STOCK TRANSFER AND SHAREHOLDER AGREEMENT

     Agreement (AAgreement@) made as of this 20th day of December,  1997, by and
between  Tokai  Industrial  Sewing  Machine  Company,  Ltd.  (ATokai@),  a Japan
corporation  having offices at No. 1800  Ushyama-Cho,  Kasugai 486, Aichi Pref.,
Japan,  and Hirsch  International  Corp.  (AHirsch@  and,  together  with Tokai,
collectively  referred to herein as the AShareholders@),  a Delaware corporation
having offices at 200 Wireless Boulevard, Hauppauge, New York 11788.

                              W I T N E S S E T H:

     WHEREAS,  Hirsch is the record and  beneficial  owner of one hundred  (100)
shares of the  common  stock,  without  par  value,  of Tajima  USA,  Inc.  (the
AShares@),  a corporation  organized under the laws of the State of Delaware and
authorized to do business in the State of New York (ACorporation@); and

     WHEREAS,  Tokai desires to purchase from Hirsch and Hirsch  desires to sell
to Tokai  forty-five (45) of the Shares owned by Hirsch on the terms and subject
to the conditions as set forth herein.

     NOW,  THEREFORE,  in  consideration  of the mutual covenants and conditions
contained herein,  receipt of which is hereby  acknowledged,  the parties hereto
agree as follows:

     1. Purchase of Shares.  Hirsch hereby sells, assigns and transfers to Tokai
and Tokai hereby purchases from Hirsch  forty-five of the Shares owned by Hirsch
for and in consideration of Nine Hundred Thousand ($900,000.00) Dollars, payable
in  legal   tender  of  the   United   States,   remitted   by  wire   transfer.


     2.  Transfer of Shares.  Hirsch shall  deliver its  certificate  evidencing
ownership  of one hundred  (100) shares to the  Corporation  and shall cause the
Corporation  to  issue  new  certificates  evidencing  ownership  by  Hirsch  of
fifty-five (55) Shares and Tokai of forty-five (45) Shares.
              

     3. Board of Directors. So long as the parties are shareholders, each agrees
to vote its shares to elect as members of the Board four (4) persons  designated
by Hirsch and one (1) person designated by Tokai. Each party reserves the right,
from time to time,  to  designate  different  persons to serve as members of the
Board,  provided the proportionate  representation of each of the parties is not
modified.  Appropriate  corporate  resolutions  shall,  from  time to  time,  be
executed by the parties to effect their intent.

     4. Restriction on Transfer of Shares.

     (a) The Shareholders  shall not pledge or otherwise  encumber their Shares,
nor will they make any  disposition of such Shares except with the prior written
consent of the other  Shareholders or as otherwise  permitted by this Agreement.
Any purported  pledge,  encumbrance  or disposition in violation of the terms of
this Agreement shall be void from the inception.

     (b) The Corporation's  share certificates  representing the Shares owned by
each of the Shareholders shall have inscribed thereon the following endorsement:

     "THE SALE,  TRANSFER,  PLEDGE OR OTHER ENCUMBRANCE OF SHARES REPRESENTED BY
THIS  CERTIFICATE IS SUBJECT TO THE TERMS OF A STOCK  TRANSFER AND  SHAREHOLDERS
AGREEMENT  DATED  AS OF  DECEMBER  20,  1997,  A COPY OF WHICH IS ON FILE AT THE
OFFICE OF THE CORPORATION."

<PAGE>

     (c)  Notwithstanding  the  foregoing,  if either  party  wishes to sell its
Shares,  notice shall be given and the remaining party shall have the right, but
not the obligation, to purchase the Shares for an amount equal to the book value
of the selling Shareholder=s  interest or the fair market value of his interest,
whichever is greater.  In the event the  remaining  party elects not to purchase
the Shares when  offered,  then the party wishing to sell shall be free to offer
its Shares to a third party for a period of six months,  provided,  however, the
remaining  Shareholder  shall have the option to purchase the Shares on the same
terms and  conditions  as a third  party is  willing to  purchase  the Shares by
giving notice within ten (10) business days after receipt of confirmation that a
third party exists and intends to purchase the shares.

     5. Sale of Business or Public  Offering.  Notwithstanding  any provision of
law or bylaws of the Corporation to the contrary, the parties agree that, except
with their  unanimous  consent,  there  shall be no sale of the  business of the
Corporation,  all or substantially all of its assets or a public offering of its
securities. 

     6. Representations and Warranties.

     (a) Hirsch  represents  and warrants to Tokai that (i) it is the record and
beneficial  owner of the Shares,  (ii) it has full right,  power,  authority and
capacity to sell, transfer, and deliver such Shares in accordance with the terms
of this Agreement, (iii) upon delivery thereof as herein contemplated Tokai will
receive good and  marketable  title to the Shares,  and (iv) the Shares are free
and clear of any claims, liens, pledges and encumbrances of any kind.

     (b) Tokai  represents  and warrants  that (i) its purchase of the Shares of
the  Corporation  has been duly  authorized,  (ii) the execution and delivery of
this Agreement,  including the terms and conditions  contained herein, have been
duly  authorized,  (iii) each person from time to time  designated to serve as a
member of the Board is and shall be duly authorized to act in the best interests
of the  Corporation  and (iv) the execution and delivery of this  Agreement does
not and shall not violate any applicable laws, rules,  governmental regulations,
agreements or bylaws to which Tokai is a party.

     7.  Indemnification.  Hirsch and Tokai each hereby  agrees to indemnify and
hold the other harmless from and against any and all claims, damages, liability,
cost and  expense  (including  reasonable  attorney=s  fees)  arising out of the
breach of any representation,  warranty or covenant of the other party contained
herein or made pursuant hereto. 

     8.  Notices.  Any and all  notices  or  other  communications  required  or
permitted to be given under any of the provision of this  Agreement  shall be in
writing and shall be deemed to have been duly given when  personally  delivered,
or when mailed by  certified  or  registered  mail,  return  receipt  requested,
addressed to the parties at the addresses  first written above (or at such other
address  as such  party  may specify  by notice  to the  other  party  given as
aforesaid). 

<PAGE>

     9.  Governing  Law.  This  Agreement  and all  amendments  hereto  shall be
governed by and construed and enforced in accordance  with the laws of the State
of New York applicable to contracts made and to be performed  therein and to the
Delaware  Corporation  Law to the extent of matters  affecting the governance of
the Corporation. 

     10. Arbitration. Any dispute or controversy arising out of with or relating
to this  Agreement,  any  document  or  instrument  delivered  pursuant to or in
connection  with this  Agreement,  or any breach of this  Agreement  or any such
document or instrument  shall be resolved by arbitration in accordance  with the
rules then  prevailing of the  International  Chamber of Commerce (AICC Rules@).
Such  arbitration  shall take place in Nassau or Suffolk  County before a single
arbitrator  appointed in accordance with the ICC Rules. Any decision rendered by
the arbitrator shall be final and may be entered as a judgment in the federal or
state  courts  of  the  State  of  New  York  or any  other  jurisdiction  where
enforcement  thereof  may be  required.  Notwithstanding  any ICC  Rules  to the
contrary,  the Shareholders agree to exchange any and all documentary  materials
relevant  to the  dispute  not less than twenty (20) days prior to the time when
the arbitrator has scheduled  hearings for the purpose of resolving the dispute.
The cost  associated  with the  arbitration  proceedings,  including  reasonable
attorneys  fees incurred  therein,  shall be allocated by the  arbitrator to the
prevailing party or as may otherwise be deemed appropriate.

     11.  Exclusive  Jurisdiction.  Each of the  parties  hereby  submits to and
agrees to the  exclusive  jurisdiction  for all  purposes  of the  Courts of the
United States of America and,  specifically,  the appropriate  federal and state
courts located within the County of Nassau, State of New York, to the extent any
judicial order is required to enforce any rights of the parties.


     12. Miscellaneous.

     (a) Independent  Counsel.  The parties hereby acknowledge that each of them
has  received  the  advice  of  independent   counsel  in  connection  with  the
transactions contemplated herein. 

     (b) No Adverse  Construction.  The rule that a contract is to be  construed
against the party  drafting  the  contract is hereby  waived,  and shall have no
applicability in construing this Agreement or any provision hereof.


     (c) Binding  Effect.  This  Agreement  shall inure to the benefit of and be
binding on the parties hereto and their respective successors and assigns, heirs
and personal representatives.

     (d) Entire  Agreement.  This Agreement  constitutes the entire agreement of
the parties with respect to the subject  matter hereof and  supersedes all prior
agreements, arrangements or understandings related to the subject matter hereof.
This  Agreement may not be modified,  amended or terminated  except by a written
agreement specifically referring to this Agreement signed by all parties hereto.

<PAGE>

     (e) No  Waiver.  No waiver  of any  breach or  default  hereunder  shall be
considered  valid  unless in writing and signed by the party giving such waiver,
and no waiver  shall be deemed a waiver of any  subsequent  breach or default of
the same or similar nature.

     (f) Headings.  The section headings contained herein are for the purpose of
convenience  only and are not  intended to define or limit the  contents of said
sections.

     (g)  Severability.  If any provisions of this Agreement is determined to be
legally invalid,  inoperative or unenforceable,  only that particular  provision
shall be affected,  and the determination shall have no effect whatsoever on any
other provision of this Agreement, and all other provisions shall remain in full
force and effect and fully enforceable. 

     (h) Further Assurances.  Each party hereto shall cooperate, shall take such
further  action and shall  execute and deliver such further  documents as may be
reasonably  requested  by the  other  party  hereto  in order  to carry  out the
provisions and purposes of this Agreement. 

     (i)   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  all of  which  taken  together  shall  be  deemed  one  original.


     13.  Translations.  The parties  acknowledge  that this Agreement  shall be
prepared  and executed in English and  Japanese.  In the case of any conflict in
interpretation  between the  different  versions of the  documents,  the parties
agree to be bound by the English translation for all purposes.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed as of the day and year first above written.

     Tokai Industrial                          Hirsch International Corp.
     Sewing Machine Co., Ltd.


  By: /s/Ikuo Tajima                       By: /s/Henry Arnberg
      ---------------------------              ------------------------
      Ikuo Tajima, President                   Henry Arnberg, President