HIRSCH INTERNATIONAL CORP.
                      NON-QUALIFIED STOCK OPTION AGREEMENT



     AGREEMENT,  made and entered into this 20th day of December,  1996, between
HIRSCH  INTERNATIONAL  CORP., a Delaware corporation with its principal place of
business   at  200   Wireless   Boulevard,   Hauppauge,   New  York  11788  (the
"Corporation"),  and JIMMY L. YATES,  residing at 3801 Hollow  Creek Road,  Fort
Worth, Texas 76116 (the "Optionee").

     WHEREAS,  simultaneously  herewith  the  Corporation  has  entered  into an
employment  agreement with the Optionee  pursuant to which the  Corporation  has
agreed to grant to the  Optionee  an option to purchase  an  aggregate  of Sixty
Thousand  Three  Hundred   (60,300)   authorized  but  unissued  shares  of  the
Corporation's  Class A Common  Stock,  par  value  $.01 per share  (the  "Common
Shares"), upon the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, for good and valuable consideration paid by the Optionee to
the  Corporation,  the receipt and sufficiency of which is hereby  acknowledged,
and the mutual covenants hereinafter set forth, the parties agree as follows:

     1. Grant of Option. The Corporation hereby grants to the Optionee the right
and option to purchase all or any part of an aggregate of Sixty  Thousand  Three
Hundred (60,300) Common Shares (subject to adjustment as provided in Paragraph 6
hereof) on the terms and conditions set forth herein (the "Option").

     2.  Purchase  Price.  The purchase  price of Common  Shares  covered by the
Option shall be the closing bid price of the Corporation's  Class A Common Stock
on the date hereof as reported by NASDAQ  (subject to  adjustment as provided in
Paragraph 6 hereof).


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     3. Vesting of Option.  The Option granted hereby shall be exercisable as to
(i) Fifteen  Thousand  Seventy-Five  (15,075) Common Shares  commencing one year
from the date hereof, (ii) an additional Fifteen Thousand  Seventy-Five (15,075)
Common  Shares  commencing  two years from the date hereof,  (iii) an additional
Fifteen Thousand Seventy-Five (15,075) Common Shares commencing three years from
the date hereof, and (iv) an additional Fifteen Thousand  Seventy-Five  (15,075)
Common Shares commencing four years from the date hereof.

     4. Method of  Exercising  Option.  If the  Optionee  elects to exercise the
Option,  he may do so in whole or in part (to the extent that it is  exercisable
in  accordance  with its  terms) by giving  written  notice to the  Corporation,
specifying therein the number of Common Shares which he then elects to purchase.
Such notice shall be  accompanied  by payment of the full purchase  price of the
Common  Shares  by cash or by a  certified  check  payable  to the  order of the
Corporation.

     As soon as practicable  after receipt by the Corporation of such notice and
of payment in full of the purchase  price of all the Common  Shares with respect
to  which  the  Option  has  been  exercised,   a  certificate  or  certificates
representing  such Common Shares shall be issued in the name of the Optionee and
shall be delivered to the Optionee.  All Common Shares shall be issued only upon
receipt by the  Corporation  of the  Optionee's  representation  that the Common
Shares are  purchased  for  investment  and not with a view toward  distribution
thereof.

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     5. Availability of Shares. The Corporation, during the term of this Option,
shall keep  available at all times the number of shares of common stock required
to satisfy the Option.

     The  Corporation  shall  utilize  its  best  efforts  to  comply  with  the
requirements  of each  regulatory  commission or agency having  jurisdiction  in
order to issue and sell the Common Shares to satisfy the Option. Such compliance
will be a condition precedent to the right to exercise the Option. The inability
of the Corporation to effect such compliance with any such regulatory commission
or agency  which  counsel for the  Corporation  deems  necessary  for the lawful
issuance and sale of the Common  Shares to satisfy this Option shall relieve the
Corporation  from any  liability for failure to issue and sell the Common Shares
to  satisfy  the  Option  for  such  period  of time as such  compliance  is not
effectuated.

     6.  Adjustments.  If prior to the exercise of any option granted  hereunder
the  Corporation  shall  have  effected  one  or  more  stock  split-ups,  stock
dividends,  or other  increases  or  reductions  of the  number of shares of its
common  stock  outstanding  without  receiving  compensation  therefor in money,
services or property,  the number of Common Shares  subject to the option hereby
granted  shall (a) if a net increase  shall have been  effected in the number of
outstanding  shares  of the  Corporation's  Common  Shares,  be  proportionately
increased  and  the  cash  consideration  payable  per  Common  Share  shall  be
proportionately  reduced; and (b) if a net reduction shall have been effected in
the  number  of  outstanding  shares  of the  Corporation's  Common  Shares,  be
proportionately  reduced and the cash consideration  payable per Common Share be
proportionately increased.

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     7.  Non-Transferability  of Option  and Common  Shares.  The holder of this
Option, by acceptance hereof, represents, warrants and agrees as follows:

     (a)  Optionee  is  acquiring  the Option for his own account and not with a
view to the resale or distribution thereof.

     (b) This Option and the right to purchase  the Common  Shares  hereunder is
personal to the Optionee and shall not be  transferred by Optionee other than by
will or the  laws of  descent  and  distribution  and  may be  exercised  during
Optionee's  lifetime  only by the Optionee or the  Optionee's  guardian or legal
representative. The Option may not be pledged or otherwise hypothecated.

     (c) The holder hereof has been advised and understands  that the Option has
been issued in reliance upon exemptions from  registration  under the Securities
Act and applicable state statutes;  the exercise of the Option and resale of the
Option and the Common Shares have not been  registered  under the Securities Act
or applicable state statutes and must be held and may not be sold,  transferred,
or otherwise  disposed of for value unless (i) they are subsequently  registered
under the Securities Act or (ii) unless an exemption from such  registration  is
available  and the Optionee has furnished  the  Corporation  with notice of such
proposed  transfer  and  the  Corporation's  legal  counsel,  in its  reasonable
opinion, shall deem such proposed transfer to be so exempt.

     8. Stockholder's Rights. The Optionee shall not have any of the rights of a
stockholder with respect to the Common Shares until such shares have been issued
after the due exercise of the Option.

     9. Acknowledgements. The Optionee hereby acknowledges that:

                                       -4-

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     (a) The Option is not  intended  to qualify as an  incentive  stock  option
under Section 422A of the Internal  Revenue Code of 1986,  as amended,  and that
the tax benefits  associated  with incentive stock options will not be available
in  connection  with the  granting and exercise of the Option or the sale of the
Common Shares.  

     (b) If Optionee exercises the Option, he must bear the economic risk of the
investment  in the  Common  Shares  for an  indefinite  period of time since the
Common Shares will not have been registered  under the Act and cannot be sold by
Optionee unless they are registered  under the Act or an exemption  therefrom is
available thereunder.

     (c) The  Corporation  shall place stop  transfer  orders with its  transfer
agent against the transfer of the Common  Shares in the absence of  registration
under the Act or an exemption therefrom.

     (d) In the absence of registration,  the certificates evidencing the Common
Shares shall bear the  following  legend:  THE  SECURITIES  REPRESENTED  BY THIS
CERTIFICATE  HAVE NOT BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933,  AS
AMENDED  (THE  "SECURITIES  ACT") AND ARE  "RESTRICTED  SECURITIES"  WITHIN  THE
MEANING OF RULE 144  PROMULGATED  UNDER THE SECURITIES  ACT. THE SECURITIES HAVE
BEEN  ACQUIRED  FOR  INVESTMENT  AND  MAY NOT BE  SOLD  OR  TRANSFERRED  WITHOUT
COMPLYING  WITH  RULE 144 IN THE  ABSENCE  OF  EFFECTIVE  REGISTRATION  OR OTHER
COMPLIANCE UNDER THE SECURITIES ACT.

     10.  Withholding and Deductions.  Notwithstanding  anything to the contrary
contained  herein, if at any time specified herein for the making of any payment
of cash or any delivery of Common Shares to the Optionee,  any law or regulation
of any governmental  authority having jurisdiction in the premises shall require
the Corporation to withhold, to

                                       -5-

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make any  deduction  for any taxes or take any other  action in  connection
with the payment or delivery then to be made,  such payment or delivery,  as the
case may be, shall be deferred until such  withholding  or deduction  shall have
been  adequately  provided  for, in the opinion of the Board of Directors of the
Corporation.  11. Registration Rights. The Corporation agrees to promptly file a
registration  statement  on Form S-8  (the  "Registration  Statement")  with the
Securities  and  Exchange  Commission  with  respect to the Common  Shares.  12.
Termination of Option. To the extent not heretofore exercised, this Option shall
terminate at 5:00 P.M. New York City time on December 19, 2001. 13. Notices. All
notices, requests,  deliveries,  payments, demands and other communication which
are required or permitted to be given under this  Agreement  shall be in writing
and shall  either be delivered  personally  or sent by  certified  mail,  return
receipt requested, postage prepaid, to the parties at their respective addresses
as first set  forth  above,  or to such  other  address  as  either  shall  have
specified  by notice in  writing to the  other,  and shall be deemed  duly given
hereunder  when so  delivered  or mailed,  as the case may be. 14.  Waiver.  The
waiver by any party hereto of a breach of any provision of this Agreement  shall
not operate or be construed as a waiver of any other or subsequent  breach.  15.
Entire  Agreement.  This Agreement  constitutes the entire agreement between the
parties with respect to the subject matter hereof.  16.  Successors and Assigns.
This  Agreement  shall inure to the  benefit of and be binding  upon the parties
hereto and to the extent not prohibited herein, their

                                       -6-

<PAGE>


respective heirs, successors, assigns and representatives.  Nothing in this
Agreement,  expressed or implied, is intended to confer on any person other than
the parties hereto and as provided above,  their respective  heirs,  successors,
assigns and  representatives any rights,  remedies,  obligations or liabilities.
17.  Validity and  Construction.  The validity and  construction  of this Option
shall be governed by the laws of the State of  Delaware.  Such  construction  is
vested in the  board and its  construction  shall be final  and  conclusive.  IN
WITNESS WHEREOF, the Corporation has caused this Option Agreement to be executed
by its proper corporate officers thereunto duly authorized.

                                HIRSCH INTERNATIONAL CORP.


                            By:________________________________________
                                Henry Arnberg, President


                                ----------------------------------------
                                JIMMY L. YATES, Optionee












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