<SEQUENCE>13

<FILENAME>0013.txt

<DESCRIPTION>SUBORDIANTED LOAN AND SECURITY AGREEMENT OF OAC

<TEXT>





THE  INDEBTEDNESS,  OBLIGATIONS AND OTHER  LIABILITIES  DESCRIBED HEREIN AND THE

LIENS AND SECURITY  INTERESTS  GRANTED HEREBY ARE  SUBORDINATE AND JUNIOR TO THE

INDEBTEDNESS,  OBLIGATIONS AND OTHER  LIABILITIES OF, AND THE LIENS AND SECURITY

INTERESTS GRANTED TO, CERTAIN SENIOR LENDERS, AS DESCRIBED IN THIS AGREEMENT.



                    SUBORDINATED LOAN AND SECURITY AGREEMENT



         THIS SUBORDINATED LOAN AND SECURITY AGREEMENT (the "Agreement") is made

and  entered  into as of August __, 2000 by and  between  the  Wilmington  Trust

Company and George Jeff Mennen u/a dated November 25, 1970 with George S. Mennen

FBO John  Henry  Mennen,  and its  assigns  (the  "Secured  Party"),  and  Onkyo

Acquisition  Corporation,  an Indiana  corporation,  or its successors including

Onkyo  America,  Inc.  (either or both the  "Debtor").  Onkyo  America,  Inc. is

sometimes  also  referred  to as "OAI"  and  Onkyo  Acquisition  Corporation  is

sometimes also referred to as "OAC".



         WHEREAS,  the Secured Party has extended  certain credit to the Debtor,

which is to be repaid  with  interest in  accordance  with the terms of a Senior

Subordinated  Promissory  Note of even date  herewith  executed by the Debtor in

favor of the Secured Party and in the original principal amount of Seven Million

Dollars  ($7,000,000)  (the  "Mennen  Note"),  the form of which is  annexed  as

Exhibit A;



         WHEREAS,  in order to induce the Secured  Party to extend the credit to

the Debtor referred to above;  and to secure the payment of the Mennen Note, the

Debtor enters into this Agreement  providing  for, among other things,  a junior

security  interest in favor of the Secured Party in the Collateral (as such term

is defined below);



         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual

agreements contained herein, the parties hereby agree as follows:



1. Definitions.  When used herein, (a) the terms Chattel Paper, Deposit Account,

Document, Equipment,  Financial Asset, Fixture, Goods, Inventory, and Instrument

have the respective meanings assigned thereto in the UCC (as defined below); (b)

capitalized terms which are not otherwise  defined have the respective  meanings

assigned thereto in the Credit Agreement of even date by and among GMAC Business

Credit,  LLC,  for  itself  and as  agent,  certain  financial  institutions  as

"Lenders" and the Debtor (the "Credit  Agreement");  and (c) the following terms

have the  following  meanings  (such  definitions  to be  applicable to both the

singular and plural forms of such terms):



2.  Account  Debtor  means the party who is  obligated  on or under any  Account

Receivable, Contract



Right or General Intangible.



3. Account Receivable means any right of the Debtor to payment for goods sold or

leased or for services rendered.



4. Collateral means all personal property and rights of the Debtor, tangible and

intangible,  in which a security  interest is granted  hereunder.  Following the

Debtor's  merger  into OAI,  Collateral  shall refer to the items on Schedule 1,

which are owned by OAI or as to which OAI had any interest.



5. Computer  Hardware and Software means all of the Debtor's  rights  (including

rights as licensee and lessee) with respect to (i) computer and other electronic

data processing  hardware,  including all integrated  computer systems,  central

processing units, memory units, display terminals,  printers, computer elements,

card readers, tape drives, hard and soft disk drives, cables,  electrical supply

hardware,  generators,  power equalizers,  accessories,  peripheral  devices and

other related computer hardware;  (ii) all software programs designed for use on

the computers and electronic  data processing  hardware  described in clause (i)

above,  including  all operating  system  software,  utilities  and  application

programs in whatsoever  form (source code and object code in magnetic tape, disk

or hard copy  format  or any  other  listings  whatsoever);  (iii) any  firmware

associated with any of the foregoing;  and (iv) any  documentation for hardware,

software and firmware described in clauses (i), (ii) and (iii) above,  including

flow charts, logic diagrams, manuals, specifications, training materials, charts

and pseudo codes.



6. Contract  Right means any right of the Debtor to payment under a contract for

the sale or lease of goods or the  rendering of services,  which right is at the

time not yet earned by performance.



7. Default means the occurrence of a "Default" under the Mennen Note.



8.  General  Intangibles  means all of the  Debtor's  "general  intangibles"  as

defined in the UCC and, in any event,  includes (without  limitation) all of the

Debtor's trademarks,  trade names, patents,  copyrights, trade secrets, customer

lists,   inventions,   designs,   software  programs,   mask  works,   goodwill,

registrations,  licenses,  franchises,  tax  refund  claims,  guarantee  claims,

security interests and rights to indemnification.

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