in no case
                     will the vacation be shorter than the vacation fixed in
                     the Annual Vacation Law.

              b.     The timing of your vacation shall be coordinated with
                     your supervisor one month in advance, unless the
                     vacation shall be less than three days long, in which
                     case an advance update of one week shall suffice.

              c.     No accumulation of vacation days exceeding the vacation
                     due for two years of employment is allowed.

              d.     The Company may instruct you to go on a central
                     organized vacation concurrently with all of the
                     Company's employees, utilizing no more than one half of
                     your annual vacation.

       6.     SICK LEAVE

              Payment for sick leave shall be made subject to the provision
              of medical certificates pursuant to the Sick Leave Law.

       7.     MILITARY RESERVE DUTY

              a.     Leave for active military reserve duty requires the
                     rendering of notice to the Company upon receipt of the
                     order.

              b.     During active military reserve duty, you shall be
                     entitled to receive your Salary in full, subject to
                     provision of the appropriate confirmations upon
                     conclusion of the service.

       8.     MANAGERS' INSURANCE

              a.     The Company shall pay the following amounts to a pension
                     fund, a provident fund or managers' insurance, at the
                     choice thereof:

                     1)     8.33% of the Salary, as defined in clause 4(a),
                            for severance pay - at the Company's expense.

                     2)     5% of the Salary, as defined in clause 4(a), for
                            provident payments - at the Company's expense.

                     3)     5% of the Salary, as defined in clause 4(a), for
                            provident payments - at your expense.

              b.     The Company's payments to managers' insurance as set out
                     in subsection (a) above shall be in lieu of any other
                     duty of payment of severance pay, payments to a pension
                     fund etc.

                     In the event that the payments to be made prior to
                     termination of your employment shall not suffice in
                     order to cover the severance pay due to

<PAGE>

                                       4

                     you under this agreement, the Company shall complement
                     the payment within the period of time fixed in the law.

              c.     Your consent to section (b) exempts the Company from the
                     need to apply to the Minister of Labor for his approval
                     under Article 14 of the Severance Pay Law; however, if
                     such a need for an application for an appropriate permit
                     should arise, your signing of this agreement shall
                     constitute an authorization of the Company to apply for
                     the permit on your behalf too.

              d.     Should the Company be required in future, whether by law
                     or by an expansion order which shall apply to the entire
                     labor market, to make payments to another comprehensive
                     pension fund or arrangement, such payment to the new
                     applicable fund or arrangement shall be in lieu of the
                     arrangement herein, and you will not be permitted to
                     draw funds on account of the payments made within the
                     framework of the previous arrangement, but subject to
                     the regulations of the appropriate fund.

       9.     ADVANCED STUDY FUND

              During the Period of your Employment with the Company and
              subject to the General Manager's approval, the Company shall
              make payments to an advanced study fund to which you belong at
              the acceptable rate, i.e., 7.5% of the Salary, as defined in
              clause 4(a), at the Company's expense, and 2.5% at the
              employee's expense.

       10.    CONFLICT OF INTERESTS

              You shall perform no act which shall derogate from your loyalty
              to the Company and/or which may place you in a conflict of
              interests with the Company's objectives. In addition,
              throughout the term of your employment, you shall work in no
              other occupation or employment without the Company's prior
              written approval.

       11.    DECLARATION OF CONFIDENTIALITY AND NON-COMPETITION

              You undertake to maintain confidentially and non-competition,
              both during the term of your employment with the Company and
              thereafter, as specified in the undertaking of confidentially
              and non-competition of the Company in the form attached to this
              letter, marked as Appendix A and constituting an integral part
              of this letter.

       12.    DEFENSE SECRETS

              a.     Please be advised that the Company may engage, INTER
                     ALIA, in secret projects for the defense forces; you
                     therefore undertake to maintain in confidence
                     information, or defense secrets, which shall reach you,
                     both in writing and verbally, while discharging your
                     duties, and to refrain

<PAGE>

                                       5

                     from transferring the same to any person and/or entity,
                     unless required to do so by your duties, as imposed on
                     you.

              b.     Please be advised that should you fail to fulfill this
                     undertaking, you shall be liable for the penalties
                     prescribed by the Criminal Amendment Law (State
                     Security), 5717-1957.

       13.    PATENTS, INVENTIONS AND COMMERCIAL SECRETS

              a.     The Company shall have exclusive title to any copyright
                     to any invention or patent (related to the fields in
                     which the Company engages) which you or any Company
                     employee under your supervision shall invent during the
                     Period of your Employment with the Company, and to any
                     commercial secret related to the Company's work. The
                     Company shall be entitled to defend any invention,
                     patent or commercial secret by way of registration or
                     otherwise in Israel or elsewhere. It is clarified that
                     you will not be entitled to register the invention
                     and/or patent or commercial secret nor take any action
                     with respect thereto, save for the acts necessary for
                     the registration or utilization of the patent in the
                     name of or by the Company. The provisions of this clause
                     shall remain in effect also after termination of your
                     work for the Company and shall bind you and your lawful
                     representatives.

              b.     You undertake to notify the Company in writing of any
                     invention, patent or commercial secret which either you
                     or any Company employee under your supervision shall
                     invent, immediately upon discovery thereof.

              c.     Save as set forth in Appendix B hereof, you have no
                     interest in any invention, patent, patent application or
                     copyright.

       14.    a.     The Company's rights under this contract may be assigned.

              b.     Your undertakings under this contract may not be
                     modified and shall not be terminated, either in whole or
                     in part, but pursuant to a written document signed by an
                     authorized representative of the Company.

              c.     If any of the terms of this contract shall, for any
                     reason, be determined to be invalid or unenforceable,
                     the validity and effect of the remaining provisions of
                     the contract shall not be affected.

Upon signing this personal contract and formally joining the Company's staff,
we wish you continued satisfaction and enjoyment from your work. I hope that
our relationship will yield cooperation for many years to come, for the
benefit of yourself and of the Company, the employees and owners thereof.

Sincerely,

<PAGE>

                                       6


(-) /s/ A. Heiman
------------------------------------
                 - General Manager
Nogatech Ltd.

I have perused this letter and Appendix A hereof, and have prepared Appendix
B and I hereby express my agreement to the content of the letter and of the
Appendix.

I am aware that this letter is a special and personal contract which
regulates the relationship between the Company and myself, and that the
provisions of no other agreement, including collective agreements between the
Company and the employees thereof, shall apply to me so long as this
agreement is in force.

I am further aware that the terms of the above agreement and any conditions
which shall be in effect so long as I am employed by the Company are personal
and I undertake to maintain them in confidence.

Name:                                       Date: DECEMBER 22, 1998
      -------------------------------

I.D.:
      -------------------------------

Address:
         ----------------------------
                                        Employee's signature: (-) /s/ Y. Garmazi
-------------------------------------

IN THE EVENT THAT THE EMPLOYEE SHALL RETIRE VOLUNTARILY, AND SHALL NOT HAVE
COMMITTED AN ETHICAL VIOLATION, THE COMPANY SHALL PAY HIM THE COMPENSATION
WHICH WOULD HAVE BEEN PAYABLE TO HIM IN THE EVENT OF DISMISSAL.

THE EMPLOYEE SHALL RECEIVE A LOAN FOR THE PURCHASE OF A CAR IN THE AMOUNT OF
NIS 90,000. THE LOAN SHALL STAND FOR FIVE YEARS, AND 20% THEREOF SHALL BE
WAIVED EACH YEAR.

THE EMPLOYEE SHALL RECEIVE CAR MAINTENANCE ACCORDING TO THE "HESHEV" RATE FOR
1,500 KM PER MONTH.

<PAGE>

                                                                     APPENDIX A

Attn.: Nogatech Ltd.


Re: UNDERTAKING OF CONFIDENTIALITY AND NON-COMPETITION


Whereas       I wish to be employed by your company (hereinafter: the
              "Company"); and

Whereas       the Company is in the business of _______________________ and
              engages in projects related thereto; and

Whereas       during the term of my employment with the Company, I received
              and will receive Information, as defined hereunder:

              Any information, document, draft, process, material, commercial
              secret, formula, datum, program, plan, algorithm, patent,
              invention, whether patent-worthy or otherwise, discovery,
              innovation, improvement, research, any method, scientific
              technical development, prototype, model, picture, record,
              compact disc, tape, description, drawing, computer tape, sketch
              and any other thing or means of storage, whether in writing or
              verbal and relating to the planning and development of control
              systems, including software integrated with hardware and
              information concerning the unique matters in which the Company
              deals, and, INTER ALIA, on the subjects of
              ____________________, and matters in which the Company and/or a
              new company to be organized within the Company shall engage,
              and any information relating to the Company's customers and/or
              manufacturing or marketing facilities, except for information
              which:

              (1)    Is in the public domain or will be in the public domain
                     other than as a result of the breach of this undertaking;

              (2)    Was in my lawful possession prior to my employment;

              (3)    Constituted part of my general knowledge prior to my
                     employment;

              (hereinafter: the "Information"); and

Whereas       my undertaking to maintain confidentiality and non-competition
              is a condition precedent to my employment with the Company and
              to receipt of the Information by myself;

Therefore     I declare and undertake as follows:

<PAGE>

       PART I - CONFIDENTIALITY

       1.     To maintain the Information which has reached or shall reach me
              or become known to me, whether directly or indirectly, during
              the term of my employment with the Company and/or my
              involvement in the Company, without limitation in time, also
              after termination of my employment with the Company, in strict
              confidence.

       2.     Not to divulge and/or sell, whether for or without
              consideration and/or cause the Information to be divulged,
              whether directly or indirectly, and to take all measures in
              order to maintain the secrecy of the Information and to prevent
              the delivery or transfer thereof to any third party, person,
              entity or corporation, except to my supervisors in the Company
              or pursuant to their instructions for the purpose of
              discharging my duties as an employee of the Company.

       3.     To make no use of the Information or any part thereof for my
              needs or for the needs of others, whether directly or
              indirectly, other than for the purpose of executing my duties
              as an employee of the Company pursuant to the instructions of
              my supervisors in the Company.

       4.     To make no copies of the Information in any manner or form,
              other than pursuant to the instructions of the Company or of
              another authorized for this purpose on its behalf.

       5.     I am aware that sole title to the Information which has reached
              me or which shall reach me or become known to me in any way
              belongs to the Company and that it is the exclusive property
              thereof, and I hereby undertake to surrender thereto,
              immediately upon termination of my work for any reason, or
              immediately upon its demand at any time, any material
              containing Information, whether written or in any other form,
              which is or shall be in my possession at any time.

       6.     I am aware that the delivery of the Information and/or any part
              thereof to any third party may inflict severe damages on the
              Company, and I shall commit no act of manufacture and/or
              marketing and/or transfer and/or sale of the Information and/or
              of the products developed by you and/or existing products
              and/or products developed by myself or jointly with others,
              including customers of the Company or jointly with any third
              party, whether to your customers or to others.

       PART II - NON-COMPETITION

       7.     I undertake than from the date of termination of my work for
              the Company for any reason, I shall neither work for, nor
              maintain, nor consult, nor take part in a business competing
              with the Company, whether directly or indirectly, whether alone
              or jointly with others.

<PAGE>

              I further undertake to render no advice of any kind to such
              competing business nor be employed by such competing business,
              whether for or without remuneration, nor be directly or
              indirectly active in the management and/or operation of such
              competing business.

              This undertaking shall be valid for eighteen (18) months from
              the date of termination of my employment. For the purposes of
              this clause, "competing business" shall mean a business dealing
              with and/or marketing and/or manufacturing and/or developing
              products in which the Company shall have dealt or products in
              the process of being developed by the Company during the three
              years preceding the termination of my employment (hereinafter:
              the "Company's Products"). For the removal of doubt, the
              employee shall not be barred from working in a business dealing
              with products containing components of the same type as the
              Company's Products, so long as the employee shall not engage,
              whether directly or indirectly, in the development, manufacture
              or marketing of components which may compete with the Company's
              Products.

       PART III - VARIOUS BREACHES

       8.     In any case in which I shall breach my foregoing undertaking or
              part thereof, I shall be obliged to compensate the Company for
              all the damages and/or expenses which the Company shall incur
              due to such breach, without derogating from any other remedy
              available to you against me under any law due to the breach of
              my foregoing undertakings.

       9.     This undertaking is attached to the employment agreement signed
              between myself and the Company on ________ and constitutes an
              integral part thereof. This undertaking does not derogate from
              any undertaking imposed on me as an employee of the Company
              pursuant to the said agreement and/or any law.

       10.    I am aware that this undertaking contains limitations to which
              I shall be subject after termination of my employment with the
              Company. I am signing the same after having considered the
              matter and been given time to consult with a professional.




       ----------------------             -----------------------------
       Date                               Employee's signature

<PAGE>

                                   APPENDIX B

             Pursuant to clause 13(c) of the employment agreement


                          EMPLOYEE'S INTELLECTUAL PROPERTY

       NONE.