CONTRACT OF SALE


            MARTIN GOLDBAUM SALLY GOLDBAUM, The SOUND MILL, Inc. and

                  LORIEL CUSTOM AUDIO VIDEO CORP., as Sellers,

                                     with -

                       HARVEY ELECTRONICS, Inc., Purchaser



     This AGREEMENT is made as of July 2, 1998 among MARTIN GOLDBAUM,  and SALLY
GOLDBAUM, individually, and as officers and directors of The SOUND MILL, Inc., a
New York corporation  authorized to transact  business in the State of New York,
and of LORIEL CUSTOM AUDIO VIDEO CORP., a Connecticut  corporation authorized to
transact business in the State of New York and in the State of Connecticut,  all
of whom have a place of business at 115 East Main Street,  Mount Kisco, New York
10549  (collectively,   and  jointly  and  severally,   "Seller");   and  HARVEY
ELECTRONICS, Inc., a corporation authorized to transact business in the State of
New York,  having  offices at 205 Chubb  Avenue,  Lyndhurst,  New  Jersey  07071
("Purchaser" or "Buyer").

     WHEREAS,  the  Seller  owns and  conducts a retail  business  for the sale,
installation  and  servicing of audio and video  equipment  under the trade name
"The Sound Mill" at 115 East Main Street,  Mount Kisco, New York (the "Business"
and the "Premises", respectively); and

     WHEREAS, the Purchaser wishes to purchase, upon the terms and conditions of
this  Agreement,  certain of the assets of the  Business  listed on Schedule "A"
(including  Schedules A-1 through A-2 attached to this Agreement (the "Assets"),
subject to the terms and conditions of this Agreement; and

     WHEREAS,  the  individual  Sellers  are the  owners of all the  issued  and
outstanding stock of The Sound Mill, Inc. and Loriel Custom Audio Video Corp.

     WHEREAS,  the  Purchaser  desires to purchase  the Assets set forth in this
Agreement,  and to lease  the  Premises  from the  Seller,  upon the  terms  and
conditions set forth in this Agreement;

NOW, THEREFORE, the parties agree as follows:

     FIRST:  Upon the terms and  conditions  set  forth in this  Agreement,  the
Seller will sell, and the Purchaser  will purchase,  free and clear of all liens
or  encumbrances  the Assets of the Seller  located at the Premises;  excepting,
however:  (a) all cash on hand and in bank accounts of the Seller as of the date
of  Closing;  b)  accounts  receivable  of the  Seller as of the date of Closing
(inclusive of any loans  receivable by the Seller from any officer,  director or
employee of The Sound Mill or from any other  person) . In no event is Purchaser
assuming  any  liabilities  of  Seller  existing  as of the date of  Closing  or
thereafter.  Seller  agrees to indemnify and hold  harmless  Purchaser  from and
against such liabilities for a period of two (2) years subsequent to Closing.

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     SECOND:  (a) The Purchase  Price is Two Hundred Ten Thousand  ($210,000.00)
Dollars for the Assets of the Seller,  allocated as follows,  and payable in the
manner set forth in this Agreement:

     Furnishings, fixtures, vehicles and equipment:       $   50,000.00
     Franchises, trade name and good will:                $ 160,000.00

     (b) At the Closing, the parties shall complete and execute Internal Revenue
Code Asset  Acquisition  Statements  under Section 1060 of the Internal  Revenue
Code  consistent  with the  allocation  set forth above;  and each covenants and
agrees to file the  appropriate tax forms with their  respective  Federal Income
Tax Returns for their respective tax periods consistent with such statements.

     THIRD:  The  inventory and spare parts of the Seller will be disposed of in
the following manner:

     i) Promptly  following the execution of this Agreement by the Purchaser and
the Seller,  the  Purchaser  and Seller  will,  jointly,  inspect  the  Seller's
inventory  and spare parts at the Premises;  and the Purchaser  shall advise the
Seller of which items of  inventory or parts the  Purchaser  desires to purchase
from the Seller and the prices  offered by Purchaser  for such items,  and which
items the Purchasers does not wish to purchase from the Seller. Between the date
of this Agreement and the Closing, as to those items of inventory or spare parts
which the Purchaser does not purchase from the Seller, the Seller shall have the
privilege of  disposing  in any manner the Seller deems fit,  whether at retail,
wholesale or otherwise. However, in no event shall Seller conduct any "going out
of business" or similar sale at the Premises.  Prior to Closing,  those items of
spare parts and inventory  which the Purchaser does not purchase from the Seller
shall be removed from the Premises by the Seller.

     ii) With respect to the items to be purchased  by  Purchaser,  an inventory
shall be conducted  by the Seller and the  Purchaser  not more than  forty-eight
hours  prior to the time of  Closing.  Seller  agrees not to dispose of any such
items  between  the date  hereof and the time of Closing.  At the  Closing,  the
Purchaser  will pay to the Seller the Purchase  Price (as  determined  above) by
certified check, bank check or wire transfer.

     FOURTH: The Purchase Price, as determined as set forth above, shall be paid
as follows:

     i) Upon  the  execution  of this  Agreement,  the  sum of  Twenty  Thousand
($20,000.00)  Dollars, to be held in escrow by the attorney for the Seller in an
interest-bearing  account at Chase Manhattan Bank, N.A., 711 North Bedford Road,
Bedford Hills, New York, until the Closing.

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     ii) At the Closing,  the sum of One Hundred Ninety  Thousand  ($190,000.00)
Dollars,  plus the  agreed  value of the  inventory  and  parts,  if any,  to be
purchase by the Purchaser  from the Seller,  by bank check,  certified  check or
wire transfer to the order of the Seller.

     FIFTH:  This Agreement may not be assigned by the Purchaser or Seller.  The
Purchaser  may  designate a nominee to take title to the assets to be sold under
this  Agreement;  however,  any such  designation of a nominee shall not relieve
Purchaser  of  its  obligations  under  this  Agreement.  In  the  event  of the
designation by the Purchaser of a nominee,  the name and address of such nominee
shall be furnished,  in writing, to the Seller's attorney not less than ten (10)
business days prior to the Closing.

     SIXTH:  At the Closing,  the Seller will grant to the  Purchaser a lease of
the Premises  presently occupied by the Seller for the operation of the Business
(the "Lease"),  substantially  in the form of the proposed Lease annexed to this
Agreement  as Schedule  "B".  The  Purchaser  may  designate a nominee to be the
Lessee under the Lease; however, in the event of such designation, the Purchaser
named in this Agreement shall execute and deliver to the Seller, at the Closing,
a Guarantee whereby the Purchaser named in this Agreement shall  unconditionally
guarantee the full payment and  performance by the Lessee of all of the Lessee's
obligations  under  the  Lease.  Such  Guarantee  shall be in a form  reasonably
acceptable to Seller's attorney.  In the event of such designation of a nominee,
the name and address of such nominee shall be furnished, in writing, to Seller's
attorney not less than ten (10) business days prior to the Closing.

     SEVENTH:  All Notices under this  Agreement,  or under any instrument to be
delivered  at the  Closing,  shall be in  writing,  and shall be served upon the
person to whom such Notice is directed at the  respective  address  shown on the
first page of this Agreement,  with an additional copy thereof addressed to such
recipient's legal counsel. Counsel for the Seller is: Kenneth Karpel, Esq., P.O.
Box 388,  Pawling,  New York  12564-0388.  Counsel for the Buyer is:  Richard H.
Kaplan,  Esq.,  Rubin,  Kaplan &  Associates,  P.C.,  501 Hoes Lane,  Suite 100,
Piscataway,  New Jersey 08854-5000.  Any address to which a Notice is to be sent
may be changed,  provided  Notice of such change is given in accordance with the
provision of this Article SEVENTH.

     EIGHTH: The Closing shall be held at a time and place mutually agreeable to
the parties on or about August 1, 1998.

     NINTH:  (a) If the Seller  has  accounts  receivable  a the time of Closing
which are not fully  collected by the Seller,  such  accounts  receivable  shall
remain the property of the Seller.  The Seller shall deliver to the Purchaser at
Closing a schedule of the Seller's accounts receivable.  Purchaser shall have no
obligation to collect the Seller's  accounts  receivable on the Seller's behalf,
and the Seller shall collect the Seller's  accounts  receivable which are unpaid
as of the date of  Closing.  If,  however,  any  such  accounts  receivable  are
received  by,  or paid to,  the  Purchaser  on and  after  the date of  Closing,
Purchaser  will accept the same as the agent of the Seller,  in trust,  and will
promptly remit to the Seller the amounts so received,  if any.  Seller  reserves
the right to  direct  that  accounts  receivable  outstanding  as of the date of
Closing be remitted to an address other than to the address of the Business.

     (b) As of the Closing,  the Seller's  work-in progress shall be adjusted as
between the Seller and the Purchaser as follows:

<PAGE>

     With respect to each such work in progress:

     i) As of the  close of  business  on the day of  Closing,  the value of all
labor,  equipment,  materials and services actually delivered or provided to the
Seller's  customers and billed for, shall be deemed  accounts  receivable of the
Seller and the Seller  shall be entitled to retain  such  receivable  when paid,
following  the  Closing.  In no  event,  however,  shall  any  equipment  and/or
materials  delivered  or provided to the  Seller's  customers as of such date be
included in "inventory" to be paid for by Purchaser pursuant to the provision of
Article "THIRD" of this Agreement.

     ii) On and after the day  following  the  Closing,  the value of all labor,
equipment,  materials and services then and thereafter  delivered or provided by
Purchaser  shall be deemed accounts  receivable of the Purchaser;  and Purchaser
shall be entitled to bill for such labor, equipment, materials and services, and
to retain such receivables when paid, following the Closing.

     iii) Upon the execution of this Agreement by the parties,  the Seller shall
provide to the Purchaser a schedule of the Seller's work in progress including a
description  of each project and the status  thereof,  copies of all  contracts,
invoices  and  purchase  orders  and all  other  material  documentation,  and a
statement as to whether or not each such project shall be completed on or before
Closing;  which  schedule  shall be updated and such updated  schedule  shall be
provided to the Seller as of the date Closing. With respect to each such work in
progress  which  Seller  intends  to  complete  prior to  Closing,  such work in
progress shall be excluded from the Assets being  purchased  hereunder and shall
be included in Seller's accounts receivable retained by Seller.  Seller shall be
solely responsible for completion thereof prior to Closing. With respect to each
such work in progress which Seller does not intend to complete prior to Closing,
Purchaser  shall  have the  option  to  either  assume  or  reject  such work in
progress.  If  Purchaser  rejects  such work in  progress,  then Seller shall be
solely responsible for completion thereof post-Closing, in which event such work
in progress shall be excluded from the Assets purchased hereunder,  and shall be
included in Seller's  accounts  receivables  retained  by Seller.  If  Purchaser
assumes such work in progress,  then such work in progress  shall be governed by
paragraph  Ninth (d) below and shall be assigned to and assumed by  Purchaser at
Closing pursuant to said paragraph Ninth (c) below.

     (c) At the  Closing,  and  subject  to the  adjustments  set  forth in this
Agreement,  the  Seller  shall  assign  to the  Purchaser  all  outstanding  and
unperformed  work in progress which  Purchaser  elects to assume under paragraph
Ninth (b) (iii)  above;  and (to the extent  assignable)  all  franchise  and/or
dealer agreements with manufacturers  and/or distributors which Purchaser elects
to assume (as set forth on Schedule A) . If such  agreements  are not assignable
without the prior consent of the party(ies)  with whom such agreements have been
made, then the Seller will use the Seller's best efforts in good faith to obtain
such consent; but the failure to obtain such consent, or the refusal of consent,
shall not be a condition of Closing; nor shall such failure to obtain consent or
refusal to consent to the assignment of such agreements  result in any abatement
of the Purchase  Price payable at the Closing.  However,  if such consent is not
obtained, then at Purchaser's option such agreement shall be deemed rejected and
shall  be  Seller's  sole  responsibility  post-Closing.   The  Purchaser  shall
affirmatively assume to perform all such contracts and agreements so assigned on
and after the date of Closing.  The Purchaser  shall be entitled to bill for and
to  collect  (subject  to the  adjustments  and  allocations  set  forth in this
Agreement)  the proceeds of such assumed  agreements  from the  customers of the
Business.  Purchaser  shall,  and does hereby agree to,  indemnify  and hold the
Seller  harmless from any and all claims in connection  with  post-Closing  work
assumed by the Purchaser.  Seller shall, and does hereby agree to, indemnify and
hold  Purchaser  harmless  from  any and  all  claims  in  connection  with  any
pre-Closing  work performed by Seller and any  post-Closing  work not assumed by
Purchaser.

<PAGE>

     (d) Seller  shall,  prior to  Closing,  pay all wages,  salaries,  employee
benefits,  employment  taxes and employment  insurance  premiums with respect to
employees and/or independent  contractors of the Seller, which are due and owing
for any period prior to Closing.  At Purchaser's  option (and without obligation
to do so), Purchaser may offer employment to any or all of Seller's employees or
independent contractors, as of the Closing.

     (e) At the  Closing,  the Seller shall be entitled to a credit (to be added
to the balance of the Purchase  Price due at Closing)  equivalent to one half of
the prepaid portion of the Yellow Pages  advertisement  placed by the Seller for
the period computed from the Closing and ending  February,  1999. If any portion
of the cost of such advertisement is payable after the Closing (for example,  as
a surcharge shown on a telephone bill), then the Purchaser agrees to assume such
charge, and to pay such charge for the period from the Closing through February,
1999.  In the latter event,  the Purchaser  shall be entitled to a credit (to be
deducted  from the balance of the Purchase  Price due at Closing)  equivalent to
one  half of such  charges  for the  period  from the  date of  Closing  through
February,  1999. Prior to Closing, Seller shall provide to Purchaser appropriate
documentation  showing the  contract  terms,  prepaid  amount and unpaid  amount
sufficient for Purchaser to verify the appropriate closing adjustment.

     TENTH: (a) At the Closing,  the Seller will deliver to the Purchaser a bill
of sale  covering  all of the Assets  included  in this sale,  together  with an
affidavit  of the  Seller  certifying  that all of the  creditors  of the Seller
(except for tax obligations specified in paragraph Eleventh (c) below) have been
either paid in full, or will be paid in full  promptly  after the Closing out of
the proceeds of the sale.  Such  affidavit  shall specify the name,  address and
amount for all  creditors  to be paid out of the  Closing  proceeds,  and Seller
shall provide at Closing  appropriate  documentation  evidencing  such payments.
After the Closing, the Seller will indemnify the Purchaser and agree to hold the
Purchaser  harmless  from and against any claims  against the  Purchaser  or the
Assets asserted by any creditors of Seller.

     (b) At the  Closing,  and  subject  to the  adjustments  set  forth in this
Agreement, the Seller represents and warrants that all salaries, wages and other
compensation of the Seller's  employees or independent  contractors hired by the
Seller  shall have been fully  paid as of the close of  business  of the date of
Closing,   inclusive  of  all  withholdings  from  employees'  compensation  and
employer's  contributions for Social Security  benefits,  workers'  compensation
insurance,  and unemployment  Insurance  required under any applicable law to be
paid  by  employers   with  respect  to  such   salaries,   wages  and/or  other
compensation. If such withholdings from earnings or employer's contributions can
not  reasonably be calculated as of the date of Closing,  or if such matters are
customarily  calculated and/or paid at the end of a period following the date of
Closing,  the Seller shall promptly  calculate and/or pay the same as of the end
of such period. The Seller hereby agrees to indemnify the Purchaser against, and
to hold the Purchaser harmless from, any claims or liability with respect to any
of the matters  enumerated in this  paragraph  "(b)",  including any interest or
penalties  assessed  thereon by reason of the Seller's failure to pay any of the
same in the timely  manner.  This provision  shall survive the Closing.  Nothing
contained in this  Agreement,  however,  shall be construed as any obligation on
the part of the Seller to pay, nor to hold the Purchaser  harmless  from, nor to
indemnify  the  Purchaser  against,  any  claim  for  salaries,  wages  or other
compensation of Purchaser's employees and/or independent  contracts;  nor any of
the Sellers' former employees or former  independent  contractors who become the
employees or independent contracts of the Purchaser, for any period on and after
the date of Closing.

<PAGE>

     ELEVENTH:  (a) Within ten (10) days prior to Closing (or such  shorter time
as shall be required by New York or  Connecticut  law),  Seller will execute the
appropriate  Bulk Sales Tax Notice and Return or similar  document  required  by
law, and submit such return to the appropriate taxing authorities.

     (b) At least  fifteen  (15) days  prior to the  Closing,  the  Seller  will
furnish the  Purchaser  with the required  affidavit of  creditors,  which shall
include a list  (signed  and sworn to by  Seller)  of  Seller's  existing  trade
creditors  with the amounts owed to each and also the names and addresses of all
persons  or firms  who are known to Seller  to  assert  claims  against  Seller,
whether  disputed or not,  liquidated or  unliquidated.  Such Affidavit and list
shall be revised as  necessary  so as to be accurate and complete as of the date
of  Closing.  The  parties  shall  execute  and  deliver  such other and further
documents,  notices and statements as may be required or appropriate in order to
comply with the laws of the State of New York and  Connecticut  relating to bulk
sales.

     (c) Seller shall provide the Purchaser  with all  information  necessary or
appropriate  in order to notify the New York State  Department  of Taxation  and
Finance  and the State of  Connecticut  Department  of Revenue  Services  of the
nature of the transaction(s) contemplated hereby; and the parties agree that the
withholding  in  escrow of the sum of Sixty  Thousand  ($60,000.00)  Dollars  by
Seller's  attorney shall be sufficient  escrow pending the issuance of the Sales
Tax  clearance   letter  (or  its  equivalent)  by  each  of  the  above  taxing
authorities.  Seller  represents  and  warrants  that Seller has not  transacted
business in any states  other than New York and  Connecticut.  Said sum shall be
held by the attorney for the Seller, as Escrow Agent,  pending the issuance of a
Sales  Tax  clearance  letter  from  the  State  of New  York  and the  State of
Connecticut  showing no unpaid Sales Tax  liability of the Seller for any period
in either  jurisdiction.  If either Sales Tax  clearance  letter shows an unpaid
Sales Tax  liability of the Seller,  then the Escrow Agent shall use any portion
of the escrowed  funds to satisfy the same. If both Sales Tax clearance  letters
show no unpaid Sales Tax  liability  of the Seller,  then the Escrow Agent shall
release said funds to the Seller,  together  with any interest  actually  earned
thereon.  Until such Sales Tax  clearance  letters are  obtained,  Seller  shall
indemnify  and defend  Purchaser  from any such tax liability of Seller which is
imposed upon Purchaser or the Assets post-Closing.

     (d) At the Closing,  the Purchaser will pay the New York State Sales Tax on
that portion of the Purchase Price allocated to the non-exempt taxable chattels,
fixtures, equipment and machinery of the Assets to be sold under this Agreement.
Purchaser shall prepare, execute and deliver at Closing the New York State Sales
Tax Return.  In the event the New York State Department of Taxation and Finance,
or other taxing  authority,  shall  determine  that the  allocated  value of the
non-exempt chattels,  fixtures,  equipment and machinery subject to Sales Tax is
in excess of the allocation made in this Agreement, then the Purchaser shall pay
the Sales Tax on such  excess,  if any.  The Seller shall not be required to pay
such Sales Tax,  nor the tax on such excess if so  determined;  however,  if the
Seller  does pay any such Sales Tax,  then the  Purchaser  shall  reimburse  the
Seller fur the amount so paid,  upon ten (10) days'  written  Notice and request
for the same. The Purchaser  shall have the right to contest any such assessment
or re-assessment. This provision shall survive the Closing.

<PAGE>

     (e) As of the date of Closing, the Seller will furnish the Purchaser with a
letter signed by the accountant then regularly servicing the books of the Seller
to the effect,  in substance,  that to the knowledge,  information and belief of
such accountant and after review of all sales tax returns of Seller for the past
three (3) years,  all Sales Tax returns of the Seller for all  periods  prior to
the period in which the Closing shall occur have been duly filed with all taxing
authorities, and all Sales Taxes shown to be due on such returns have been fully
paid, with interest and penalties (if applicable),  and that to the knowledge of
such accountant the sales reflected in such returns accurately reflect the sales
of Seller for the periods covered  thereby.  Such letter shall further state, in
substance, that to the knowledge,  information and belief of such accountant, no
Sales Tax return so filed for any such prior  period has been audited or subject
to review by any taxing  authority  (or,  if audited or subject to reviews  such
audit and/or  review has been closed,  and any  additional  tax found to be due,
together  with  interest and  penalties,  if any, has been fully paid);  and, in
substance, that to the knowledge,  information and belief of such accountant, no
such  audit  or  review  is as of the date of  Closing  actually  threatened  or
pending.

     TWELFTH:  Following  the  Closing,  the  Seller  agrees  that none of them,
without the Purchaser's  prior written consent,  will engage (either directly or
indirectly,  excepting only as a less than five (5%) percent passive investor in
a publicly  traded  company) in the  operation  of an audio and video  equipment
servicing,  installation  and/or  sales  business for a period of five (5) years
following  the date of  Closing  within a radius of thirty  (30)  miles from the
Premises.  The foregoing  restrictive covenant shall not apply in the event of a
breach by the Purchaser of Purchaser's  obligations under the Lease, as a result
of which  breach the  Seller  shall have  elected  to retake  possession  of the
Premises.  No portion of the  Purchase  Price shall be deemed to be allocated to
the restrictive covenant set forth in this Article "TWELFTH".

     THIRTEENTH:  All of the parties to this Agreement mutually  acknowledge and
represent to the others that no broker was involved in the  introduction  of the
Purchaser  to the Seller,  nor in the  negotiation  of this  Agreement,  nor was
otherwise  the  procuring  cause  of  the  transactions   contemplated  by  this
Agreement. This provision shall survive the Closing.

<PAGE>

     FOURTEENTH:  The Seller  represents,  warrants and acknowledges that, as of
the date of this Agreement and as of the date of Closing:

     i) Seller is the owner of the Assets included in this sale, and that at the
Closing,  such  Assets  will be free and clear of all  liens  and  encumbrances,
except as otherwise expressly set forth in this Agreement.

     ii) Schedule "A" (along with other applicable provisions of this Agreement)
contains a true and  complete  list of all of the Assets to be sold to Purchaser
hereunder;  and title to which will be conveyed  to  Purchaser  at the  Closing,
subject to the conditions of this Agreement.

     iii) The Seller has paid, or will pay out of the proceeds of the sale,  any
and all fees, taxes or other charges levied, assessed or imposed upon any of the
Assets of the Seller in the  operation  of the Business  which,  by the terms of
this Agreement or by law are the Seller's obligation to pay, except as otherwise
expressly set forth in this Agreement.

     iv) There are no lawsuits or governmental  proceedings  pending,  or to the
knowledge of the Seller  threatened,  against the Seller which might  materially
affect the  financial  condition,  the Business or the Assets of the Seller,  or
which  might  adversely  affect  the  ability of the  Seller to  consummate  the
transactions contemplated by this Agreement. The consummation of the transaction
contemplated  by  this  Agreement  are  not in  violation  of the  terms  of any
agreement,  judgment  or order to which the Seller is a party or under which the
Seller is or may be bound.

     v) There are no written  contracts  of  employment  between  Seller and any
officer or other employee or contractor of the Seller; and all oral contracts of
employment  are  terminable  at will,  or on not more than  thirty  days'  prior
notice.

     vi) The Seller has no pension, bonus, insurance,  profit sharing,  deferred
Compensation  or  retirement  plans for its  employees  which  might  impose any
Obligation or liability upon the Purchaser.

     vii) The Seller is not in default of any mortgage affecting the Premises or
the land and building in which the Premises are located.

     viii) The Seller will not,  between the date of this Agreement and the date
of Closing:

     a) Conduct  the  Business  in any  manner  other  than in the  regular  and
ordinary course;

     b) Enter into any transaction other than in the regular and ordinary course
of business;

     c) Make no commitments or contracts (other than this Agreement),  nor incur
any liability, extending beyond sixty days;

     d) Make no purchase of inventory for which  Purchaser  might be liable,  or
which Purchaser might be required to purchase from Seller, except in the regular
and ordinary course of business;
<PAGE>

     e)  Knowingly  violate  the terms of any  license  or  franchise  agreement
related to the operation of the Business;

     f) Increase the salaries of any of Seller's employees.

     ix) Except as  otherwise  requested by  Purchaser,  the Seller will use its
best efforts to preserve the Business,  to keep  available for the Purchaser the
services of present employees which Purchaser may elect to hire; to preserve for
the Purchaser the records of the Business; and to preserve for the Purchaser the
good will of Seller's  customers and others having  business  relations with it.
However,  the  ability  of  Purchaser  to hire  Seller's  present  employees  or
customers  is not and  shall  not be a  condition  of  Closing,  nor  shall  the
inability to hire any such employees and/or customers relieve any of the parties
of their  obligations  to consummate  the  transaction(s)  contemplated  by this
Agreement and by the Lease.

     x) There are no accrued benefits for vacation pay, vacation time,  personal
leave or sick leave in favor of any employee of the Seller,  except as otherwise
set forth on the Schedules  annexed to this  Agreement.  The Seller is not party
to, nor subject to, any union or collective bargaining contract.

     y) The consummation of the transactions  contemplated by this Agreement has
been duly authorized by Seller as Seller's duly authorized act and deed.

     FIFTEENTH:  The Purchaser represents,  warrants and acknowledges that as of
the date of this Agreement, and as of the date of Closing:

     a) The Purchaser is and will be a corporation duly organized under the laws
of the  State  of its  organization;  is in good  standing  in the  State of its
organization  and in the State of New York; and is duly authorized  regularly to
transact business in the State of New York.

     b) The Purchaser is and will be  authorized to enter and to consummate  the
transactions  contemplated  by this  Agreement  and by the  Lease,  and that all
necessary action to authorize the execution of this Agreement and the Lease, and
to consummate the  transactions so contemplated  have been taken;  and that this
Agreement and the Lease constitutes and will constitute,  when executed, a valid
and binding  obligation  upon the Purchaser,  and enforceable in accordance with
their respective terms.

<PAGE>

     c) That there are no claims pending,  nor any material  litigation pending,
nor (to the knowledge of the Purchaser)  threatened  against the Purchaser which
may  prevent  the  Purchaser  from  entering  this  Agreement,  the  Lease,  and
consummating the transactions contemplated thereby.

     d) The  Purchaser's  entering into this  Agreement and the Lease is not and
will not be in  violation  of the terms of any  agreement,  order,  judgment  or
governmental  rule or  regulation  binding  upon  the  Purchaser;  nor  will the
consummation of the transactions  contemplated hereby result in any violation or
breach  of  any  such  agreement,   order,  judgment  or  governmental  rule  or
regulation.

     e) All of the  representations  and warranties of the Purchaser are true as
of the date of execution of this Agreement;  and shall be true as of the date of
Closing.  SIXTEENTH:  (a)  Following  the  Closing,  the Seller shall permit its
warranty and service  records to remain with the  Purchaser.  The Purchaser will
safeguard  such records  until two (2) years from the date of Closing,  at which
time,  the Seller  shall  either  remove  such  records  from the  Premises,  or
Purchaser shall be permitted to abandon and discard the same.

     (b) Any labor which has been  performed  by the Seller prior to the Closing
which is subject to a guarantee or warranty of the Seller which  extends  beyond
the date of  Closing  shall  remain the sole  obligation  and  liability  of the
Seller.  Seller  represents and warrants that it has guaranteed to its customers
of home  installations  that,  for a period  of two (2)  years  from the date of
completion  of such  installation,  the labor so  provided by the Seller to such
customers is guaranteed; and that in the event that additional labor is required
to remedy any defective labor previously  provided,  such additional labor would
be provided to such  customers  at no charge.  At the  Closing,  the Seller will
provide the Purchaser with a list of all such  customers.  In the event any such
claim is made by any such  customer,  and  additional  labor is  required  to be
provided to such  customer,  then: i) Martin  Goldbaum shall be notified of such
claim,  and he shall have the  obligation  to resolve  such claim in an amicable
manner with such  customer;  and ii) if such claim can not be amicably  resolved
without the  expenditure  of additional  labor to remedy the same,  Seller shall
perform the work  required to resolve such claim.  If Seller fails to do so, and
if Purchaser  thereafter does so (without  obligation),  the Purchaser's cost of
such labor  shall be borne by Seller.  Seller  hereby  agrees to  indemnify  the
Purchaser  for the cost of the same.  This  provision  shall survive the Closing
until the expiration of all such guarantees.

     SEVENTEENTH:  (a) The Purchaser has relied upon no  representation  made by
Seller, nor by any representative or agent of the Seller, which is not expressly
set forth in this  Agreement,  which  Agreement  fully sets  forth the  parties'
respective  understandings  and  expectations.  This  Agreement  is  made by the
parties  after a full  examination  by the  Purchaser  of the  Business,  of the
Seller's books and records, and of the physical condition of the assets included
in this  sale.  Purchaser  is relying  upon no  warranty,  express  or  implied,
relating  to the  merchantability  of any of the assets  included  in this sale,
except  as  otherwise  set  forth  in  this  Agreement.   The  parties  mutually
acknowledge to each other that each has had the benefit of independent financial
and legal counsel in the negotiation  and  consummation of this Agreement and of
the transactions contemplated by this Agreement.
<PAGE>

     (b) On and after the Closing,  and subject to the terms and  conditions  of
this Agreement, the Purchaser shall, and does hereby agree to, indemnify, defend
and hold the Seller  harmless  from and against any and all claims,  liabilities
and/or  obligations which may accrue with respect to the Purchaser's  actions on
and after the date of Closing,  except those obligations  which, by the terms of
this  Agreement,  are to remain  the  obligations  of the Seller  following  the
Closing. This provision shall survive the Closing.

     (c) On and after the Closing,  and subject to the terms and  conditions  of
this Agreement,  the Seller shall, and does hereby agree to,  indemnify,  defend
and hold the Purchaser harmless from and against any and all claims, liabilities
and/or  obligations  (except  those  obligations  which,  by the  terms  of this
Agreement,  are to be  assumed  by the  Purchaser)  of  whatever  kind or nature
arising out of the Seller's operation of the Business prior to the Closing. This
provision shall survive the Closing.

     (d) In the event that the Seller  shall fail to perform any of the Seller's
obligations  which, by the terms of this  Agreement,  are to be performed by the
Seller following the Closing,  or which  obligations are to survive the Closing,
then the  Purchaser  shall  deliver  a Notice  to the  Seller  setting  forth in
reasonable  detail the nature of the Seller's failure to so perform.  If, within
ten (10) days from the  delivery of such  Notice,  the Seller has not  performed
such  obligation  or (if full  performance  is not  reasonably  capable  of full
performance  within such ten-day  period) the Seller has not promptly  taken all
reasonable  steps to commence such  performance and to complete such performance
in a  reasonable  time  thereafter,  then the  Purchaser  may (but  shall not be
required to) complete such  performance on the Seller's behalf in a commercially
reasonable  manner.  In such latter case, the Seller shall upon written  request
(given by Notice) reimburse the Purchaser for the reasonable and necessary costs
and expenses so incurred by the Purchaser.  Nothing  contained in this paragraph
(d) shall preclude the Seller from challenging,  in good faith, the propriety of
such cost and  expense so  incurred  by the  Purchaser  (and so offset  from the
Rent); and if there be a final judicial  determination  that the reason for such
cost and  expense,  or the  amount  thereof,  or any  portion  thereof,  was not
incurred by the  Purchaser as a consequence  of the Seller's  failure to perform
the  Seller's  obligations  following  the  Closing,  then the  Purchaser  shall
reimburse  the Seller the  amount(s) so paid by the Seller or so offset  against
the Rent. This provision shall survive the Closing.

     EIGHTEENTH:   (a)  This  Agreement  may  not  be  modified  verbally.   Any
modification of this Agreement, in order to be binding, shall be in writing, and
signed by the party to be charged  with any such  modification.  This  Agreement
shall be binding upon the parties,  and upon their  permitted  assignees,  their
legal  representatives  and  successors.  Any noun or pronoun  contained in this
Agreement shall be deemed to include the masculine,  feminine or neuter genders;
or the singular or plural, as the context may require.

     (b) This Agreement  shall be construed and enforced in accordance  with the
laws of the State of New York.  The parties agree to submit to the  jurisdiction
of the  Supreme  Court of the  State of New  York,  County  of  Westchester,  in
connection with any dispute arising out of this Agreement.  This provision shall
survive the Closing.

<PAGE>

     (c) This  Agreement may be executed in multiple  counterparts,  each one of
which shall be deemed an  original.  By  affixing  their  respective  signatures
below, the parties  mutually  acknowledge that any person signing on behalf of a
corporation  has been duly  authorized  to so sign by the Board of  Directors of
such corporation;  and that such signature shall fully and effectively bind such
corporation to the obligations contained in this Agreement.

     NINETEENTH:  (a) In connection  with this  Agreement,  Seller has agreed to
certain   post-closing   obligations,   including  without  limitation  Seller's
post-closing  agreements under  paragraphs  First,  Ninth (b) (iii),  Ninth (c),
Tenth (a),  Tenth (b),  Eleventh  (c),  and  Sixteenth  (b) and has made certain
representations  and  warranties  which  shall  survive  Closing  hereunder.  In
connection  therewith,  Seller  agrees to indemnify,  defend and hold  Purchaser
harmless  from  and  against  all  loss,  cost,  expense  (including  reasonable
attorneys fees) and damage incurred by Purchaser as a result of Seller's failure
to  perform  any  of  Seller's  post-Closing  obligations,   representations  or
warranties hereunder.

     b) At the Closing hereunder, Martin Goldoaum and Sally Goldbaum shall enter
into the Lease for the Premises with Purchaser as set forth on attached Schedule
UBU.  Seller has  represented  and warranted to Purchaser that there is only one
(1) mortgage  currently  encumbering the Premises in the  approximate  principal
balance  of  $79,000  (which  is paid up to  date)  and that  the  Premises  are
otherwise  owned by Martin  Goldbaum and Sally Goldbaum in fee simple title free
and clear of all liens and  encumbrances.  Seller has further  agreed that for a
period of two (2) years  after the Closing  Seller  will not convey  title to or
re-mortgage  the  existing  mortgage or otherwise  increase  the total  mortgage
balance  encumbering the Premises.  In the event of Seller's  failure to perform
any of Seller's post-Closing  obligations referenced in paragraph Nineteenth (a)
above,  Purchaser shall have the right to offset Purchaser's loss, cost, expense
or damage  against  the rent  payable  under the Lease.  It is agreed  that this
provision is part of the express consideration for the making of this Agreement.
The foregoing provision shall be expressly included in the Lease.
<PAGE>

     IN WITNESS  WHEREOF,  the parties have signed this Agreement as of the date
set forth above.


                                             The Sound Mill, Inc.

The undersigned Escrow Agent
agrees to be bound by the                  By: /s/ Martin Goldbaum   
provisions of Articles "FOURTH"             -------------------------
(i) and "ELEVENTH (c)" of the               Martin Goldbaum, President
foregoing Agreement:

                                              /s/Martin Goldbaum 
/s/Kenneth N. Karpel                        -------------------------
-------------------------                    Martin Goldbaum, individually
Kenneth N. Karpel, Esq.                                     


                                             /s/Sally Goldbaum   
                                             -----------------------
                                             Sally Goldbaum, individually


                                             Loriel Custom Audio Video Corp.
                                        By:  /s/Martin Goldbaum           
                                             -------------------------
                                             Martin Goldbaum, President


                                             Harvey Electronics, Inc.
                                        By:  /s/Franklin C. Karp         
                                             -------------------------
                                             Franklin C. Karp, President

<PAGE>                                                

                                 Schedule "A-1"


     1) Furnishings, fixtures. vehicles, equipment included in the sale:

     (All located at 115 East Main Street, Mount Kisco, New York, "As Is")

Shelving, sales counter, carpeting
Built-in equipment racks, sales literature racks
Napco Alarm System
Halo track lighting
Switchers:        M&I, Switchcraft, Audio Authority, M&K
Bang & Olaffson "Wall"
Panasonic Telephone System
Computer System
Calculators, cash register, cash drawer
Fire extinguishers
Fax Machine
Shredder
Copier
Office desks, file cabinets, chairs and furnishings
Water Cooler
Refrigerator
Electrolux vacuum cleaner
Steel warehouse shelving
2 Large handtrucks (refrigerator size)
2 Standard size handtrucks
2 Furniture dollies
4 six foot fiberglass ladders
1 eight foot fiberglass ladder
1 twenty eight foot fiberglass ladder
1 Milwaukee Saws-All
1 Shop Vac
Extension cords
Solder stations
1995 Chevy Van with deluxe shelving system
1996 Chevy Van with deluxe shelving system
Repair shop equipment listed on Schedule A-2
Installation tools listed on Schedule A-3
Supplies

<PAGE>

     2) Inventory and spare parts included in the sale:

     as determined by paragraph Third


     3) Work in progress/contract rights included in the sale:

     as determined in paragraph Third

     4) Intangibles and Miscellaneous included in the sale:

     All  rights to trade  name "The  Sound  Mill"  Existing  telephone  # (914)
241-1230

     Existing telephone # (914) 241-1230

     Customer  list (which will be provided on computer disk along with computer
system)

     All computer software used in connection with the Business

     All existing  franchises  (subject to Buyer's right to reject any franchise
after reviewing the terms of the existing franchise agreement)

<PAGE>

                                 Schedule A - 2

Sound Technology 1OOOA FM Alignment Generator
Sound Technology 1700B Distortion Analyzer
Hewlett Packard 5315B Frequency Counter
Leader Laser Power Meter
Heathkit Audio Generator
Sencore VC 63 VCR Test Accessory
Sencore NT 64 NTSC Adapter
Sencore VA 62 Video Analyzer
Sencore SC 61 Scope
Sencore PR 57 Variable Isolation Transformer
Mitsubishi ctv-2 Substitute Control Panel
2 Soldering stations
Telematic Focus Adapter
1 Vise

<PAGE>

                                  Schedule "B"


                  (Annex copy of Lease as Exhibit to Agreement)