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                                                                   EXHIBIT 10.17

                              EMPLOYMENT AGREEMENT
                               OF MENASHE SHAHAR
                                      WITH
                                   VYYO INC.

     THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
effective as of the 1st day of February, 2001, by and among VYYO INC., a
Delaware corporation (hereinafter the "Corporation"), VYYO LTD., an Israeli
company and a subsidiary of the Corporation ("Vyyo Israel"), and MENASHE SHAHAR
(hereinafter "Shahar").

                                    RECITALS

     WHEREAS, Shahar has been employed by Vyyo Israel; and

     WHEREAS, the Corporation, Vyyo Israel and Shahar desire that Shahar
relocate to the United States and become an employee of the Corporation and
cease his employment with Vyyo Israel; and

     WHEREAS, the Corporation and Shahar agree to the employment terms set forth
herein for Shahar's position as the Corporation's Executive Vice President,
Engineering and Chief Technical Officer.

                                   AGREEMENT

     NOW, THEREFORE, the parties hereto hereby agree as follows:

1.   Employment Duties.
     -----------------

     a.   General.  The Corporation hereby agrees to employ Shahar, and Shahar
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hereby agrees to accept employment with the Corporation, on the terms and
conditions hereinafter set forth.

     b.   Corporation's Duties.  The Corporation shall allow Shahar to, and
          --------------------
Shahar shall, perform responsibilities normally incident to the position of
Executive Vice President, Engineering and Chief Technical Officer, commensurate
with his background, education, experience and professional standing.  The
Corporation shall provide Shahar with such office equipment, supplies, customary
services, office, and cooperation suitable for the performance of his duties.

     c.   Shahar's Duties. Unless otherwise agreed to by the parties, Shahar
          ---------------
shall serve as Executive Vice President and Chief Technical Officer.  Shahar
shall devote his full productive work time, attention, energy and skill to the
business of the Corporation and its subsidiaries.  Shahar shall report directly
to the Chief Executive Officer of the Corporation.  Shahar's primary office
location shall be in Cupertino, California, but he shall be expected to perform
his duties worldwide, where requested by the Corporation.


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2.        Term.    The initial term of this employment is two (2) years from the
          ----
date of this Agreement.  Thereafter, this Agreement may be renewed by Shahar and
the Corporation on such terms as the parties may agree to in writing.  Except as
provided in Section 6 (below), absent written notice to the contrary, thirty
(30) days prior to the end of the initial two (2) year employment term, this
Agreement will be automatically renewed for consecutive one (1) year extensions.

3.        Compensation.  Shahar shall be compensated as follows:
          ------------

     a.   Fixed Salary.  Shahar shall receive a fixed annual salary of Two
          ------------
Hundred Twenty-Five Thousand Dollars ($225,000).  The Corporation agrees to
review the fixed salary on, or before, January 1, 2002, and thereafter at the
end of each calendar year during the employment term based upon Shahar's
services and the financial results of the Corporation, and to make such
increases as may be determined appropriate in the sole discretion of the
Corporation's Board of Directors, and/or the Corporation's Compensation
Committee.

     b.   Payment.  Shahar's fixed salary shall be payable on a semi-
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monthly basis, in accordance with the Corporation's usual payroll practices.

     c.   Bonus Compensation.   During the Employment Term, Shahar shall
          ------------------
participate in each bonus plan adopted by the Corporation's Board of Directors.
Commencing in 2001, Shahar shall be entitled to receive an annual bonus equal to
(1) fifteen percent (15%) of his annual base salary should the Corporation meet
eighty percent (80%) of its plan as presented to the Board in January of each
year, during the term of Shahar's employment ("Yearly Plan"); (2) fifty percent
(50%) of his annual base salary should the Corporation meet its Yearly Plan; and
(3) ninety percent (90%) of his annual base salary should the Corporation meet
one hundred twenty percent (120%) of its Yearly Plan, with the bonus prorated if
the Yearly Plan is met between eighty percent (80%) and one hundred percent
(100%); or between one hundred percent (100%) and one hundred twenty percent
(120%).  For purposes of this Section, the meeting of the Yearly Plan shall be
based upon the actual revenues set forth by management and the Board of
Directors for each applicable year (each compared to the revenues and other
items projected in the Yearly Plan).  The bonus shall be prorated for any year
should Shahar's employment terminate prior to the full calendar year.  Shahar
shall also be entitled to receive an additional annual bonus based on his
performance and that of the Corporation each year as determined by the Board of
this Corporation, or its Compensation Committee, in its discretion.

     d.   Stock Options.  Shahar shall be eligible for stock options that may be
          -------------
awarded by the Corporation, from time to time, in recognition of Shahar's
contribution to the Corporation's success.

     e.   Vacation.  Shahar shall accrue paid vacation at the rate of twenty
          --------
(20) days for each twelve (12) months of employment.  Shahar shall be
compensated at his usual rate of compensation during any such vacation.  Shahar
shall be entitled to paid holidays as generally given by the Corporation.
Shahar shall receive sick leave or disability leave in accordance with the terms
of the Corporation's standard sick leave or disability leave policy.

     f.   Benefits.  During the employment term, Shahar and his dependents shall
          --------
be entitled to participate in any group plans or programs maintained by the
Corporation for any employees relating to group health, disability, life
insurance and other related benefits as in effect from time to time. Shahar
shall also be entitled to Director and Officer ("D&O") insurance in such amounts
and coverage and

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such indemnification provisions as are afforded other officers and directors of
the Corporation. Premiums for such benefits under this Section 3.f. will be paid
for by the Corporation.

     g.   Expenses.  The Corporation shall reimburse Shahar for his normal
          --------
and reasonable expenses incurred for travel, entertainment and similar items in
promoting and carrying out the business of the Corporation in accordance with
the Corporation's general policy as adopted by the Corporation's management from
time to time.  In addition, Shahar shall be reimbursed for the reasonable costs
associated with one cellular telephone, and shall be entitled to reimbursement
for such reasonable continuing professional education, memberships and
certifications as are deemed normal and appropriate for Chief Executive
Officers.  As a condition of payment or reimbursement, Shahar agrees to provide
the Corporation with copies of all available invoices and receipts, and
otherwise account to the Corporation in sufficient detail to allow the
Corporation to claim an income tax deduction for such paid item, if such item is
deductible.  Reimbursements shall be made on a monthly, or more frequent, basis.

     h.   Relocation and Related Expenses.  In connection with Shahar's
          -------------------------------
relocation to California, the Corporation shall provide the following payments
and reimbursements to Shahar:

               i.   Until the earlier of November 14, 2002 or until the closing
date of Shahar's purchase of a home in California, the Corporation will
reimburse Shahar for rental payments made by Shahar on a home in California, up
to $8,000 per month. The rental security deposit of $15,000 previously paid on
behalf of Shahar shall be credited against the final reimbursement payments
payable to Shahar under this subsection 3.h.i.

               ii.  The Corporation shall loan Shahar an amount of up to One
Million Dollars ($1,000,000) to be used to purchase a home in the Cupertino,
California, area. The loan shall be subject to the following terms: (a) subject
to the above $1,000,000 maximum, the amount of the loan shall be equal to 50% of
the home purchase price if Shahar purchases the home no later than June 30,
2001, 40% of the home purchase price if Shahar purchases the home between July
1, 2001 and December 31, 2001, and 30% of the home purchase price if Shahar
purchases the home on or after January 1, 2002; (b) the loan shall bear interest
at the lowest allowable rate under applicable tax and accounting laws, and
accrued interest shall be paid on December 15 of each year with a 30 day grace
period, during which the loan is outstanding; (c) the principal amount of the
loan shall be repaid at the first to occur of 90 days after Shahar's employment
termination with the Corporation (including termination in the event that Shahar
returns to Israel as an employee of Vyyo Israel), or immediately upon the sale
of the home. The loan will be evidenced by a note secured by a second deed of
trust on the home, junior in interest only to a loan on the home that enables
Shahar to complete the purchase of the home. If Shahar sells the home prior to
December 31, 2002, to the extent that the Sales Price of the home is less than
the purchase price that Shahar paid for the home, the principal amount due under
the loan shall be reduced by an amount equal to the amount by which the purchase
price exceeds the Sales Price; provided that the Corporation is given the option
of purchasing the home at the proposed Sales Price and/or has agreed to the
proposed Sales Price. As used in this Agreement, the term "Sales Price" refers
to the price paid by a subsequent buyer of the Shahar home less any applicable
real estate brokerage commissions paid by Shahar by reason of the sale.

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               iii.  If Shahar purchases a home on or before June 30, 2001, the
Corporation will reimburse Shahar for his closing costs in connection with such
purchase, including up to two points charged by a lender on a home mortgage, and
other customary closing costs.

               iv.  During the period from January 1, 2001 through December 31,
2002, the Corporation will reimburse Shahar for automobile lease payments made
by Shahar for two leased automobiles, up to a total of $1,000 per month for both
automobiles.

               v.   During the term of this Agreement, Shahar and his spouse
will be entitled to three round trip business class tickets to Israel at the
Corporation's expense, and each of Shahar's two children will be entitled to two
coach class tickets to Israel at the Corporation's expense.

               vi.  The Corporation will pay for reasonable US and Israeli tax
planning and compliance advice from PriceWaterhouseCoopers in Israel, Ernst &
Young in the United States, and Fischer, Behar, Chen & Co. in Israel, for Shahar
in connection with his relocation to the United States and his employment with
the Corporation.

               vii. The Corporation will pay for all of Shahar's reasonable
moving costs for his move from Israel to California, up to $20,000 including
shipment of household goods, and two househunting trips to California for
Shahar's spouse, and in addition shall pay Shahar a $25,000 moving bonus. In the
event Shahar elects to terminate his employment with the Corporation for any
reason, including to return to Israel as an employee of Vyyo Israel, prior to
December 31, 2002, any such costs, expenses and bonus paid by the Corporation
under this subsection 3.h.vii. shall be repaid by Shahar to the Corporation.

               viii.  The Corporation shall reimburse Shahar for any taxes
incurred by Shahar as a result of any of the payments or reimbursements made to
Shahar pursuant to Section 3.h.i and Sections 3.h.iii through 3.h.vii, and for
any taxes incurred by Shahar (net of any tax deductions related to or resulting
from any related payments made by Shahar, or payments, reimbursements or loans
made by the Corporation under this Section 3.h.) as a result of such
reimbursement pursuant to this Section 3.h.viii.

4.        Confidentiality and Competitive Activities.  Shahar agrees that during
          ------------------------------------------
the employment term he is in a position of special trust and confidence and has
access to confidential and proprietary information about the Corporation's
business and plans.  Shahar agrees that he will not directly or indirectly,
either as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or in any similar individual or
representative capacity, engage or participate in any business that is in
competition, in any manner whatsoever, with the Corporation.  Notwithstanding
anything in the foregoing to the contrary, Shahar shall be allowed to invest as
a shareholder in publicly-traded companies, or through a venture capital firm or
an investment pool.

     For purposes of this Section 4 and of Sections 5 and 7 of this Agreement,
the term "Corporation" shall include the Corporation, and any subsidiaries or
affiliated entities of Corporation.

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5.        Trade Secrets.
          -------------

          a.   Special Techniques.  It is hereby agreed that the Corporation has
               ------------------
developed or acquired certain products, technology, unique or special methods,
manufacturing and assembly processes and techniques, trade secrets, special
written marketing plans and special customer arrangements, and other proprietary
rights and confidential information and shall during the employment term
continue to develop, compile and acquire said items (all hereinafter
collectively referred to as the "Corporation's Property").  It is expected that
Shahar will gain knowledge of and utilize the Corporation's Property during the
course and scope of his employment with the Corporation, and will be in a
position of trust with respect to the Corporation's Property.

          b.   Corporation's Property. It is hereby stipulated and agreed
               ----------------------
that the Corporation's Property shall remain the Corporation's sole property. In
the event that Shahar's employment is terminated, for whatever reason, Shahar
agrees not to copy, make known, disclose or use, any of the Corporation's
Property without the Corporation's prior written consent. In such event, Shahar
further agrees not to endeavor or attempt in any way to interfere with or induce
a breach of any prior proprietary contractual relationship that the Corporation
may have with any employee, customer, contractor, supplier, representative, or
distributor for nine (9) months after any termination of this Agreement. Shahar
agrees upon termination of employment to deliver to the Corporation all
confidential papers, documents, records, lists and notes (whether prepared by
Shahar or others) comprising or containing the Corporation's Property. Shahar
recognizes that violation of covenants and agreements contained in this Section
5 may result in irreparable injury to the Corporation which would not be fully
compensable by way of money damages, and that Corporation shall be entitled to
pursue and seek any available remedy for Shahar's violation of this agreement,
including but not limited to injunctive and equitable relief.

6.        Termination.
          -----------

          a.   General.  The Corporation may terminate this Agreement without
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cause, on ninety (90) days' written notice to Shahar. Shahar may voluntarily
terminate his employment hereunder upon ninety (90) days' written notice to the
Corporation.

          b.   Termination for Cause.  The Corporation may immediately terminate
               ---------------------
Shahar's employment at any time for cause.  Termination for cause shall be
effective from the receipt of written notice thereof to Shahar specifying the
grounds for termination and all relevant facts.  Cause shall be deemed to
include:  (i) material neglect of his duties or a significant violation of any
of the provisions of this Agreement, which continues after written notice and a
reasonable opportunity (not to exceed thirty (30) days) in which to cure; (ii)
fraud, embezzlement, defalcation, dishonesty, conviction of any felonious
offense, or commission of an act of moral turpitude which results in either
civil or criminal liability; or (iii) intentionally imparting confidential
information relating to the Corporation, or any subsidiaries or affiliated
entities of Corporation, or their businesses, to competitors or to other third
parties other than in the course of carrying out his duties hereunder.  The
Corporation's exercise of its rights to terminate with cause shall be without
prejudice to any other remedy it may be entitled at law, in equity, or under
this Agreement.

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          c.   Termination Upon Death or Disability. This Agreement shall
               ------------------------------------
automatically terminate upon Shahar's death. In addition, if any disability or
incapacity of Shahar to perform his duties as the result of any injury,
sickness, or physical, mental or emotional condition continues for a period of
thirty (30) business days (excluding any accrued vacation) out of any one
hundred twenty (120) calendar day period, the Corporation may terminate Shahar's
employment upon written notice. Payment of salary to Shahar during any sick
leave shall only be to the extent that Shahar has accrued sick leave or vacation
days. Shahar shall accrue sick leave at the same rate generally available to the
Corporation's employees.

          d.   Severance Pay.
               -------------

               (i) If this Agreement is terminated by the Corporation without
cause pursuant to Section 6.a. (above), the Corporation shall pay Shahar a
severance payment equal to the greater of the full amount of the compensation he
could have expected under this Agreement, as and when payable under this
Agreement, without deduction except for tax withholding amounts, through the end
of the term, or six (6) months of his then-current salary without bonus, subject
to tax withholding amounts, in either case in exchange for a release as to any
and all claims Shahar may have against the Corporation. During the time period
that Shahar is receiving such severance pay, he shall remain as an employee of
the Corporation in a non-policy making role, and his options shall continue to
vest.

               (ii)  If this Agreement is not renewed after the original two
year term, the employment shall be deemed to terminate at the end of the
original term and the Corporation shall pay Shahar a severance payment equal to
six (6) months of his then-current salary without bonus, subject to tax
withholding amounts, in exchange for a release as to any and all claims Shahar
may have against the Corporation.

               (iii) If this Agreement is terminated by Shahar pursuant to
Section 6.a (above), the employment shall be deemed to terminate at the end of
the ninety (90) day notice provision and there shall be no severance payment.

               (iv)  If this Agreement is terminated by the Corporation for
cause pursuant to Section 6.b (above), the employment shall be deemed to
terminate on the date that the notice is given by the Corporation and the
Corporation shall pay to Shahar a severance payment equal to three (3) months of
his then-current salary without bonus, subject to tax withholding amounts, in
exchange for a release as to any and all claims Shahar may have against the
Corporation.

          e.   Termination as a Result of Relocation to Israel. Notwithstanding
               -----------------------------------------------
the provisions of Section 6.d. above, no severance payments shall be made to
Shahar by the Corporation in the event that this Agreement or Shahar's
employment with the Corporation is terminated in connection with Shahar's
relocation to Israel as an employee of Vyyo Israel.

7.    Corporate Opportunities.
      -----------------------

          a.   Duty to Notify. In the event that Shahar, during the employment
               --------------
term, shall become aware of any material and significant business opportunity
directly related to any of the Corporation's significant businesses, Shahar
shall promptly notify the Corporation's Chairman of the Board of such
opportunity. Shahar shall not appropriate for himself or for any other person
other than the

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<PAGE>

Corporation, or any affiliate of the Corporation, any such opportunity unless,
as to any particular opportunity, the Board of Directors of the Corporation
fails to notify Shahar within thirty (30) days that the Corporation would like
to avail itself of such opportunity or further review such opportunity.
Shahar's duty to notify the Corporation and to refrain from appropriating all
such opportunities for thirty (30) days shall neither be limited by, nor shall
such duty limit, the application of the general law of California relating to
the fiduciary duties of an agent or employee.

          b.   Failure to Notify.  In the event that Shahar fails to notify the
               -----------------
Corporation of, or so appropriates, any such opportunity without the express
written consent of the Corporation, Shahar shall be deemed to have violated the
provisions of this Section notwithstanding the following:

               i.  The capacity in which Shahar shall have acquired
                   such opportunity; or

               ii. The probable success in the Corporation's hands of such
                   opportunity.

8.   Miscellaneous.
     -------------

     a.   Termination of Vyyo Israel Employment Agreement; Entire Agreement.
          -----------------------------------------------------------------

          i.  The parties hereto hereby agree that the Employment Agreement,
dated as of January 1, 2000, by and between Shahar and PhaseCom, Ltd. (now Vyyo
Israel) (the "Prior Employment Agreement"), is hereby terminated and of no
further force or effect.  In addition, in the event that the Corporation or
Shahar elects to have Shahar return to Israel as an employee of Vyyo Israel
after the initial two year term of this Agreement, and provided that Vyyo Israel
agrees to employ Shahar after such two year term, the parties agree that Vyyo
Israel and Shahar shall enter into an employment agreement on substantially the
terms contained in the Prior Employment Agreement.

          ii.  This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matters herein, and supersedes
and replaces any prior agreements and understandings, whether oral or written
between them with respect to such matters, excluding a certain termination
agreement between Shahar and Vyyo Israel dated effective as of December 31,
2000, which termination agreement shall remain in full force and effect.  The
provisions of this Agreement may be waived, altered, amended or repealed in
whole or in part only upon the written consent of both parties to this
Agreement.

     b.   No Implied Waivers.  The failure of either party at any time to
          ------------------
require performance by the other party of any provision hereof shall not affect
in any way the right to require such performance at any time thereafter, nor
shall the waiver by either party of a breach of any provision hereof be taken or
held to be a waiver of any subsequent breach of the same provision or any other
provision.

     c.   Personal Services.  It is understood that the services to be performed
          -----------------
by Shahar hereunder are personal in nature and the obligations to perform such
services and the conditions and covenants of this Agreement cannot be assigned
by Shahar.  Subject to the foregoing, and except as otherwise provided herein,
this Agreement shall inure to the benefit of and bind the successors and assigns
of the Corporation.

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<PAGE>

     d.   Severability.  If for any reason any provision of this Agreement shall
          ------------
be determined to be invalid or inoperative, the validity and effect of the other
provisions hereof shall not be affected thereby, provided that no such
severability shall be effective if it causes a material detriment to any party.

     e.   Applicable Law.  This Agreement shall be governed by and construed in
          --------------
accordance with the laws of the State of California, applicable to contracts
between California residents entered into and to be performed entirely within
the State of California.

     f.   Notices.  All notices, requests, demands, instructions or other
          -------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given upon delivery, if
delivered personally, or if given by prepaid telegram, or mailed first-class,
postage prepaid, registered or certified mail, return receipt requested, shall
be deemed to have been given seventy-two (72) hours after such delivery, if
addressed to the other party at the addresses as set forth on the signature page
below.  Either party hereto may change the address to which such communications
are to be directed by giving written notice to the other party hereto of such
change in the manner above provided.

     g.   Merger, Transfer of Assets, or Dissolution of the Corporation.  This
          -------------------------------------------------------------
Agreement shall not be terminated by any dissolution of the Corporation
resulting from either merger or consolidation in which the Corporation is not
the consolidated or surviving corporation or a transfer of all or substantially
all of the assets of the Corporation.  In such event, the rights, benefits and
obligations herein shall automatically be assigned to the surviving or resulting
corporation or to the transferee of the assets.

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

VYYO INC.,                                       MENASHE SHAHAR
a Delaware corporation
                                                 _____________________________
20400 Stevens Creek Blvd., Ste. 800
Cupertino, California  95014                     _____________________________
                                                 (Print Address)

By:  /s/ John O'Connell                           /s/ Menashe Shahar
     -------------------------------             ----------------------
     John O'Connell, Chief Executive             (Signature)
     Officer

VYYO LTD.,
an Israeli company


By:   /s/ Eran Pilovsky
   --------------------
Name:  Eran Pilovsky
     ---------------
Title:  Director
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