<PAGE>

                              THIRD AMENDMENT TO
                              ------------------
                          LOAN AND SECURITY AGREEMENT
                          ---------------------------

     This Third Amendment to Loan and Security Agreement (the "Third Amendment")
is made as of the 16th day of May, 2001 by and among

     Back Bay Capital Funding, LLC (the "Lender"), a Delaware limited liability
     company with offices at 40 Broad Street, Boston, Massachusetts, and

     Harry's Farmers Market, Inc. (the " Borrower"), a Georgia corporation with
     its principal executive offices at 1180 Upper Hembree Road, Roswell,
     Georgia 30076

in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

                                   WITNESSETH
                                   ----------

     WHEREAS, the Lender and the Borrower has entered into a Loan and Security
Agreement dated as of December 2, 1999 (as amended and in effect, the "Loan
Agreement"); and

     WHEREAS, the Borrower has defaulted in the performance of certain of its
obligations under the Loan Agreement and has requested that the Lender waive
such default and modify and amend certain provisions of the Loan Agreement and
the Lender is willing to do so on the terms set forth herein.

     NOW THEREFORE, it is hereby agreed as follows:

1.  Definitions: All capitalized terms used herein and not otherwise defined
    -----------
shall have the same meaning herein as in the Loan Agreement.

2.  Amendments to Article 4.  The provisions of Article 4 of the Loan Agreement
    -----------------------
are hereby amended as follows:

    a.  The following new section is hereby added to the Loan Agreement
        immediately after Section 4-3:

        4-3A   Amendment Fees.  In addition to any other fee or expense paid
               --------------
        by the Borrower on account of the Revolving Credit and Term Loan, the
        Lender has earned, and the Borrower shall pay the Lender, Amendment
        Fees (so referred to herein) as follows:

               (a)  the sum of $125,000.00 shall be fully earned on the date of
               the Third Amendment to Loan and Security Agreement, and shall be
               payable in full on the Termination Date or, if earlier the date
               that all Liabilities have been paid in full and the obligations
               of the Lender to make loans and advances under the Loan Agreement
               terminated. Such amount shall be capitalized
<PAGE>

               (added) to the Term Loan principal balance, shall bear interest
               in accordance with Section 3-3 of the Loan Agreement, and such
               interest shall be paid in accordance with Section 3-3 of the Loan
               Agreement; and

               (b)  the sum of $50,000.00 payable on October 1, 2001 unless all
               Liabilities have then irrevocably been paid in full and the
               obligations of the Lender to make loans and advances under the
               Loan Agreement terminated; and

               (c) the sum of (i) $50,000.00, plus (ii) an additional $25,000.00
               for each month subsequent to October, 2001, payable on the first
               day of each month thereafter, commencing November 1, 2001 until
               all Liabilities have then irrevocably been paid in full and the
               obligations of the Lender to make loans and advances under the
               Loan Agreement terminated.

    b.  The provisions of Section 4-5 of the Loan Agreement are hereby amended
        by adding the words "Amendment Fees" after the words "Early Termination
        Fee" in the second line thereof.

3.  Amendment to Exhibits.  The provisions of Exhibit 7-12 to the Loan Agreement
    ---------------------
are hereby amended as follows:

    a.  by deleting the EBITDA requirements set forth in clause (c) in their
        entirety and the following substituted in their stead:

        c.  The Borrower shall not permit EBITDA, calculated on a cumulative
            basis commencing on February 1, 2001, to be less than the following
            amounts for the following periods:

<TABLE>
<CAPTION>

Fiscal Quarter Ending                                       Minimum Cumulative EBITDA
--------------------------------------------------------------------------------------------
<S>                                                         <C>
April, 2001                                                 $1,000,000
--------------------------------------------------------------------------------------------
July, 2001                                                  $2,000,000
--------------------------------------------------------------------------------------------
October, 2001                                               $2,900,000
--------------------------------------------------------------------------------------------
January, 2002                                               $4,300,000
--------------------------------------------------------------------------------------------
</TABLE>

    b.  by adding the following proviso at the end of clause (e):

               , provided, however, the Borrower may reduce the $4,500,000.00
        amount on a dollar for dollar basis by any amounts received by the
        Borrower as a result of the sale of any non-perishable Inventory in
        connection with the winding down of

                                       2
<PAGE>

        the Borrower's locations described on Annex A to that certain Third
        Amendment to Loan and Security Agreement dated May 16, 2001 by and
        between the Borrower and the Lender.

    4.  Sale of Certain Locations.  The Borrower has notified the Lender that
        -------------------------
the Borrower may investigate the closing or relocation of one (1) or more of the
six (6) locations set forth on Annex A attached hereto and incorporated herein
by reference and liquidate the Equipment, Inventory, furniture, Fixtures and
machinery associated with each such location (collectively, the "Proposed
Closings"). The Borrower acknowledges and agrees that the consummation of the
Proposed Closings without the Lender's consent, would among other things, result
in the Borrower's breach of certain provisions of Loan Agreement, including,
without limitation, certain provisions of Section 6-6 and 6-14 of the Loan
Agreement. The Borrower has requested that the Lender consent to and waive the
provisions of 6-6 and 6-14 of the Loan Agreement solely as they relate to the
Proposed Closings. The Lender hereby consents to the Proposed Closings, and
solely with respect to such Proposed Closings, waives the following sections of
the Loan Agreement: 6-6(a)(ii), 6-6(b), 6-6(c)(i), and 6-14(d), provided,
however:

    a.  the Borrower shall have delivered to the Lender at least thirty (30)
        days prior to the consummation of any Proposed Closing, an estimate of
        all costs and expenses which the Borrower will incur in connection with
        each such Proposed Closing (which estimate shall be in form and
        substance acceptable to the Lender), including, without limitation, any
        and all payments required to be made to any landlord under any leases;

    b.  after giving effect to the Proposed Closing singly or in the aggregate,
        the costs incurred by the Borrower singly, or in the aggregate for such
        Proposed Closings, shall not exceed the proceeds received from such
        sales singly or in the aggregate (i.e. the effect of such Proposed
        Closings on the Borrower's balance sheet shall at all times be either
        cash neutral or cash positive);

    c.  the Net Proceeds, if any, received by the Borrower in connection with
        each Proposed Closing shall be immediately delivered to the Lender and
        applied in reduction of the Liabilities as provided for in the Loan
        Agreement; and

    d.  at the time of any such Proposed Closing no Suspension Event or Event of
        Default shall have occurred and be continuing, and after giving effect
        to any Proposed Closing no Suspension Event or Event of Default shall
        occur.

    Upon the consummation of each Proposed Closing, Exhibit 6-6 to the Loan
Agreement shall be deemed amended to delete the reference to the subject
location.

    Except for the limited waiver and consent provided for herein, which relate
only to the matters specifically referenced herein, and shall not be deemed to
constitute continuing waivers, all terms and conditions of the Loan Agreement
remain in full force and effect.

                                       3
<PAGE>

    5.  Limited Waiver.  The Lender hereby waives any Event of Default
        --------------
occasioned by the Borrower's failure to have complied with the minimum EBITDA
covenant set forth on Exhibit 7-12 (as in effect prior to the date of this Third
Amendment) at January 31, 2001 and at April 30, 2001. This waiver is a one-time
waiver and is not a continuing waiver. The Borrower shall remain obligated to
comply with the provisions of such covenant, as amended hereby.

    6.  Conditions to Effectiveness.  This Third Amendment shall not be
        ---------------------------
effective until each of the following conditions precedent have been fulfilled
to the satisfaction of the Lender:

    a.  This Third Amendment shall have been duly executed and delivered by the
        Borrower and the Lender. The Lender shall have received a fully executed
        copy hereof.

    b.  All action on the part of the Borrower necessary for the valid
        execution, delivery and performance by the Borrower of this Third
        Amendment shall have been duly and effectively taken. The Lender shall
        have received from the Borrower true copies of its certificate of the
        resolutions authorizing the transactions described herein, each
        certified by its secretary or other appropriate officer to be true and
        complete.

    c.  No Default or Event of Default shall have occurred and be continuing,
        after giving effect to this Third Amendment.

    d.  The Borrower shall have provided such additional instruments and
        documents to the Lender as the Lender and its counsel may have
        reasonably requested.

    7.  Miscellaneous.
        -------------

    a.  Except as provided herein, all terms and conditions of the Loan
        Agreement and the other Loan Documents remain in full force and effect.
        The Borrower hereby ratifies, confirms, and reaffirms all of the
        representations, warranties and covenants therein contained. The
        Borrower acknowledges and agrees that it does not have any offsets,
        defenses, or counterclaims against the Lender with respect to the Loan
        Agreement and other Loan Documents, or otherwise, and to the extent that
        any such offsets, defenses or counterclaims may exist, the Borrower
        hereby WAIVES and RELEASES same. The Borrower shall execute and deliver
               ------     --------
        to the Lender such releases as the Lender may request to confirm the
        foregoing.

    b.  The Borrower shall pay all costs and expenses incurred by the Lender in
        connection with this Third Amendment, including, without limitation, all
        reasonable attorneys' fees.

    c.  This Third Amendment may be executed in several counterparts and by each
        party on a separate counterpart, each of which when so executed and
        delivered, each shall be an original, and all of which together shall
        constitute one instrument.

                                       4
<PAGE>

    d.  This Third Amendment expresses the entire understanding of the parties
        with respect to the matters set forth herein and supersedes all prior
        discussions or negotiations hereon.

     IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to
be executed and their seals to be hereto affixed as the date first above
written.


                                    HARRY'S FARMERS MARKET,  INC.
                                                          ("Borrower")

                                    By /s/ Harry A. Blazer
                                       --------------------------------------
                                    Print Name: Harry A. Blazer
                                               ------------------------------
                                    Title: President and CEO
                                          -----------------------------------

                                    BACK BAY CAPITAL FUNDING LLC
                                                          ("Lender")

                                    By  /s/
                                       --------------------------------------
                                    Print Name:
                                               ------------------------------
                                    Title:
                                          -----------------------------------

                                       5
<PAGE>

                                    Annex A
                             Locations to be closed

1. Buckhead
   1875 Peachtree Street
   Atlanta, Georgia 30309

2. Ackers Mills Square
   2939 Cobb Parkway
   Atlanta, Georgia 30339

3. Dunwoody
   1418 Dunwoody Village, Suite B
   Dunwoody, Georgia 30306

4. Ponce de Leon
   1051 Ponce de Leon Drive
   Atlanta, Georgia 30306

5. Roswell
   3804 Roswell Road NE
   Atlanta, Georgia 30342

6. Peachtree City
   258 City Circle
   Atlanta, Georgia 30269

                                       6