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                                                                    EXHIBIT 10.7


                  SECURITY AGREEMENT PERTAINING TO INVENTORY,
                       ACCOUNTS RECEIVABLE AND EQUIPMENT


         Agreement made the 25th day of July, 1996, between American West
Trading Company, a corporation organized under the laws of Tennessee, with its
principal place of business at 100 Hillcrest, Dresden, Weakley County,
Tennessee, here referred to as Debtor, and The Fidelity Bank, a bank organized
under the laws of North Carolina, with its principal place of business at Post
Office Box 68, Mt. Gilead, North Carolina 27306, here referred to as Secured
Party.

                                    RECITALS

         Debtor has applied for and Secured Party has agreed to grant a loan on
the terms and conditions and the Loan Agreement, the Promissory Note, the
Security Agreement, and other associated documents, herein referred to as the
"Loan Documents."

         In consideration of the mutual covenants and promises contained in the
Loan Documents and herein, Debtor and Secured Party agree:

                                  SECTION ONE

                                LOANS TO DEBTOR

         Secured Party shall lend to Debtor funds in accordance with the Loan
Documents.

                                  SECTION TWO

                INVENTORY AND ACCOUNTS RECEIVABLE AS COLLATERAL

         As collateral security for any and all loans made under and pursuant
to the Loan Documents, and for any other indebtedness of Debtor to Secured
Party, whether direct or indirect, absolute or contingent, whenever and however
arising or evidenced, Debtor grants, transfers, conveys and assigns to Secured
Party all of Debtor's right, title and interest that Debtor now has or may in
the future acquire, in and to the following described property, intending to
create and grant to Secured Party a security interest in all such property:

         (a) All inventory now owned or in the future acquired by Debtor,
together with all additions, attachments and accessions to that inventory,
including, without limiting the generality of the above, raw materials
inventory, and finished good inventories, and;

         (b) All accounts receivable now existing and in the future arising,
and all proceeds of those accounts.
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         (c) All equipment currently owned by Debtor and in Debtor's possession.

         All of the property described in Paragraphs (a), (b), and (c) of this
section is collectively referred to in this agreement as the collateral.

                                 SECTION THREE

                                LOANS TO DEBTOR

         Within the limits of the Loan Documents, Secured Party will make a
loan to Debtor in an aggregate principal amount equal to Six Million Dollars
($6,000.000.00).

                                  SECTION FOUR

                            MAINTENANCE OF INVENTORY

         All inventory of Debtor shall be warehoused on Debtor's premises or
such other warehouse as may be mutually agreed on by the parties from time to
time.

         No inventory shall be removed from any such warehouse, except on the
sale of that inventory and for purposes of delivery to a customer or other
purchaser.

                                  SECTION FIVE

                            MAINTENANCE OF EQUIPMENT

         All equipment owned by Debtor shall remain at Debtor's place of
businesses in the state of Tennessee and shall not be removed therefrom unless
by the expressed written consent of the Secured Party.

                                  SECTION SIX

                      INSURANCE ON INVENTORY AND EQUIPMENT

         At all times while this agreement is in effect, Debtor shall keep all
inventory and equipment insured for an amount at least equal to Debtor's cost
for such inventory and the current market value, at the discretion of the
lender, of said equipment with insurance companies satisfactory to Secured
Party and covering loss by fire and other casualty.

         All the inventory and equipment shall be insured against theft with a
minimum coverage of at least Eight Million Dollars ($8,000,000.00) for loss
occasioned by any single occurrence and with a deductible clause not to exceed
Ten Thousand Dollars ($10,000.00).





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         Debtor shall cause these insurance policies to be issued with loss
payable to Secured Party as Secured Party's interest may appear.

                                 SECTION SEVEN

                       ASSIGNMENT OF ACCOUNTS RECEIVABLE

         All accounts receivable of Debtor assigned to Secured Party including
current accounts receivable and all future accounts receivable.

         Debtor will note the fact of all such assignments of accounts
receivable on its records and books of accounts, all of which books and records
shall be maintained by Debtor within the state of Tennessee while this
agreement is in effect.

         On receipt, Debtor will negotiate and deliver to Secured Party any and
all checks, drafts, cash remittances and other proceeds that may be received by
Debtor in partial or full payment of any of the accounts. All such proceeds,
while in the hands of Debtor, shall be held on express trust for the benefit of
Secured Party.

         All proceeds of accounts receivable received by Debtor or Secured
Party shall be deposited in a collateral account maintained by Secured Party in
the name of Debtor and shall be held by Secured Party as collateral security to
any and all indebtedness of Debtor to Secured Party.

         Debtor will have no right to draw against funds on deposit in the
collateral account; provided, however, that unless one or more of the events
set forth in Section Ten of this agreement has occurred, Secured Party will at
Debtor's request, transfer to Debtor's general bank account all or any portion
of the balance of the collateral account not required to support loans then
outstanding under the borrowing base formula.

         Secured Party may from time to time at its sole discretion apply any
part of the credit balance in the collateral account to the payment of any of
the indebtedness of Debtor to Secured Party whether or not such indebtedness be
then due.

                                 SECTION EIGHT

                    REPRESENTATION AND WARRANTIES OF DEBTOR

         Debtor expressly represents and warrants that:

         (a) The names, sums and due dates of all accounts shall be correctly
stated on to books and records of Secured Party;

   (b) The accounts represent the proceeds of the sale of Debtor's inventory;





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         (c) The goods have been either delivered to the purchaser or, if
retained in Debtor's possession, such goods shall have been excluded from
inventory figures applied to Secured Party for inclusion in the borrowing base
under this agreement;

         (d) There are no set-offs, defenses or counterclaims against the
accounts or their proceeds, except for Debtor's customary advertising or
promotional allowances;

         (e) No assignment of accounts nor their proceeds have or will be made
while this agreement is in effect in favor of any person or entity other than
Secured Party;

         (f) No lien, title retention device or security interest of any kind
exists or will be permitted to exist in favor of any other person or entity in
respect to the inventory or its proceeds while this agreement is in effect; and

         (g) All financial statements furnished to Secured Party will be
prepared in accordance with generally accepted principals of accounting, and
will accurately reflect the financial condition of Debtor as of the dates of
the statements.

                                  SECTION NINE

                             UNDERTAKINGS BY DEBTOR

         Debtor expressly undertakes and agrees that:

         (a) Debtor will execute and deliver to Secured Party concurrently with
this agreement, for filing under the provisions of the Uniform Commercial Code
as adopted by the State of Tennessee, such financing statements as Secured
Party may request and from time to time execute and deliver such additional
instruments or documents as Secured Party may reasonably request to the end
that this agreement have its intended effect.

         (b) While Debtor is indebted to Secured Party, Debtor will permit
agents of Secured Party to examine and make extracts from the books and records
of Debtor, and at all reasonable times, permit such agents to have access to
any warehouse maintained by Debtor for the purpose of taking physical inventory
of goods located there and in the event of default by Debtor under this
agreement for the purpose of taking possession of those goods.

         (c) If any Debtor owing any of the accounts refuses to pay the full
invoice price or shall return any of the items of merchandise, the sale of
which gave rise to such account, Debtor will immediately notify Secured Party
and such account shall be excluded from the collateral and the borrowing base
shall be recalculated.

         (d) Secured Party shall be liable to account solely for such of the
proceeds of the accounts as shall actually be received by Secured Party.





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         (e) Secured Party is expressly authorized and empowered to ask for,
demand, collect, institute and maintain suits for, receive, compound,
compromise and give acquittances for, any and all sums owing, which are now or
may in the future become due on the accounts or their proceeds and to enforce
the payment of those sums either in Secured Party's own name or the name of
Debtor, and to endorse the name of Debtor on checks and other instruments
tendered or received in payment of the counts or their proceeds. Debtor
unconditionally guarantees the due and prompt payment to Secured Party of the
accounts.

         (f) Debtor will furnish from time to time such collateral reports,
financial statements, and audit reports prepared and certified by such persons
and in such form as Secured Party may reasonably request.

                                  SECTION TEN

                               EVENTS OF DEFAULT

         At the option of Secured Party, Secured Party's obligations under this
agreement shall immediately terminate and all indebtedness of Debtor shall
immediately become due and payable without demand or notice of any kind, which
are here expressly waived, on the occurrence of any one or more of the
following events:

         (a) Any representation or warranty under this agreement shall be
materially false.

         (b) Any indebtedness of Debtor shall not be paid when due.

         (c) Debtor shall fail to perform any of its undertakings or agreements
under this agreement.

         (d) Debtor shall fail to perform any of Debtor's obligation or fulfill
Debtor's agreements contained in a repurchase agreement by and between Secured
Party and Debtor of even date with this agreement.

         (e) Any court of competent jurisdiction shall make an order
adjudicating the bankruptcy of Debtor or appointing a trustee or receiver of
Debtor or any substantial part of Debtor's property or approving a petition
for, or effecting an arrangement in bankruptcy, a reorganization pursuant to
bankruptcy laws or any other judicial modification or alteration of the rights
of Secured Party or of other creditors.

         (f) Debtor shall file any petition or take or consent to any action,
seeking any such judicial order as outlined in previous paragraph (e) making
assignment for the benefit of Debtor's creditors, or have failed within twenty
(20) days to pay or otherwise discharge any one or more judgments or
attachments against Debtor, exceeding Fifty Thousand Dollars ($50,000.00) in
the aggregate, unless such judgment is in good faith being appealed.





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         (g) Debtor shall fail to perform any of Debtor's obligation or fulfill
Debtor's agreements contained in any of the Loan Documents.

                                 SECTION ELEVEN

                      EXERCISE OF RIGHTS BY SECURED PARTY

         Secured Party shall have and may exercise all of the rights, powers,
privileges and remedies (all of which are collectively referred to as remedies)
contained in the Loan Documents or that may now or in the future be provided by
law for the holder of a security interest under the Uniform Commercial Code as
adopted by the state of Tennessee.

         No delay or omission of Secured Party to exercise any such remedy
shall impair any remedy or be a waiver of any event of default under this
agreement.

         Any single or partial exercise of any such remedies shall not preclude
other or further exercise of them.

         No waiver of any remedy shall be valid unless in writing signed by
Secured Party and then only to the extent specifically set forth.

                                 SECTION TWELVE

                   GOVERNING LAW; BINDING EFFECT OF AGREEMENT

         This agreement shall be governed by the laws of Tennessee, where
applicable, otherwise state of North Carolina will have jurisdiction, and shall
be binding upon and shall inure to the benefit of the successors and assigns of
the parties.

         Executed at Mt. Gilead, North Carolina, in duplicate on this the 22nd
day of July, 1996.

                                        AMERICAN WEST TRADING COMPANY



                                        By: /s/ D. Gary McRae, Treasurer
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                                        By: /s/ James W. McRae, Secretary
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