EMPLOYMENT AGREEMENT

                              EMPLOYMENT AGREEMENT

     This   Employment   Agreement is entered into as of the 19th day of December,
2006 by and   between   HARVEY   ELECTRONICS,   INC.,   a New York   corporation   (the
"Company"), and MARTIN W. McCLANAN ("Executive").

     In consideration of the mutual covenants   contained in this Agreement,   the
Company and Executive agree as follows:

     1. Employment. During the term of this Agreement (as defined in Section 2),
the Company shall employ Executive, and Executive hereby accepts such employment
by the Company,   in accordance   with the terms and   conditions set forth in this
Agreement.

     a) Position and Duties.   Executive   shall serve as Interim Chief   Executive
Officer and President of the Company or in such other position with the Company,
as the Board of   Directors   of the Company   shall,   from time to time,   specify.
Executive shall perform all duties,   services and responsibilities and have such
authority   and powers for,   and on behalf of, the Company as are   customary   and
appropriate   for such position   designated by, as are   established   from time to
time by, or in accordance with procedures established by, the Company's Board of
Directors.

     (b)   Performance.   Executive shall perform the duties called for under this
Agreement to the best of his ability and shall devote an   appropriate   amount of
his business time (no less than 40 hours per week), energies,   efforts and skill
to such duties during the term of his employment and shall not accept employment
with any other   employer   or   business   or engage in any other   business   of any
nature   whatsoever,   in any capacity   whatsoever,   unless approved in writing in
advance   by the   Board of   Directors   of the   Company.   During   the term of this
Agreement,   Executive   shall   be   physically   present   in the   Metropolitan   New
York/New   Jersey or other Harvey   related   business   location area not less than
fifteen (15) business days out of every calendar   month.   Vacation days shall be
excluded from this requirement.

     2. Term. The term of   Executive's   employment   under this   Agreement   shall
begin on the date   hereof   and   shall   continue   until   January   31,   2007   (the
"Termination   Date").   Subject to Section 4 hereof, at any time on or before the
Termination   Date or any   Extended   Termination   Date (as defined   herein),   the
Company may, at its sole option,   extend this   Agreement for a period of one (1)
month (the expiration of any extension being referred to herein as the "Extended
Termination   Date");   provided,   however,   that   the   Company   may   extend   this
Agreement no more than three (3) times for an aggregate of three (3) months.

     3.    Compensation,    Expenses   and   Benefits.    As   full   compensation   for
Executive's   performance of his duties pursuant to this   Agreement,   the Company
shall pay   Executive   during the term of this   Agreement,   and   Executive   shall
accept as full payment for such performance, the following aggregate amounts and
benefits:

     (a) Salary.   As salary for   Executive's   services to be rendered under this
Agreement,   the Company   shall pay Executive a monthly   salary of $21,500,   such
salary   to be paid in   accordance   with the   regular   payroll   practices   of the
Company.

     (b)   Business   Expenses.   Within   seven   (7)   days of the   presentation   of
receipts therefor,   the Company shall pay or reimburse Executive for airfare for
weekly round trips between New York and his Continental U.S.   location per month
(coach   class;   lowest   available   fare),   rental car while in the New York area
(lowest   available   rate   for   mid-sized   vehicle)   and for   lodging   in   either
Metropolitan   New York or New   Jersey,   provided   that the cost of said   lodging
shall not exceed   $3,500 per month.   In addition,   the Company   shall   reimburse
Executive,   or cause   him to be   reimbursed,   for all   reasonable   out-of-pocket
expenses   incurred   by him in the   performance   of his   duties   hereunder   or in
furtherance of the business and/or interests of the Company. While traveling out
of the San   Francisco   area on   Company   related   matters,   Executive   shall   be
entitled   to a $35 per day pier   diem meal   allotment.   If   legitimate   business
entertainment   expenses   exceed   $35 per day,   Executive   will   need to file for
expense   reimbursement   and not   receive   a per diem   allocation   for that   day.
Executive   will   be   entitled   to   a   $50   per   week   communications   allocation
regardless   of   location.   The   communications   allocation   is intended to cover
cellular phone, home office phone, mobile Wi-Fi and other forms of paid internet
connectivity.   Such   expenses,   will not be reimbursed by the Company beyond the
agreed amount.   Other out of pocket expenses will be reimbursed   provided,   that
(i) such   expenses are incurred in   accordance   with   Company   policy,   and (ii)
Executive   furnishes to the Company an itemized   account   (including   receipts),
satisfactory to the Company, in substantiation of such expenditures.

     (c) Vacation. Executive shall be entitled to 5 paid vacation days per three
month period with the first accruing between October 1, 2006-December 31, 2006.

     (d) Options. Upon the execution of this Agreement,   the Company shall grant
Executive a   "non-qualified   stock option" (the   "Option")   pursuant to the Free
Standing Non-Qualified Stock Option Agreement attached hereto as Annex A.

The   parties   agree   that   Executive   shall   be   granted   certain    "piggy-back"
registration   rights to the   extent the shares of common   stock   underlying   the
Option are not   covered by an   effective   registration   statement.   The   parties
further   acknowledge and agree that the number of shares and exercise prices set
forth in Annex A reflect a one-for-four reverse split consummated by the Company
on November 10, 2006.   Executive   further agrees and acknowledges   that he shall
not sell any shares of the Company's   common stock underlying the Option until a
period   commencing one year from the later of the Termination Date and the final
Extended   Termination Date and Executive further agrees and acknowledges that he
shall not sell more than 25,000 Option Shares in any three-month period.

Should   Executive   purchase shares of the common stock of the Company outside of
the scope of this Agreement and the option granted   hereunder,   Executive agrees
that such purchases shall be made pursuant to a plan meeting the requirements of
Rule 10b5-1(c)   under the   Securities and Exchange Act of 1934, as amended.   The
prohibition on the sale of shares set forth in this Agreement shall not apply to
such shares,   provided,   however, that Executive acknowledges that to the extent
Executive   purchases   such   shares   at any   time   the   Executive   is   deemed   an
"affiliate"   (as such term is defined under Rule 144(a)(1) of the Securities Act
of   1933,   as   amended   (the   "Act"))   of the   Company,   such   shares   shall   be
"restricted   securities"   (as such term is defined   under Rule   144(a)(3) of the
Act) and may only be resold   pursuant   to an   effective   registration   statement
under the Act or pursuant to an applicable exemption under the Act. .

     (e) Executive shall have the right to participate, on the same basis and to
the same extent as other   executive   employees of the Company,   in the Company's
employee benefit programs, if any, including, without limitation, group life and
medical insurance programs covering Executive and his dependents.

     (f) Indemnification;   Directors and Officers Insurance.   The Company shall,
to the   fullest   extent   authorized   or   permitted   by   the   New   York   Business
Corporation   Law,   the   Company's   Charter and the   Company's   By-Laws,   defend,
indemnify and hold Executive,   his heirs,   executors,   administrators   and other
legal   representatives,   harmless   from and against   any and all claims,   suits,
debts,   causes of   action,   proceedings   or other   actions,   at law or in equity
("Claims"),   which   any   person or   entity   may have had,   now has or may in the
future have with   respect to   Executive's   service to the Company as an officer,
director,   executive   or agent   thereof,   including   any   costs   and   reasonable
attorney fees incurred in connection with defending such Claims.   This provision
shall survive the termination of this agreement.

     (g) The Company shall deduct from   Executive's   compensation   hereunder and
any other   payment,   any   federal,   state,   or city   withholding   taxes,   social
security   contributions,   and any   other   amounts   which may be   required   to be
deducted   or withheld by the Company   pursuant to any   federal,   state,   or city
laws, rules, or regulations.

     4. Termination.

     The Company or Executive can terminate   this Agreement on thirty (30) days'
notice to the other party;   provided   however   this   Agreement   shall   terminate
immediately upon Executive's death.

     5. Effects of Expiration or Termination.

     (a)   Expiration   under   Section 2 or   Termination   under Section 4. If this
Agreement   expires   or   Executive's   employment   with   the   Company   under   this
Agreement is terminated   pursuant to Section 4, the Company's   obligations under
this Agreement,   including obligations under Section 3, shall end except for the
Company's   obligation   to:   (i)   reimburse   Executive   (or his   estate)   for all
out-of-pocket expenses incurred and unpaid pursuant to Section 3(b); (ii) pay to
Executive (or his estate) any salary and accrued vacation,   pursuant to Sections
3(a)   and   (c),   actually   earned,   accrued   and   unpaid   through   the   date   of
termination   and (iii)   indemnify   Executive as provided under section 3(e). All
unvested options as of the termination of this Agreement shall be forfeited.

     (b) Rights and   Obligations.   Termination of Executive's   employment   under
this   Agreement   shall not   affect any   party's   rights   and   obligations   under
Sections 3 (subject to the   limitations   set forth in Sections 5(a), 6, 7, 8, 9,
10, 11 and 12,   such   rights and   obligations   shall   continue   and   survive the
termination of Executive's employment and this Agreement.

     6.   Solicitation   of Employees   and   Consultants.   Upon   expiration of this
Agreement or termination of Executive's   employment   with the Company under this
Agreement pursuant to Section 4, Executive shall not for a period of three years
following   the date of such   termination,   without   the   written   consent of the
Company, directly or indirectly:

     (i) solicit,   recruit,   or attempt to hire any person who is then   employed
by, or is a consultant   to, the Company or who, to   Executive's   knowledge,   was
employed by, or was a   consultant   to, the Company at any time during the period
of Executive's employment with the Company under this Agreement; or

     (ii)   encourage,   solicit or entice any such person to terminate his or her
employment or consultation with the Company, or employ or engage any such person
as an employee, or independent contractor of any person or entity other than the
Company or a Company subsidiary.

     This provision   will not apply to Executive's   appointment of the Company's
employees,   board members or   consultants   to serve on the board of directors of
another   company,   provided such   appointment   is to the board of directors of a
company whose interests are not adverse to the Company.

     7. Covenant Not to Compete/ Non Disparagement.

     (a) During the term of Executive's   employment under this Agreement and for
a   period   of   three   years   following   expiration   of   this   Agreement   or   the
termination   of   Executive's   employment   with the Company under this   Agreement
pursuant to Section 4, Executive shall not, directly or indirectly,   himself, or
through or for an individual,   person or entity wherever located:   (i) engage in
any   activities   or perform any services for a company that   specializes   in the
sale and custom   installation   of audio   visual and home   theater   products   for
consumers or, businesses located in the states of Alabama, South Carolina, North
Carolina,   Kentucky,   Tennesee,   Illinois,   Michigan, Ohio,   Pennsylvania,   West
Virginia, Virginia, Maryland, Delaware, New Jersey, New York, Connecticut, Rhode
Island,   Massachusetts,   Vermont, New Hampshire, Maine, Florida, Georgia, Texas,
or any other   jurisdiction   or state in which the   Company   does   business   (the
"Prohibited   Area"); or (ii) be employed by, consult with, own any capital stock
of, or have any   financial   interest of any kind in, any   individual,   person or
entity,   wherever located, for a company that specializes in the sale and custom
installation   of audio   visual   and   home   theater   products   for   consumers   or
businesses in a Prohibited Area; provided that Executive may own, for investment
purposes up to 1% of the   securities of any such publicly   traded   company whose
securities (i) trade or are listed on a national   securities exchange registered
under   Section 6 of the   Securities   and Exchange   Act of 1934,   as amended (the
"Exchange   Act") or (ii) are quoted on the National   Association   of   Securities
Dealers'   electronic   bulletin board or any other   "over-the-counter   market"(so
long as Executive is not otherwise affiliated with such business).

     (b) Each of the parties agrees that it will not, and will instruct,   as the
case may be, each of its respective representatives, officers and members of its
board of directors not to, make any statements,   written or oral, which would be
reasonably   likely to   disparage or damage the other   party.   Executive   further
acknowledges   and agrees that,   following   the   expiration   of the   Agreement or
termination of Executive's employment with the Company pursuant to Section 4, he
will not make any   statement   about the Company or his service   thereto,   or any
related matter, without the prior written consent of the Company.   Following the
expiration of this Agreement or termination of Executive's   employment   with the
Company pursuant to Section 4, Executive further agrees to provide assistance to
and shall cooperate with the Company upon its reasonable request with respect to
matters   within   the scope of   Executive's   duties and   responsibilities   during
employment.   The Company agrees and   acknowledges   that it shall, to the maximum
extent possible under then prevailing circumstances, coordinate any such request
with Executive's other commitments and   responsibilities   to minimize the degree
to which such request interferes with such commitments and responsibilities. The
Company agrees that it will reimburse   Executive for reasonable   travel expenses
(i.e.,   travel,   meals,   and   lodging)   that   Executive   may incur in   providing
assistance to the Company hereunder.

     8. Solicitation of Company Customers.   Upon expiration of this Agreement or
termination   of   Executive's   employment   with the Company under this   Agreement
pursuant to Section 4, Executive shall not, directly or indirectly,   at any time
within three years after the date of such termination,   solicit any entity that,
to Executive's   knowledge,   was a customer of the Company within the year before
the date of such   termination,   to perform   services or supply products for such
customer of a similar nature to those services performed or products provided by
the Company to such customer.

     9. Intellectual Property/Confidential Information; Return of Documents.

     (a) Executive   covenants and undertakes that he will not at any time during
or   after   the   expiration   of this   Agreement   or   termination   of   Executive's
employment   with the   Company   under this   Agreement   pursuant   to Section 4, in
perpetuity,   reveal, divulge, or make known to any person, firm, corporation, or
other business organization (other than the Company or its affiliates,   if any),
or use   for   his   own   account   or for   the   account   of   another,   directly   or
indirectly, any customer lists, pricing policies, marketing plans or strategies,
financial   information,   trade   secrets,   "know-how",   or any   other   secret   or
confidential   information   of any kind used by the   Company   (the   "Confidential
Information")   during his employment by the Company,   and made known (whether or
not with the knowledge and permission of the Company,   whether or not developed,
devised,   or otherwise   created in whole or in part by the efforts of Executive,
and whether or not a matter of public knowledge unless as a result of authorized
disclosure) to Executive by reason of his   employment by the Company.   Executive
further   covenants   and agrees   that he shall   retain   and use the   Confidential
Information   in trust for the sole benefit of the Company,   its   successors   and
assigns.

     (b) Executive   shall promptly   communicate   and disclose to the Company all
inventions, ideas, discoveries, improvements,   modifications, writings, artistic
or creative   material,   or other   intellectual   property in any form   whatsoever
(hereinafter   "Inventions"),   conceived,   developed,   or made by him   during his
employment by the Company, whether solely or jointly with others, and whether or
not patentable or copyrightable,   (a) which relate to any matters or business of
the type carried on or being developed by the Company,   or (b) which result from
or are suggested by any work done by him in the course of his   employment by the
Company.   Executive shall also promptly   communicate and disclose to the Company
all other data obtained by him concerning the business or affairs of the Company
in the course of his employment by the Company.

     (c) All written   materials,   records,   and   documents (in any form) made by
Executive   or   coming   into his   possession   during   the term of this   Agreement
concerning   the business or affairs of the Company shall be the sole property of
the Company,   and,   upon the   expiration   of this   Agreement or   termination   of
Executive's employment with the Company under this Agreement pursuant to Section
4, or upon the request of the Company   during the term hereof,   Executive   shall
promptly deliver the original and all copies (whether physical or electronic) of
same to the Company.   Executive   agrees to render to the Company such reports of
the activities   undertaken by Executive o