<PAGE>   1
                                                                   EXHIBIT 10.46

                             SHAREHOLDERS AGREEMENT

Made and entered into in Tel-Aviv on this _______day of August, 1997 by and
among AG Associates (Israel) Ltd., an Israeli company of Ramat Gabriel
Industrial Park, P.O.B. 171, Migdal Haemek 10551, Israel (the "Company"), AG
Associates Inc., a Californian corporation of 4425 Fortran Drive, San Jose,
California 95134, USA ("AGA"), Clal Electronics Industries Ltd., an Israeli
company of Druyanov 5, Tel Aviv, Israel ("CLAL"), and each of the Subscribers
(as defined herein). All of the above parties are collectively referred to
herein as the "Parties" and each of the parties is individually referred to
herein as a "Party".

The Parties hereby covenant and agree as follows:

1.   Binding Effect

     This Shareholders Agreement shall become effective, be valid and binding,
     among and between the Company, AGA, CLAL and each Subscriber (as defined
     herein), only if and when a Closing under the Subscription Agreement (as
     hereinbelow defined) has been held, ipso facto.

2.    Definitions

      2.1   The "Subscription Agreement" - the Preferred Shares Subscription
            Agreement executed by subscribers for the purchase of the Company's
            Preferred Shares, to which the form of this Shareholders Agreement
            is attached as an Annex thereto.

      2.2   Unless otherwise noted herein, all capitalized terms used herein
            shall have the meaning ascribed to them in the Subscription
            Agreement.

      2.3   The term "Subscribers' as used herein shall mean any and all
            Subscribers, as this term is defined in the Subscription Agreement
            (excluding CLAL), and each of the Subscribers shall herein be
            referred to as a "Subscriber".

3.    Board of Directors

     Until an Initial Public Offering of the Company's Securities ("IPO") is the
following shall apply:

      3.1   Each tranche of shares constituting 11% of the Company's
            shareholdings based on their par value, shall entitle the holder(s)
            thereof to appoint one (1) director, to remove him from office and
            to replace him whenever his place is vacated.

Such appointment, removal and replacement of directors shall be made by written
notice delivered to the Company at the Company's registered office,



<PAGE>   2
                                        2

by the holders of the tranche of shares by virtue of which the director is so
appointed, removed, or replaced.

3.2   Notwithstanding Section 3.1 above, as of the Closing, for as long as and
      provided that, AGA and transferees of its shares, if any (the "AGA
      Holders"), CLAL, and transferees of its shares, if any (the "CLAL
      Holders"), and the Subscribers and transferees of their shares, if any
      (the "Subscribers Holders"), shall be entitled to appoint, pursuant to the
      shareholdings requirement of Section 3.1 above, not less than three
      directors with respect to CLAL Holders, two directors with respect to AGA
      Holders, and two directors with respect to the Subscribers Holders, then
      each of the CLAL Holders, the AGA Holders and the Subscribers Holders may
      appoint directors only by virtue of their respective shares without
      joining shares with shares of any other shareholder.

3.3   It is hereby agreed, that any single Subscriber, or transferee of
      Subscribers' shares, shall have the right to have one (1) observer
      appointed by him to the Board, by written notice given to the Company, for
      as long as such Subscriber or transferee holds a tranche of shares
      constituting 5% or more of the Company's shareholdings, based on their par
      value and is not using any of his shares as part of a tranche of shares,
      by virtue of which a director is appointed pursuant to Section 3.1 above.
      Such observer shall be entitled to attend all meetings of the Board of
      Directors in a non-voting observer capacity, and shall receive notices of
      such meetings and the information provided by the Company to the Board of
      Directors; provided h that as a condition precedent to the right under
      this Section 3.3, the proposed observer shall execute a confidentiality
      and non-competition undertaking towards the Company in a form similar to
      the provisions of Sections 3.4 and I I below, provided to such observer by
      the Company, under which such observer shall undertake to hold in
      confidence all information received by it during such meetings or
      otherwise provided to it by the Company or on the Company's behalf in such
      observer's capacity as an observer, and to abide by the non competition
      and prohibition of conflict of interest obligation which applies to a
      director under the law and under Section 3.4 hereinbelow. Section 3.3
      above notwithstanding: (i) for as long as the provisions of Section 3.2
      above apply, the Subscribers shall be entitled to appoint one observer-,
      and (ii) , the Subscribers Holders may appoint or have observers in such
      number that, together with the number of directors to which they are
      entitled to appoint pursuant to Section 3.1 or 3.2 above, and the
      directors actually appointed in participation with other shareholders of
      the Company - not be more than three (3).

3.4   No person may be appointed or serve as a director or observer in the
      Board, if at such time he serves as a director, officer or representative
      and/or has any ownership tights of more than 5%, in any company, entity or
      business, which competes with the Company. It is agreed that the
      provisions of this Section 3.4 shall not apply to a person who serves as a
      director, officer or



<PAGE>   3
                                        3

      representative, and/or has ownership rights as aforesaid, in AGA or any
      subsidiary thereof

3.5   (i)   the Board shall meet as frequently as reasonably necessary, and in
            any event at least once every quarter, unless otherwise determined
            by the majority of the directors; and

      (ii)  information regarding the operations and financial aspects of the
            Company shall be presented by the Company's management at each Board
            meeting.

3.6   (a)   The chairman of the Board shall be one of the members of the Board,
            who shall be appointed, dismissed and replaced by the shareholder
            who has the right to appoint the largest number of directors to the
            Board, provided such shareholder has the right to appoint no less
            than 3 members to the Board. Such appointment, dismissal or
            replacement of the Chairman shall be carried out by giving notice to
            this effect to the Company.

      (b)   In the event the chairman is not appointed, or cannot be appointed,
            pursuant to subsection (a) above, or if no single shareholder has
            the right to appoint directors in a number greater than that of any
            other single shareholder, the chairman shall be appointed, dismissed
            and replaced by the Board.

4.    Restrictive Provisions

      4.1   Until an IP0, the Company shall not:

            (i)   amend the rights, preferences, or privileges attached to the
                  Preferred Shares without first obtaining the consent of
                  holders of at least 2/3 of Preferred Shares (excluding CLAL)
                  (based upon their respective shareholdings out of the
                  Preferred Shares).

            (ii)  enter into a transaction with an "Interested Party" ("Ba'alei
                  Inyan") as defined in the Israeli Companies Ordinance (New
                  Version) 5743- 1983 (the "Companies Ordinance")- without the
                  approval of the audit committee to be established by the
                  Company immediately following the Closing. Such audit
                  committee shall consist of three (3) members who shall be
                  appointed by the Board of Directors, from among the directors
                  then serving on the Board, provided that at least one,
                  director who has been appointed by each of. (a) the CLAL
                  Holders ; (b) the AGA Holders ; and (c) the Subscribers
                  Holders ; shall serve as a member of the committee (unless he
                  is barred by the provisions of the Companies Ordinance). The
                  Board, subject to the consent of the audit committee, may
                  however increase the number of the members of the audit
                  committee in case the Company issues shares to a third party
                  or entity, who will be entitled to appoint at least one
                  director to the Board, and the Board



<PAGE>   4
                                        4

may then appoint such director as an additional member to the committee.

It is provided that any member of the audit committee who has a personal
interest in the transaction which is brought for the approval of the committee,
shall not participate in the discussion and the approval procedure held with
respect to such transaction.

It is further provided that, for the purpose of approvals required above and/or
pursuant to the Companies Ordinance, any director or member of the audit
committee shall be deemed to have a personal interest in a transaction brought
for the approval of the audit committee or the Board, if such director or member
is the appointee of a shareholder who has an interest in the transaction.

It is hereby clarified that such approval of the audit committee shall not
derogate from the provisions of the Companies Ordinance.

      4.2  Until the lapse of two years from the Closing or the conversion of
           the Preferred Shares into Ordinary Shares, according to the earlier,
           the Company shall not issue securities which have a priority over the
           Preferred Shares (except where such priority is only expressed as a
           right of the holders thereof to receive, prior to the other classes
           of shares, the purchase price for the securities paid to the
           Company), without the affirmative vote of at least one director
           appointed by the holders of Preferred Shares (excluding CLAL), if
           appointed, provided that such requirement for an affirmative vote
           shall not apply if none of the directors appointed by the holders of
           Preferred Shares attends the meeting wherein a notice of such meeting
           was given to such director(s) in the manner provided in the Company's
           Articles.

      4.3  the Company shall not issue Preferred A Shares or Preferred B Shares
           (but may issue, subject to the foregoing, preferred shares of other
           series), without the consent of the holders of 2/3 of the Preferred
           Shares (excluding CLAL).

5.    Preemptive Rights

     Until the IPO, all shareholders in the Company, except for employees who
     were issued shares in the framework of an employee share option plan, shall
     have a right of pro rata participation in any future issuance of securities
     by the Company, as provided under the Company's Articles of Association,
     except for an issuance within the framework of the IPO, under an employee
     share option plan, to a Strategic Investor, or pursuant to the exercise of
     the Preferred Shares' anti-dilution right.

6.    Transfer of Shares

      6.1  Any transfer of the Company's shares shall be executed in accordance
           with the Company's Articles of Association, as in effect at the
           relevant time, including, without limitation, in accordance with the
           right of first refusal and the approval required by the Company's
           Board of Directors.



<PAGE>   5
                                        5

6.2   Right of Co-Sale. In addition to the provisions in Section 6.1 above, if
      AGA or CLAL proposes to sell its Ordinary Shares in the Company (i.e. the
      shares held by it prior to the Closing) (the "Tag Along Shares") prior to
      the IPO, a third party, it shall first offer each of the Subscribers, in
      writing (the "Notice of Sale"), to participate in such sale. The Notice of
      Sale is to specify the total number of shares proposed to be sold, the
      identity of the buyer and the proposed terms of the sale. Each Subscriber
      who wishes to participate, must notify AGA or CLAL, as applicable, in
      writing (the "Notice of Reply"), within thirty (30) days after receipt of
      the Notice of Sale, of its election to participate in such sale,
      specifying the number of shares which it wishes to sell in such sale. Each
      Subscriber shall be entitled to participate in such sale in a number of
      shares which shall not exceed the product obtained by multiplying the
      aggregate number of shares from the Tag Along Shares offered by AGA or
      CLAL, as applicable, by a fraction, the numerator of which is the number
      of shares issued to such Subscriber pursuant to the Subscription Agreement
      which are owned by it at the time it receives the Notice of Sale (subject
      to adjustments for stock splits, recapitalization, reorganization, etc.),
      and the denominator of which is the total number of shares owned by all of
      the Subscribers who participates in the sale, plus the Tag Along Shares
      owned by AGA or CLAL, as applicable, at that time (subject to adjustments
      for stock splits, recapitalization, reorganization, etc.) (the "Co-Sale
      Right"). By sending such Notice of Reply, such Subscriber will be
      obligated by the terms agreed upon between AGA or CLAL, as applicable, and
      the buyer, as specified in the Notice of Sale. Failure by any of the
      Subscribers to deliver the Notice of Reply as aforesaid, or to complete
      the sale within the time period specified in the Notice of Sale, shall be
      deemed to be a refusal by such Subscriber to exercise its Co-Sale Right.
      No transfer of the Tag Along Shares by AGA or CLAL, as applicable, shall
      be concluded unless the purchaser thereof concurrently purchases, on the
      same terms, all of the shares included in the Notices of Reply received by
      AGA or CLAL, as applicable, provided however that the Subscribers given
      such Notice of Reply have My complied with the terms of the sale.

      It is hereby clarified that notwithstanding anything to the contrary, upon
      the transfer of the Tag Along Shares made in accordance with the
      provisions of this Section 6.2, such shares and the transferee thereof
      shall no longer be subject to the Co-Sale Right.

6.3   No transfer of shares shall be permitted unless the transferee undertakes
      in writing and in advance to be bound by the provisions of this
      Shareholders Agreement such that the transferee shall comply with the
      undertakings herein in place of the transferor as if the transferee was a
      party to this Shareholders Agreement as the holder of the shares being
      transferred.

7.  Sale of the Company

In the event that the holders of 65% or more of the issued share capital of the
Company (based on the par value of the shares), decide to sell the Company by
means of selling all of the Company's shares (in this Section 7 the "Deciding
Shareholders"), in consideration for cash, for shares of other company(ies), or
in



<PAGE>   6
                                        6

consideration for a combination of both, then the other shareholders, if any,
shall be obligated to join such sale and to sell their entire shares in the
Company under those terms, pursuant to which the Deciding Shareholders shall
sell their shares; provided however that if such sale is made within four (4)
years from the date of the Closing , AGA shall not be obligated to comply with
such obligation to sell, nor shall any other shareholder be so bound, if such
sale is directed to a person or entity who, at the time of the sale transaction,
is a direct competitor of AGA within its Field of Use, as defined in that
certain agreement dated February 27, 1995 executed between AGA, CLAL and several
other parties, as further clarified in the clarification letter dated _______,
1997.

Information Rights and Books of Account

8.1   The Company will keep at its main office true records and books of account
      in which full, true and correct entries will be made of all dealings and
      transactions in relation to its business and affairs, all in accordance
      with Israeli GAAP, applied on a consistent basis.

8.2   Until the IPO the Company shall prepare and furnish to: (i) any single
      holder of Preferred Shares, who holds at least 5% of the Company's
      shareholdings, based on their par value, ; and (ii) CLAL, as long as it
      holds at least 5% of the Company's shareholdings, based on their par value
      ; and (iii) AGA, as long as it holds at least 5% of the Company's
      shareholdings, based on their par value - of the following:

      (a)    Annual, audited financial statements - within 45 days after the end
             of each fiscal year, and

      (b)    Quarterly interim financial statements, reviewed by the Company's
             CPA, and setting forth, in comparative form, the figures for the
             parallel calendar quarter in the previous year - within 35 days
             after the end of each calendar quarter, and

     (c)     Monthly reports prepared by the Company's general manager setting
             forth material events which occurred in the reported month and any
             executed orders for the purchase of the Company's products, all to
             the extent the Company's general manager believes that the
             disclosure as abovesaid will not result in material harm to the
             Company, and

     (d)     Within 21 days after the approval of the budget by the Company's
             board of directors, a general outline of the Company's budget; and

     (e)     Pursuant to a request made by any of the persons or entities under
             (i), (ii) or (iii) who is a public company, any information
             necessary for such requesting Party by virtue of its status as a
             public company, subject to reporting requirements under law, where
             such information shall be delivered within the time period required
             under such reporting requirements.



<PAGE>   7
                                        7

            (f)   For the purpose of obtaining the holding of shares required
                  under this Section 8.2 for the receipt of the aforementioned
                  information, shareholders which are - (i) under common control
                  of, or (ii) controlling; or (iii) under control of - another
                  shareholder in the Company, may be deemed to be a single
                  holder, upon giving notice in writing to the Company,
                  detailing the relationship between such shareholders.

            (g)   The Company shall be obligated to furnish the aforementioned
                  information only to one designated person of each of the
                  aforesaid parties which are entitled to receive the
                  information. The designation shall be made by a written notice
                  given to the Company.

9.    Initial Public Offering

      9.1   The Parties hereto shall use reasonable commercial efforts to
            initiate and consummate an IPO, as soon as commercially feasible,
            provided that such IPO is economical, viable and advantageous to the
            Company.

      9.2   It is agreed that in the event that the holders of 5 1 % or more of
            the issued share capital of the Company (based on the par value of
            the shares) decide on initiating a public offering for the Company's
            shares (in this Section 10 the "Deciding Shareholders"), then all of
            the other shareholders shall exercise their voting rights in such a
            manner to cause the initiation of such public offering as decided by
            the Deciding Shareholders, including by voting in favor of making
            the required changes in the Company's Articles of Association and by
            voting in favor of adopting the necessary corporate resolutions.

10.   Confidentiality

      Each of the Subscribers, AGA and CLAL (and any transferee of their
      respective shares, if any) will hold in strict confidence all information
      concerning the Company, its business, financial, commercial and/or
      technological information, operations, sales, marketing, customers,
      suppliers and all information pertaining to any of the Company's
      intellectual property rights and technology and any other proprietary
      information of the Company whatsoever including, without limitation, any
      reports provided by the Company to such parties hereunder (all hereinafter
      referred to as the "Confidential Information"). Each of the parties also
      undertake not to use the Confidential Information in any way, directly or
      indirectly, for purposes other than for the Company and/or with respect to
      such party's rights as shareholders in the Company. A party may disclose
      such Confidential Information, to its officers, directors, consultants,
      counsel and their representatives, only on a need to know basis, under
      confidentiality agreement, and in connection with the transactions
      contemplated by this Shareholders Agreement and shall ensure that all such
      persons shall protect all Confidential Information as provided herein. The
      obligations hereunder shall not apply as to any Confidential Information
      which is proven: (i) known by it at the time of receiving such information
      and provided that such other party has given notice to this effect; or
      (ii) in the public domain through no fault of the party; or (iii)
      information lawfully received by the party from a third party who was not
      in breach of confidentiality in delivering or exposing the



<PAGE>   8
                                        8

information; or (iv) information independently developed by the party as shown
in such party's written records. Disclosure of any Confidential Information
pursuant to any compelling judicial or administrative order or proceeding, or as
required by law, or if it is imperative by virtue of such party's being a
publicly traded company, shall not be deemed a breach hereof.

The provisions hereof shall survive any termination of this Shareholders
Agreement.

11. Assignment

     Each of the Subscribers, CLAL and AGA may assign any of their rights or
     obligations under this Shareholders Agreement, to any person or entity,
     only as part of a transfer of their shares, duly made under the
     Subscription Documents and the Company's Articles of Association, provided
     that the rights and obligations assigned are only such rights and
     obligations which relate to those shares so transferred, and only with
     respect to those shares being so transferred.

12. Further Cooperation

     The Parties agree to use the powers and rights conferred upon them, by
     virtue of their shares in the Company, including their voting power and
     rights, to cause the fulfillment of the provisions herein.

Furthermore, the Parties agree to execute any and all documents required, in
order to consummate and implement the provisions herein, including, without
limitation by means of corporate resolutions and powers of attorney.

13. Governing Law and Forum

     This Shareholders Agreement, its interpretation, validity and breach shall
     be governed by the laws of the State of Israel, without regard to its
     choice of law rules, and any dispute or claim with respect thereto shall be
     submitted to the competent courts in Tel Aviv, Israel, who shall have
     exclusive jurisdiction in such matter.

14. Entire Agreement

     This Shareholders Agreement constitutes the entire agreement between the
     Parties with respect to the subject matter hereof, and no previous
     agreement, term, memorandum, promise, negotiation, consent, undertaking,
     representation, warranty and/or any other document exchanged or provided
     prior to the execution hereof between all of the Parties hereto with
     respect to the subject matter hereof shall have any force or effect. Any
     amendment, addition or omission will be valid upon all parties if made in
     writing by the Company, CLAL, AGA and the Subscribers holding a majority of
     all Preferred Shares issued under the Subscription Agreement, , and if so
     executed by the Company, AGA, CLAL and such Subscribers, such amendment,
     addition and omission shall obligate all of the Parties to this
     Shareholders Agreement.

15. Counterparts

     This Agreement may be executed in any number of counterparts, each of which
     shall be an original, but all of which together shall constitute one
     instrument.



<PAGE>   9
                                        9

The Company shall deliver to each Subscriber, a copy of the signature pages
executed with each of the other Subscribers who constitute Parties hereto.

16. Captions

      The captions to Sections herein have been inserted for identification and
      reference purposes only and shall not be used or construed to interpret
      this Agreement.

17. Notices

      All notices given by one Party to the other hereunder will be given in
      writing, and will be deemed to have been delivered to the addressee
      immediately upon their delivery, if delivered by hand, or upon
      transmission if sent by facsimile and confirmed by machine printout
      verifying such sending, or by written reply by facsimile, or within seven
      (7) business days after being sent by mail, express airmail, or via
      international courier, as per the addresses indicated herein, or to such
      other address or facsimile number as a Party may thereafter give notice in
      writing, to the other Parties hereto.

IN WITNESS WHEREOF the Parties have signed this Shareholders Agreement as of the
date first hereinabove set forth:

------------------------------------         -----------------------------------
AG Associates (Israel) Ltd.                  AG Associates, Inc.
By:_________________________________         By:________________________________

------------------------------------         -----------------------------------
Clal Electronics Industries Ltd.             Charter AGI L.L.C.
By:_________________________________         By:________________________________

------------------------------------         -----------------------------------
The Israel Private Equity Fund L.P.          Evergreen International Investments
                                             N.V.
By:_________________________________         By:________________________________

------------------------------------         -----------------------------------
The Israel Private Equity Fund               Yarok Az Investment (1994) Ltd.
(Cayman) L.P.
By:_________________________________         By:________________________________

                                             -----------------------------------
                                             UT Technologies Ltd. Fund By: