EXHIBIT 10.17

                             SUBORDINATION AGREEMENT


         This  Subordination  Agreement  is made as of August 25,  1999,  by and
between the  undersigned  creditor  ("Creditor"),  and Venture  Banking Group, a
division of Cupertino National Bank ("Bank").


                  A. Videonics,  Inc. ("Borrower") has requested and/or obtained
certain loans or other credit  accommodations from Bank to Borrower which are or
may be from time to time secured by assets and property of Borrower.


                  B.  Creditor has extended or other  credit  accommodations  to
Borrower,  and/or may extend  loans or other credit  accommodations  to Borrower
from time to time.


                  C. In order to induce  Bank to  continue  to extend  credit to
Borrower and, at any time or from time to time, at Bank's  option,  to make such
further  loans,  extensions  of credit,  or other  accommodations  to or for the
account of  Borrower,  or to purchase or extend  credit upon any  instrument  or
writing in respect of which Borrower may be liable in any capacity,  or to grant
such renewals or extension of any such loan, extension of credit,  purchase,  or
other  accommodation  as  Bank  may  deem  advisable,  Creditor  is  willing  to
subordinate:  (i) all of Borrower's  indebtedness  and  obligations to Creditor,
whether presently existing or arising in the future (the "Subordinated Debt") to
all of  Borrower's  indebtedness  and  obligations  to  Bank;  and  (ii)  all of
Creditor's  security  interests,  if any, to all of Bank's security interests in
the Borrower's property.


         NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

                  1. Creditor subordinates to Bank any security interest or lien
that  Creditor  may  have  in any  property  of  Borrower.  Notwithstanding  the
respective  dates of  attachment  or  perfection  of the  security  interest  of
Creditor and the security interest of Bank, the security interest of Bank in the
Collateral, as defined in the Loan and Security Agreement,  between Borrower and
Bank, as amended from time to time (the "Loan Agreement"), shall at all times be
prior to the security interest of Creditor.

All Subordinated  Debt is subordinated in right of payment to all obligations of
Borrower to Bank now existing or hereafter  arising,  together with all costs of
collecting such obligations  (including  attorneys'  fees),  including,  without
limitation,  all interest accruing after the commencement by or against Borrower
of any bankruptcy,  reorganization  or similar  proceeding,  and all obligations
under the Loan Agreement (the "Senior Debt").

                  2.  Creditor  will not demand or receive  from  Borrower  (and
Borrower will not pay to Creditor) all or any part of the Subordinated  Debt, by
way of payment,  prepayment,  setoff,  lawsuit or  otherwise,  nor will Creditor
exercise any remedy with respect to the Collateral,  nor will Creditor commence,
or cause to commence,  prosecute or participate in any administrative,  legal or
equitable action against Borrower, for so long as any portion of the Senior Debt
remains outstanding.  The foregoing notwithstanding,  Creditor shall be entitled
to receive  each  regularly  scheduled  payment  of  interest  that  constitutes
Subordinated  Debt,  provided  that an Event of Default,  as defined in the Loan
Agreement, has not occurred and is not continuing or would not exist immediately
after such payment.

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Creditor  shall  promptly  deliver  to Bank in the  form  received  (except  for
endorsement or assignment by Creditor where required by Bank) for application to
the Senior Debt any  payment,  distribution,  security  or proceeds  received by
Creditor with respect to the  Subordinated  Debt other than in  accordance  with
this Agreement.

                  5. In the event of Borrower's  insolvency,  reorganization  or
any case or proceeding  under any  bankruptcy or insolvency law or laws relating
to the  relief of  debtors,  these  provisions  shall  remain in full  force and
effect,  and Bank's claims against  Borrower and the estate of Borrower shall be
paid in full before any payment is made to Creditor.

                  6.  For so  long as any of the  Senior  Debt  remains  unpaid,
Creditor irrevocably appoints Bank as Creditor's attorney-in-fact, and grants to
Bank a power  of  attorney  with  full  power  of  substitution,  in the name of
Creditor or in the name of Bank, for the use and benefit of Bank, without notice
to Creditor,  to perform at Bank's option the following acts in any  bankruptcy,
insolvency or similar proceeding involving Borrower:

                           (i) To file appropriate claim or claims in respect of
the Subordinated  Debt on behalf of Creditor if Creditor does not do so prior to
30 days before the expiration of the time to file claims in such  proceeding and
if Bank elects, in its sole discretion, to file such claim or claims; and

                           (ii) To accept or reject  any plan of  reorganization
or arrangement on behalf of Creditor and to otherwise vote Creditor's  claims in
respect of any Subordinated  Debt in any manner that Bank deems  appropriate for
the enforcement of its rights hereunder.

                 7.  Creditor   shall   immediately   affix  a  legend  to  the
instruments  evidencing the  Subordinated  Debt stating that the instruments are
subject to the terms of this Agreement. No amendment of the documents evidencing
or relating to the  Subordinated  Debt shall  directly or indirectly  modify the
provisions of this  Agreement in any manner which might  terminate or impair the
subordination  of the  Subordinated  Debt or the  subordination  of the security
interest or lien that  Creditor may have in any property of Borrower.  By way of
example,  such  instruments  shall not be  amended to (i)  increase  the rate of
interest with respect to the  Subordinated  Debt, or (ii) accelerate the payment
of the principal or interest or any other portion of the Subordinated Debt.

                  8.  This  Agreement  shall  remain  effective  for so  long as
Borrower owes any amounts to Bank under the Loan Agreement or otherwise.  If, at
any time after  payment in full of the Senior  Debt any  payments  of the Senior
Debt must be disgorged by Bank for any reason  (including,  without  limitation,
the  bankruptcy  of  Borrower),  this  Agreement  and the  relative  rights  and
priorities  set  forth  herein  shall be  reinstated  as to all  such  disgorged
payments  as  though  such  payments  had  not  been  made  and  Creditor  shall
immediately  pay  over  to  Bank  all  payments  received  with  respect  to the
Subordinated  Debt to the extent that such payments  would have been  prohibited
hereunder.  At any time and from time to time, without notice to Creditor,  Bank
may take such  actions  with  respect  to the Senior  Debt as Bank,  in its sole
discretion,  may deem appropriate,  including,  without limitation,  terminating

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advances to Borrower,  increasing  the principal  amount,  extending the time of
payment,  increasing  applicable  interest  rates,  renewing,   compromising  or
otherwise amending the terms of any documents  affecting the Senior Debt and any
collateral  securing  the Senior Debt,  and  enforcing or failing to enforce any
rights  against  Borrower or any other person.  No such action or inaction shall
impair  or  otherwise  affect  Bank's  rights  hereunder.  Creditor  waives  the
benefits,  if any, of Civil Code Sections 2809,  2810,  2819,  2845, 2847, 2848,
2849, 2850, 2899 and 3433.

                  9. This  Agreement  shall bind any  successors or assignees of
Creditor and shall benefit any successors or assigns of Bank.  This Agreement is
solely for the benefit of Creditor  and Bank and not for the benefit of Borrower
or any other party.  Credit further agrees that if Borrower is in the process of
refinancing a portion of the Senior Debt with a new lender,  and if Bank makes a
request of  Creditor,  Creditor  shall  agree to enter into a new  subordination
agreement with the new lender on substantially  the terms and conditions of this
Agreement.

                  10.   This   Agreement   may  be   executed  in  two  or  more
counterparts,  each of  which  shall  be  deemed  an  original  and all of which
together shall constitute one instrument.

                  11.  This  Agreement  shall be governed  by and  construed  in
accordance  with the laws of the State of  California,  without giving effect to
conflicts  of  laws  principles.  Creditor  and  Bank  submit  to the  exclusive
jurisdiction  of the state and federal  courts  located in Santa  Clara  County,
California.  CREDITOR AND BANK WAIVE THEIR RESPECTIVE  RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS  AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLETED HEREIN.

                  12.  This  Agreement  represents  the  entire  agreement  with
respect to the subject  matter hereof,  and  supersedes all prior  negotiations,
agreements and commitments.  Creditor is not relying on any  representations  by
Bank or Borrower in entering into this Agreement, and Creditor has kept and will
continue to keep itself fully  apprised of the financial and other  condition of
Borrower.  This  Agreement may be amended only by written  instrument  signed by
Creditor and Bank.


                  13. In the event of any legal  action to enforce the rights of
a party under this  Agreement,  the party  prevailing  in such  action  shall be
entitled,  in addition to such other  relief as may be granted,  all  reasonable
costs and  expenses,  including  reasonable  attorneys'  fees,  incurred in such
action.

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



                                        "Creditor"


                                        By: /s/ Carl Berg
                                            -------------
                                                Carl Berg



                                        "Bank"

                                        Venture Banking Group, a division of
                                        Cupertino National Bank


                                        By: /s/ Jason Hartmann
                                            ------------------

                                        Title: Commercial Loan Officer
                                               -----------------------


The undersigned approves of the terms of this Agreement.

"Borrower"

Videonics Inc.
--------------

By: /s/ Gary Williams
    -----------------

Title: V.P. Finance and CFO
       --------------------

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