SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

     This  Amendment  is made as of the 7th day of July,  2000,  by and  between
Harvey  Electronics,  Inc. a New York corporation (the "Borrower"),  and Paragon
Capital LLC, a Delaware limited liability company (the "Lender").

                                    Recitals

     The Borrower and the Lender have entered into a Loan and Security Agreement
dated as of November 3, 1997, as amended by First Amendment dated as of November
29, 1999 (as so amended, the "Loan Agreement").

     The Lender has agreed to make certain loan  advances to the Borrower and to
issue or cause to be issued  certain  letters of credit  for the  account of the
Borrower pursuant to the terms and conditions set forth in the Loan Agreement.

     The loan advances  under the Loan Agreement are evidenced by the Borrower's
promissory note dated as of November 3, 1997, in the maximum principal amount of
Three Million Three Hundred Thousand  ($3,300,000.00) Dollars and payable to the
order of the Lender (the "Master Note").

     All  indebtedness of the Borrower to the Lender is secured  pursuant to the
terms of the Loan Agreement and all other security  documents  executed in favor
of the Lender (collectively, the "Security Documents").

     The Borrower has  requested  that  certain  amendments  be made to the Loan
Agreement,  which  the  Lender  is  willing  to make  pursuant  to the terms and
conditions set forth herein.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  of  the  mutual
covenants and agreements herein contained, it is agreed as follows:

     1. Terms used in this  Amendment  which are  defined in the Loan  Agreement
shall  have the same  meanings  as defined  therein,  unless  otherwise  defined
herein.

     2. The Loan Agreement is hereby amended as follows:

     (a) Section  1-8(a) is  stricken  in its  entirety  and the  following  new
Section 1-8(a) substituted therefor:

     "(a) The unpaid  principal  balance of the Loan Account up to $2,500,000.00
shall bear  interest,  until  repaid  (calculated  based upon a 360-day year and
actual days elapsed), at the aggregate of Base plus three-quarters of one (.75%)
percent  per annum but in no event less than eight (8%)  percent per annum or in
excess of the maximum rate  permitted by  applicable  law. The unpaid  principal
balance of the Loan Account in excess of  $2,500,000.00  shall bear  interest at
the aggregate of Base plus one (1%) percent per annum."

     (b) Section  1-9(b) is  stricken  in its  entirety  and the  following  new
Section 1-9(b) substituted therefor:


     "(b) Annual  Facility  Fee. On October 1, 2000, a facility fee in an amount
equal to  one-half  of one (.50%)  percent of the Credit  Limit which shall have
been fully  earned on October 1,  2000,  shall be due and  payable,  and on each
October 1st  thereafter,  a facility  fee in an amount  equal to one-half of one
(.50%) percent of the Credit Limit, which shall have been fully earned as of the
applicable October 1st and shall be due and payable."

     (c) Section  1-9(c) is  stricken  in its  entirety  and the  following  new
Section 1-9(c) substituted therefor:

     "(c) Loan  Maintenance  Fee.  On October 1, 2000,  and on each  anniversary
thereof, a loan maintenance fee in the amount of $18,000.00. Such fee shall have
been fully earned as of October 1, 2000,  and as of each October 1st  thereafter
and shall be  payable in twelve  (12)  installments  as  follows:  $1,500.00  on
October  1,  2000,  and  $1,500.00  on the  first day of each  month  thereafter
(commencing on November 1, 2000) until the loan maintenance fee has been paid in
full."

     (d) Section  9-10(d) is  stricken in its  entirety  and the  following  new
Section 9- 10(d) substituted therefor:

     "(d) The Lender  contemplates  conducting two (2) commercial finance audits
(in each event, at the Borrower's  expense in the amount of $750.00 per man day,
plus expenses) of the Borrower's  books and records during any twelve (12) month
period during which the within  Agreement is in effect,  but in its  discretion,
may undertake additional such audits during such period."

     (e) Section 13-3 is stricken in its entirety and the  following new Section
13-3 substituted therefor:

     "13-3 Prepayment Premium. If Borrower pays in full all or substantially all
of the  Liabilities  prior to September 30, 2003,  other than  temporarily  from
funds  internally  generated in the ordinary course of business,  at the time of
such payment Borrower shall also pay to Lender a prepayment premium as follows:

      Period                                      Premium
      ------                                      -------

      If prepaid prior to September 30, 2001      $ 100,000.00

      If prepaid after September 30, 2001,
      but prior to September 30, 2002             $  30,000.00

      If prepaid after September 30, 2002,
      but prior to September 30, 2003             $  20,000.00

     Any tender of payment in full of the Liabilities  following an acceleration
     by Lender of the Liabilities  pursuant to Article 10, shall be for purposes
     of this  section  deemed to be a prepayment  requiring  Borrower to pay the
     aforementioned prepayment premium.


     Such prepayment  premium shall be paid to Lender as liquidated  damages for
the loss of the bargain by Lender and not as a penalty."

     (f) The  definition  of the term "Credit  Limit"  contained on Exhibit 3 is
stricken in its entirety and the following new definition substituted therefor:

     "'Credit Limit': Means Three Million Five Hundred Thousand  ($3,500,000.00)
Dollars,  minus (i) the then unpaid principal balance of the Loan Account, minus
(ii)  the  then  aggregate  of  such  Availability  Reserves  as may  have  been
established by the Lender, minus (iii) the then outstanding Stated Amount of all
L/C's."

     (g) The  definition of the term "Maturity  Date"  contained on Exhibit 3 is
stricken in its entirety and the following new definition substituted therefor:

     "'Maturity  Date':  September  30,  2003,  unless  extended  as provided in
Article  13-1,  in which  event the  Maturity  Date shall be the last day of the
applicable renewal term."

     3. Except as  explicitly  amended by this  Amendment,  all of the terms and
conditions of the Loan Agreement shall remain in full force and effect and shall
apply to any advance or letter of credit thereunder.

     4. This  Amendment  shall be  effective  upon  receipt  by the Lender of an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:

     (a) The  replacement  note  substantially  in the form of Exhibit A hereto,
duly executed on behalf of the Borrower (the "Replacement Note").

     (b)  Certificate  of the  Secretary  of the Borrower  certifying  as to the
resolutions  of the Board of Directors of the Borrower  approving  the execution
and delivery of this Amendment.

     5. The Borrower  hereby  represents and warrants to the Lender that (i) the
resolutions of the Board of Directors of the Borrower attached to the Borrower's
General Certificate dated as of November 3, 1997, and delivered to the Lender in
connection with the execution and delivery of the Agreement (the  "Certificate")
are in full force and effect,  (ii) the Articles of Organization  and By-Laws of
the Borrower,  which were certified and delivered to the Lender  pursuant to the
Certificate,  continue  in full force and  effect  and have not been  amended or
otherwise  modified except as set forth in the Certificate to be delivered,  and
(iii) the officers  and agents of the  Borrower  who have been  certified to the
Lender pursuant to the Certificate as being authorized.

     6. All references in the Loan Agreement to "this Agreement" shall be deemed
to refer to the Loan Agreement as amended hereby;  and any and all references in
the  Security  Documents to the Loan  Agreement  shall be deemed to refer to the
Loan  Agreement  as  amended  hereby.  Upon  the  satisfaction  of  each  of the
conditions set forth in paragraph 4 hereof,  the definition of "Master Note" and
all references thereto in the Loan Agreement shall be deemed amended to describe
the Replacement  Note, which Replacement Note shall be issued by the Borrower to
the Lender in replacement,  renewal and amendment,  but not in repayment, of the
Master Note.

     7. This  Amendment may be executed in any number of  counterparts,  each of
which when so executed  and  delivered  shall be deemed an  original  and all of
which  counterparts,   taken  together,   shall  constitute  one  and  the  same
instrument.

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

                                    HARVEY ELECTRONICS, INC.


                                 By:______________________________________
                                    Joseph Calabrese, Executive Vice President

                                     PARAGON CAPITAL LLC


                                 By:______________________________________


<PAGE>



                                    EXHIBIT A

                   EXHIBIT 1-6 TO LOAN AND SECURITY AGREEMENT

                                   MASTER NOTE
                                   (REVOLVING)

$3,500,000.00                                              Newton, Massachusetts
                                                           July           , 2000

     For value received, the undersigned,  Harvey Electronics,  Inc., a New York
corporation (the "Borrower"),  hereby promises to pay on September 30, 2003 (the
"Maturity  Date",  unless  extended  as  provided  in  Article  13-1 of the Loan
Agreement (as defined below), in which event the Maturity Date shall be the last
day of the  applicable  renewal  term),  to the order of Paragon  Capital LLC, a
Delaware limited liability company (the "Lender"), at its main office in Newton,
Massachusetts,  or at any  other  place  designated  at any  time by the  holder
hereof,  in lawful  money of the  United  States of America  and in  immediately
available  funds,  the  principal  sum of Three  Million Five  Hundred  Thousand
($3,500,000.00)  Dollars or, if less, the aggregate  unpaid  principal amount of
all  advances  made by the  Lender  to the  Borrower  hereunder,  together  with
interest on the principal amount  hereunder  remaining unpaid from time to time,
computed on the basis of the actual  number of days elapsed and a 360-day  year,
from the date hereof until this Note is fully paid at the rate from time to time
in effect  under the Loan and  Security  Agreement  dated  November 3, 1997 (the
"Loan  Agreement")  by and between the Lender and the  Borrower.  The  principal
hereof and interest accruing thereon shall be due and payable as provided in the
Loan  Agreement.  This  Note may be  prepaid  only in  accordance  with the Loan
Agreement.

     This Note is issued pursuant, and is subject, to the Loan Agreement,  which
provides,  among other things, for acceleration  hereof. This Note is the Master
Note referred to in the Loan Agreement.

     This Note is secured,  among other things,  pursuant to the Loan  Agreement
and may now or  hereafter be secured by one or more other  security  agreements,
mortgages, deeds of trust, assignments or other instruments or agreements.

     The  Borrower  hereby  agrees  to pay all  costs of  collection,  including
attorneys'  fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.

     Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.

     This Note shall be deemed to be under seal.

                                           HARVEY ELECTRONICS, INC.

                                           By:_________________________________