SURRENDER OF LEASE


     AGREEMENT dated the 22nd day of December, 1998, by and between 873 BROADWAY
ASSOCIATES,  having an office c/o  Williams  Real Estate Co.  Inc.,  380 Madison
Avenue, New York, New York (hereinafter  referred to as "Landlord"),  and HARVEY
ELECTRONICS,  INC.,  a New  Jersey  corporation  having  an  office at 205 Chubb
Avenue, Lyndhurst, New Jersey 07071 (hereinafter referred to as "Tenant").

                              W I T N E S S E T H:

     WHEREAS, by agreement of lease dated as of November,  1992, Landlord leased
to Reliable Broadway, Inc., a New York corporation, those certain premises known
as Store No. 2 and Basement No. 2 (the  "Premises") in the building known as 873
Broadway, New York, New York (the "Building");

     WHEREAS,  such lease was  assigned,  by  Assignment of Lease dated June 26,
1996,  to  Room  Plus  Furniture,   Inc.,   Tenant's   predecessor  in  interest
(hereinafter,  "Tenant's  Predecessor")  (such assignment  shall  hereinafter be
referred to as the "First Assignment");

     WHEREAS,  such  lease,  as  assigned,  was  further  assigned  to Tenant by
Assignment of Lease (herein,  the "Second Assignment") dated June 29, 1998 (such
lease,  as  assigned  and  together  with  any  modifications,   amendments  and
extensions thereof, if any, shall hereinafter be collectively referred to as the
"Lease");

     WHEREAS,  Tenant is now desirous of cancelling  the Lease and  surrendering
possession of the Premises;

     WHEREAS, Landlord is willing to accept a surrender of the Premises upon the
terms and conditions hereinafter provided.

     NOW,  THEREFORE,  in consideration of the mutual covenants herein contained
and other good and valuable consideration,  the receipt and sufficiency of which
is hereby acknowledged, it is mutually agreed as follows:

     1. The  Lease  is  hereby  cancelled  as of the  date  hereof  (hereinafter
referred  to as the  "Cancellation  Date")  with the same force and effect as if
said date were initially set forth in the Lease as the termination date thereof.

     2. Tenant  covenants and agrees that it will, on or before the Cancellation
Date,  surrender  possession  of the  Premises to  Landlord,  broom clean and in
accordance with the Lease provisions. Tenant hereby gives, grants and surrenders
unto the  Landlord,  its  successors  and  assigns,  the Premises and all of its
right,  title  and  interest  therein,  TO HAVE AND TO HOLD unto  Landlord,  its
successors and assigns, effective as of the day following the Cancellation Date.

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     3. Tenant hereby covenants that it has not done or suffered  anything to be
done whereby said Premises have been encumbered in any way whatsoever, nor shall
the Premises be in any way  encumbered on the day Tenant  surrenders  possession
thereof to Landlord. 

     4. Tenant warrants,  covenants and agrees, at its sole cost and expense, to
the extent reasonably practicable, fully and promptly cooperate with Landlord in
any action,  proceeding  or  endeavor  of Landlord to recover any moneys  and/or
damages from Tenant's  Predecessor  including,  without limitation,  damages due
from Tenant's Predecessor arising out of the First Assignment.  Such cooperation
shall  include,  without  limitation,  serving  as a  witness  and/or  providing
testimony (at depositions, in court, or otherwise), and promptly providing those
documents requested by Landlord.

     5. Tenant hereby  assigns to Landlord all its rights,  claims and interests
arising out of the Lease.  Tenant hereby releases  Landlord,  its successors and
assigns,  from any and all claims  and  obligations  under the  Lease.  Provided
Tenant  complies with the  provisions  hereof,  including,  without  limitation,
Paragraph 4, Landlord hereby releases Tenant from any and all claims of Landlord
for any payments due Landlord in connection with the Second Assignment.

     6. Landlord has simultaneously  herewith delivered to Tenant a check in the
amount of $39,748.00  (which amount  represents the sum of $50,000.00  less rent
due under the Lease through 12/31/1998 or $12,752.00 plus a rent credit equal to
$2,500.00),  and agrees to deliver a check in the  amount of  $40,000.00  on the
first anniversary of the date hereof, and a check in the amount of $35,000.00 on
the  second  anniversary  of the  date  hereof  as  consideration  for  Tenant's
agreement to surrender the Premises and comply with the other provisions of this
agreement including, without limitation, Paragraphs 4 and 5 hereof.

     7.  Provided  Tenant  fully and  faithfully  complies  with all the  terms,
covenants  and  conditions  of this  Agreement,  the  security,  or any  balance
thereof,  on deposit with Landlord under the Lease,  shall be returned to Tenant
within thirty (30) days after the Cancellation Date

     8. Tenant agrees to be responsible  for all charges for utilities  consumed
at the Premises to and including the Cancellation Date, as more particularly set
forth in the Lease.  The  obligation  of Tenant in respect of such charges shall
survive the cancellation of the Lease.

     9. Tenant  acknowledges  that this Agreement is being offered to Tenant for
signature by the managing agent of the building,  solely in its capacity as such
agent,  and is subject to Landlord's  acceptance  and approval.  Tenant  further
acknowledges  that it has affixed its  signature  hereto with the  understanding
that nothing herein  contained shall in any way bind Landlord or its agent until
such time as this  Agreement has been executed by Landlord and a fully  executed
copy delivered to Tenant.

     10.  Tenant  agrees  that it shall  solely be  liable  for,  and  warrants,
covenants and agrees to pay, any and all taxes (including,  without  limitation,
transfer  taxes)  due  to  any  governmental   authority  arising  out  of  this
transaction, all costs, expenses, fees, fines, penalties, or damages that may be
imposed on Landlord or Tenant by reason of Tenant's failure to comply therewith,
and  shall,  at  Tenant's  sole cost and  expense,  defend,  indemnify  and hold
Landlord  harmless  from  and  against  any  and all  liabilities,  obligations,
damages, penalties,  claims, costs and expenses,  including reasonable attorneys
fees,  paid,  suffered  or  incurred as a result of any breach by Tenant of this
Paragraph 10.  In case any action or proceeding is brought  against  Landlord by
reason of any such claim,  Tenant,  upon written notice from Landlord,  will, at
Tenant's expense, resist or defend such action or proceeding by counsel approved
by Landlord in writing, such approval not to be unreasonably withheld.

     11. This Agreement may not be changed,  modified or cancelled  orally,  and
shall inure to the  benefit of and be binding  upon the  parties  hereto,  their
successors, legal representatives and assigns.

     IN WITNESS WHEREOF, the parties have hereunder to set their hands and seals
as of the day and year first above written.

Witness for Landlord:                      873 BROADWAY ASSOCIATES


                                        By: /s/Martin Meyer
                                            ------------------------------
                                      Name: Martin Meyer
                                      Its:  Agent

Witness for Tenant:                        HARVEY ELECTRONICS, INC.

/s/Joseph J. Calabrese                 By:  /s/Franklin C. Karp
----------------------------               ------------------------------
Joseph J. Calabrese                  Name: Franklin C. Karp
Executive Vice President             Its:  President
 and Chief Financial Officer
Harvey Electronics