Exhibit (10)(a)(vii)

                              AMENDED AND RESTATED
                             SUBORDINATION AGREEMENT

      This Amended and Restated Subordination Agreement ("Agreement") is entered
into as of the 30th day of October, 1996, by and between HRM Holdings Corp., a
Delaware corporation ("Creditor"), having a business address at 15 Gilpin
Avenue, Hauppauge, New York 11788 and American National Bank and Trust Company
of Chicago (the "Lender"), having a business address at 33 North LaSalle Street,
Chicago, Illinois 60690.

                              W I T N E S S E T H:

      WHEREAS, Creditor previously entered into that certain Subordination
Agreement dated as of September 20, 1993 with the Lender (the "Original
Subordination Agreement");

      WHEREAS, Creditor has made a loan to the Borrower in the amount of
$1,639,000, which loan is evidenced by that certain Note dated September 20,
1993 in the principal amount of $1,639,000 (the "Subordinated Note");

      WHEREAS, Creditor and Hauppauge Record Manufacturing Ltd., a New York
corporation (the "Borrower"), desire that the Lender enter into that certain
Amended and Restated Loan and Security Agreement dated as of October 30, 1996
between Borrower and the Lender (as amended, modified or supplemented from time
to time, the "Loan Agreement"); and

      WHEREAS, the Lender is willing to enter into the Loan Agreement on the
condition that, among other things, Creditor amend and restate the Original
Subordination Agreement pursuant to this Agreement;

      NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the Creditor, the Creditor hereby agrees with the Lender that,
effective as of the "Effective Time" (as such term is defined in the Loan
Agreement), the Original Subordination Agreement is amended and restated in its
entirety as follows:


<PAGE>

      1. Standby; Subordination; Subrogation. The "Subordinated Claims" (as
defined below) are hereby subordinated to the "Obligations" (as defined
hereinafter) in all respects, and the Creditor will not, without the prior
written consent of the Lender, ask, demand, sue for, take or receive from the
Borrower, by setoff or in any other manner, the whole or any part of any monies
which may now or hereafter be owing by the Borrower, or any successor or assign
of the Borrower, including, without limitation, a receiver, trustee or debtor in
possession, to the Creditor (including, without limitation, any amounts owing by
the Borrower pursuant to the Subordinated Note or arising by right of
subrogation as a result of any payment made under the "Holdings Guaranty" (as
such term is defined in the Loan Agreement)) or be owing by any other person,
firm, partnership, corporation or entity to the Creditor for the benefit of the
Borrower (whether such amounts represent principal or interest, or obligations
which are due or not due, direct or indirect, absolute or contingent, or which
arise by right of subrogation due to reimbursement obligations or otherwise),
including, without limitation, the taking of any negotiable instruments
evidencing such amounts (all such indebtedness, obligations and liabilities,
being hereinafter referred to as the "Subordinated Claims"), nor any security
for any of the foregoing, unless and until all obligations, liabilities, and
indebtedness (including, without limitation, interest that would accrue during
the pendency of a proceeding under Title 11 of the United States Bankruptcy
Code, 11 U.S.C. ss. 101 et. seq., on any obligations owing by the Borrower to
the Lender but for the pendency of such proceeding) of the Borrower to the
Lender, whether now existing or hereafter arising directly between the Borrower
and the Lender or acquired outright, conditionally or as collateral security
from another by the Lender, shall have been fully paid and satisfied (all such
obligations, indebtedness and liabilities of the Borrower to the Lender
including without limitation the "Liabilities" (as such term is defined in the
Loan Agreement), are hereinafter referred to as the "Obligations") and all
financing arrangements between the Borrower and the Lender have been terminated.
All liens and security interests of the Creditor, whether now or hereafter
arising and howsoever existing, in any assets of the Borrower or any assets
securing the Obligations shall be and hereby are subordinated in all respects to
the rights and interests of the Lender in those assets; the Creditor shall have
no right to possession of any such assets or to foreclose upon any such assets,
whether by judicial action or otherwise, unless and until all of the Obligations
shall have been fully paid and satisfied and all financing arrangements between
the Borrower and the Lender have been terminated. In the event, at the request
of the Borrower, the Lender releases any of its security for the Obligations
which constitute part or all of the security for the Subordinated Claims, the
Creditor shall thereupon execute and deliver to the Borrower such termination
statements and releases as the Lender shall request to release the Creditor's
security interest in or lien against such property of the Borrower. The Creditor
acknowledges and agrees that, to the extent the terms and provisions of this
Agreement are inconsistent with the Subordinated Note, the Subordinated Note
shall be 


                                      -2-
<PAGE>

deemed to be subject to this Agreement. The priorities set forth herein shall
apply notwithstanding any agreement or understanding between the Creditor and
the Borroweiling or renewal of any financing statement or mortgage, the time of
attachment of any security interest, or any other priority provided by law or by
any other agreement. The term "security interest" as used herein shall mean any
security interest, lien, claim or encumbrance.

      2. No Permitted Actions. The Creditor, prior to the payment in full of the
Obligations and the termination of all financing arrangements between the
Borrower and the Lender, agrees to refrain in all aspects from enforcing any
right to payment on any obligation to Creditor from Borrower, or to otherwise
take any action against the Borrower or any of its property or any collateral
securing any of Borrower's obligations to Creditor, without the Lender's prior
written consent. Creditor further agrees that the Subordinated Note may not be
modified, supplemented or amended without the Lender's prior written consent.

      3. Subordinated Claims Owed Only to the Creditor. The Creditor represents
and warrants that the Creditor has not previously assigned any interest in the
Subordinated Claims or any security interest in connection therewith, that no
other party owns an interest in the Subordinated Claims or security therefor
other than the Creditor (whether as joint holders of the Subordinated Claims,
participants or otherwise) and that the entire Subordinated Claims is owing only
to the Creditor and covenants that the entire Subordinated Claims shall continue
to be owing only to the Creditor and all security therefor shall continue to be
held solely for the benefit of the Creditor.

      4. Lender Priority; Grant of Authority to the Lender. In the event of any
distribution, division, or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the assets
of the Borrower or the proceeds thereof to the creditors of the Borrower or
readjustment of the obligations and Subordinated Claims of the Borrower, whether
by reason of liquidation, bankruptcy, arrangement, receivership, assignment for
the benefit of creditors or any other action or proceeding involving the
readjustment of all or any part of the Subordinated Claims, or the application
of the assets of the Borrower to the payment or liquidation thereof, or upon the
dissolution or other winding up of the Borrower's business, or upon the sale of
all or substantially all of the Borrower's assets, then, and in any such event,
(i) the Lender shall be entitled to receive payment in full of any and all of
the Obligations then owing prior to the payment of all or any part of the
Subordinated Claims, and (ii) any payment or distribution of any kind or
character, whether in cash, securities or other property, which shall be payable
or 


                                      -3-
<PAGE>

deliverable upon or with respect to any or all of the Subordinated Claims shall
be paid or delivered directly to the Lender for application on any of the
Obligations, due or not due, until such Obligations shall have first been fully
paid and satisfied. In order to enable the Lender to enforce its rights
hereunder in any of the aforesaid actions or proceedings, the Lender is hereby
irrevocably authorized and empowered, in its discretion, to make and present for
and on behalf of the Creditor such proofs of claims against the Borrower on
account of the Subordinated Claims as the Lender may deem expedient or proper
and to vote such proofs of claims in any such proceeding and to receive and
collect any and all dividends or other payments or disbursements made thereon in
whatever form the same may be paid or issued and to apply the same on ans. The
Creditor irrevocably authorizes and empowers the Lender to demand, sue for,
collect and receive each of the aforesaid payments and distributions and give
acquittance therefor and to file claims and take such other actions, in the
Lender's own name or in the name of the Creditor or otherwise, as the Lender may
deem necessary or advisable for the enforcement of this Agreement; the Creditor
will execute and deliver to the Lender such powers of attorney, assignments and
other instruments or documents, including notes and stock certificates (together
with such assignments or endorsements as the Lender shall deem necessary), as
may be requested by the Lender in order to enable the Lender to enforce any and
all claims upon or with respect to any or all of the Subordinated Claims and to
collect and receive any and all payments and distributions which may be payable
or deliverable at any time upon or with respect to the Subordinated Claims, all
for the Lender's own benefit. Following payment in full of the Obligations and
termination of all financing arrangements between the Borrower and the Lender,
the Lender will remit to the Creditor, to the extent of its interest therein and
to the extent permitted by law, all dividends or other payments or distributions
paid to and held by the Lender in excess of the Obligations to the extent
Creditor has made any payment to Lender.

      5. Payments Received by the Creditor. Should any payment or distribution
or security or instrument or proceeds thereof be received by the Creditor upon
or with respect to the Subordinated Claims or any other obligations of the
Borrower to the Creditor prior to the satisfaction of all of the Obligations and
termination of all financing arrangements between the Borrower and the Lender in
violation of the terms of this Agreement, the Creditor shall receive and hold
the same in trust, as trustee, for the benefit of the Lender and shall forthwith
deliver the same to the Lender in precisely the form received (except for the
endorsement or assignment of the Creditor where necessary), for application on
any of the Obligations, due or not due, and, until so delivered, the same shall
be held in trust by the Creditor as the property of the Lender. In the event of
the failure of the Creditor to make any such


                                      -4-
<PAGE>

endorsement or assignment to the Lender, the Lender or any of its officers
or employees, is hereby irrevocably authorized to make the same.

      6. Instrument Legend. Any instrument evidencing or relating to any of the
Subordinated Claims (including without limitation the Subordinated Note and any
UCC financing statements), or any portion thereof, will, on or before the date
hereof, be inscribed with a legend conspicuously indicating that payment thereof
is subordinated to the claims of the Lender pursuant to the terms of this
Agreement, and (i) a copy thereof will be delivered to the Lender on the date
hereof and (ii) the original of any such instrument will be immediately
delivered to the Lender upon request therefor. Any instrument evidencing or
relating to any of the Subordinated Claims, or any portion thereof, which is
hereafter executed by the Borrower, will, on the date thereof, be inscribed with
the aforesaid legend and a copy thereof will be delivered to the Lender on the
date of its execution or within five (5) business days thereafter and the
original thereof will be delivered as and when described hereinabove.

      7. Reimbursements and Borrowings from the Borrower; Assignment of Claims.
The Creditor agrees that, except to the extent permitted in the Loan Agreement,
until the Obligations have been paid in full and satisfied and all financing
arrangements between the Borrower and the Lender have been terminated, the
Creditor will not, directly or indirectly, accept or receive the benefit of any
compensation (including salary, bonuses and other forms of compensation) from or
on behalf of the Borrower. The Creditor further agrees that it will not assign
or transfer to others any claim the Creditor has or may have against the
Borrower. Notwithstanding the foregoing or anything else herein to the contrary,
Creditor may receive and retain the dividends permitted by subsection 8.8 of the
Loan Agreement and other payments from Borrower, in each case as and to the
extent permitted in the Loan Agreement, provided that Creditor may not take any
action against the Borrower with respect thereto.

      8. Continuing Nature of Subordination. This Agreement shall be effective
and may not be terminated or otherwise revoked by the Creditor until the
Obligations shall have been fully discharged and all financing arrangements
between the Borrower and the Lender have been terminated. In the event the
Creditor shall have any right under applicable law to otherwise terminate or
revoke this Agreement, such termination or revocation shall not be effective
until two days after written notice of such termination or revocation, signed by
the Creditor, is actually received by the Lender at the address indicated for
the Lender in the first paragraph hereof. In the absence of the circumstances
described in the immediately preceding sentence, this is a continuing agreement
of subordination and the Lender may continue, at any time and


                                      -5-
<PAGE>

without notice to the Creditor, to extend credit or other financial
accommodations and loan monies to or for the benefit of the Borrower on the
faith hereof. Any termination or revocation described hereinabove shall not
affect this Agreement in relation to (a) any of the Obligations which arose
prior to receipt thereof or (b) any of the Obligations created after receipt
thereof, if such Obligations were incurred either through readvances by the
Lender pursuant to its financing arrangements with the Borrower, and/or for the
purpose of protecting any collateral, including, but not limited to, all
protective advances, costs, expenses, and attorneys' and paralegals' fees,
whensoever made, advanced or incurred by the Lender in connection with the
Obligations. If, in reliance on this Agreement, the Lender makes loans or other
advances to or for the benefit of the Borrower or takes other action under the
Loan Agreement after such aforesaid termination or revocation by the Creditor
but prior to the receipt by the Lender of said written notice as set forth
above, the rights of the Lender shall be the same as if such termination or
revocation had not occurred; and, in any editor hereunder shall be affected
pursuant to this Section by the death, incapacity or written revocation of the
Creditor or any other subordinator, pledgor, endorser, or guarantor, if any.

      9. Additional Agreements. The Lender, at any time and from time to time,
either before or after any such aforesaid notice of termination or revocation,
may enter into such agreement or agreements with the Borrower or others as the
Lender may deem proper, extending the time of payment of or renewing or
otherwise altering the terms of all or any of the Obligations or affecting the
security underlying, or any guaranty of, any or all of the Obligations, and may
exchange, sell, release, surrender or otherwise deal with any such security,
without in any way thereby impairing or affecting this Agreement.

      10. Creditor's Waivers. All of the Obligations shall be deemed to have
been made or incurred in reliance upon this Agreement. The Creditor expressly
waives all notice of the acceptance by the Lender of the subordination and other
provisions of this Agreement and all other notices not specifically required
pursuant to the terms of this Agreement whatsoever, and the Creditor expressly
waives reliance by the Lender upon the subordination and other agreements as
herein provided. The Creditor agrees that the Lender has made no warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Loan Agreement, or the collectibility of
the Obligations, that the Lender shall be entitled to manage and supervise its
loans to the Borrower in accordance with applicable law and its usual practices,
modified from time to time as it deems appropriate under the circumstances,
without regard to the existence of any rights that the Creditor may now or
hereafter have in or to any of the assets of the Borrower, and that the Lender
shall


                                      -6-
<PAGE>

have no liability to the Creditor for, and the Creditor waives any claim which
the Creditor may now or hereafter have against, the Lender arising out of (i)
any and all actions which the Lender takes or omits to take (including, without
limitation, actions with respect to the creation, perfection or continuation of
liens or security interests in the "Collateral" (as such term is defined in the
Loan Agreement) and other security for the Obligations, actions with respect to
the occurrence of any default, actions with respect to the foreclosure upon,
sale, release, or depreciation of, or failure to realize upon, any of the
Collateral and actions with respect to the collection of any claim for all or
any part of the Obligations from any account debtor, guarantor or any other
party) with respect to the Loan Agreement or any other agreement related thereto
or to the collection of the Obligations or the valuation, use, protection or
release of the Collateral and/or other security for the Obligations, (ii) the
Lender's election, in any proceeding (a "Bankruptcy Proceeding") instituted
under Chapter 11 of Title 11 of the United States Code (11 U.S.C. ss. 101 et
seq.) (the "Bankruptcy Code"), of the application of Section 1111(b)(2) of the
Bankruptcy Code, and/or (iii) any borrowing or grant of a security interest
under Section 364 of the Bankruptcy Code by the Borrower, as debtor in
possession. Creditor agrees not to assert any right it may have to "adequate
protection" of its interest in any property of Borrower in any Bankruptcy
Proceeding.

      11. Waivers. No waiver shall be deemed to be made by the Lender of any
rights hereunder, unless the same shall be in writing signed on behalf of the
Lender, and each waiver, if any, shall be a waiver only with respect to the
matter expressly specified therein and shall in no way impair the rights of the
Lender or the obligations of the Creditor to the Lender in any other respect at
any other time.

      12. Information Concerning Financial Condition of the Borrower. The
Creditor hereby assumes responsibility for keeping itself informed of the
financial condition of the Borrower, any and all endorsers and any and all
guarantors of the Obligations and Subordinated Claims and of all other
circumstances bearing upon the risk of nonpayment of the Obligations and/or
Subordinated Claims that diligent inquiry would reveal, and the Creditor hereby
agrees that the Lender shall have no duty to advise the Creditor of information
known to it regarding such condition or any such circumstances. In the event the
Lender, in its sole discretion, undertakes, at any time or from time to time, to
provide any such information to the Creditor, the Lender shall be under no
obligation (i) to provide any such information to the Creditor on any subsequent
occasion or (ii) to undertake any investigation and shall be under no obligation
to disclose any information which the Lender wishes to maintain confidential.
The Creditor hereby agrees that all payments received by the Lender may be
applied, reversed, and reapplied, in whole or in part, to any of the
Obligations, as


                                      -7-
<PAGE>

the Lender, in its sole discretion, deems appropriate and assents to any
extension or postponement of the time of payment of the Obligations or to any
other indulgence with respect thereto, to any substitution, exchange or release
of collateral which may at any time secure the Obligations and to the addition
or release of any other party or person primarily or secondarily liable
therefor.

      13. No Offset. In the event the Creditor at any time purchases goods or
services from the Borrower, the Creditor hereby irrevocably agrees that it shall
pay for such goods or services in cash or cash equivalents in accordance with
the terms of such purchases and shall not deduct from or setoff against any
amounts billed to the Creditor by the Borrower in connection with such purchases
any amounts the Creditor claims are due to it with respect to the Subordinated
Claims.

      14. CONSENT TO JURISDICTION; WAIVERS. THE CREDITOR CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN COOK COUNTY, ILLINOIS,
AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT
ALL SUCH SERVICE BE MADE BY REGISTERED MAIL DIRECTED TO THE CREDITOR AT THE
ADDRESS STATED IN THE INITIAL PARAGRAPH OF THIS AGREEMENT AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED AS AFORESAID. THE CREDITOR WAIVES TRIAL BY JURY, ANY OBJECTION BASED UPON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER. NOTHING IN THIS SECTION 14 SHALL AFFECT THE RIGHT OF THE LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE CREDITOR OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

      15. Governing Law. This Agreement has been delivered and accepted at and
shall be deemed to have been made in Chicago, Illinois, and shall be
interpreted, and the rights and obligations of the parties hereto determined, in
accordance with the laws and decisions of the State of Illinois, shall be
immediately binding upon the Creditor and its personal representatives, heirs,
successors and assigns, and shall inure to the benefit of the successors and
assigns of the Lender. References herein to Lender shall be deemed to refer to
Lender and its successors and assigns. Creditor shall enter into an agreement in
the form of this Agreement with any successor lender to Lender, but mutatis
mutandis. Except as provided above in this Section 15 as to successors and
assigns of the Lender, this Agreement is not intended to



                                      -8-
<PAGE>

and shall not create rights in favor of any third party (including without
limitation, the Borrower).

      16. Section Titles. The section titles contained in this Agreement are and
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreement between the parties hereto.

      17. Authority. The Creditor hereby certifies that it has all necessary
authority to grant the subordination evidenced hereby and execute this
Agreement.

      18. Counterparts. This Subordination Agreement may be executed and
accepted in any number of counterparts each of which shall be an original with
the same effect as if the signatures thereto and hereto were on the same
instrument. The delivery of an executed counterpart of a signature page to this
Subordination Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Subordination Agreement. 

      19. Effectiveness. This Agreement shall become effective at the "Effective
Time" (as such term is defined in the Loan Agreement).

      20. Amendment and Restatement. The Original Subordination Agreement is
amended and restated in its entirety in the form hereof as of the effectiveness
of this Agreement; provided, however, that any representations and warranties
made by Creditor to Lender shall survive the execution and delivery hereof.


                                       -9-




<PAGE>

           IN WITNESS WHEREOF, this instrument has been duly signed as of the
date first above written.

                               HRM HOLDINGS CORP.


                                    By: /s/ George Fishman
                                       --------------------------------
                                    Title: Chief Executive Officer
                                          -----------------------------

Acknowledged and accepted in
Chicago, Illinois as of the date
first above written:

AMERICAN NATIONAL BANK AND
  TRUST COMPANY OF CHICAGO


By: /s/ Catherine Saccany
   ------------------------------
Title:  Vice President
      ---------------------------

      
                                      -10-




<PAGE>


1  Hauppauge Record Manufacturing, Ltd., a New York corporation, hereby accepts,
and acknowledges receipt of a copy of, the foregoing Subordination Agreement and
agrees that it will not pay any of the "Subordinated Claims" (as defined in the
foregoing Subordination Agreement) or grant any security therefor except to the
extent expressly permitted by the terms of such Subordination Agreement. In the
event of a breach of any of the provisions herein or of the foregoing
Subordination Agreement, all of the "Obligations" (as defined in the foregoing
Subordination Agreement) shall, without presentment, demand, protest or notice
of any kind, become immediately due and payable, unless the Lender shall
otherwise elect in writing.

Dated:  October 30, 1996

                               Hauppauge Record Manufacturing Ltd.


                             By: /s/ George Fishman
                                -------------------------------
                             Its: Chief Financial Officer
                                 ------------------------------


Attest:


By: /s/ Charles Kavanagh
   ----------------------------
    Vice President-Finance
   ----------------------------
    and Treasurer
   ----------------------------

(AFFIX CORPORATE SEAL)


                                      -11-