Document:

EXHIBIT 10.6

                          LOAN AND SECURITY AGREEMENT

                                                             Loan No. 3700692971

     THIS LOAN AND SECURITY AGREEMENT ("Agreement) is dated as of June 29, 2005,
by and between VAUGHAN FOODS, INC., an Oklahoma  corporation  ("Borrower"),  and
COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK ("Bank").

                                R E C I T A L S:

     BACKGROUND.  Borrower has  requested  that Bank lend to Borrower up to Four
Million Dollars ($4,000,000.00)  ("Loan"), on a revolving credit line basis, and
Bank is willing to do so upon the terms and  conditions  set forth herein and in
other documents and instruments executed on an even date herewith.

     NOW, THEREFORE, in consideration of the promises herein contained, and each
intending to be legally bound thereby, the parties agree as follows:

                                   SECTION I
                          DEFINITIONS AND USED HEREIN

     1.  "Accounts,"  "Chattel Paper,"  "Commercial  Tort Claims,"  "Contracts,"
Contract Rights," "Documents,"  "Equipment,"  "Fixtures,"  "Furniture," "General
Intangibles," "Goods," "Instruments,"  "Intellectual Property," "Inventory," and
"Letter-of-Credit  Rights,"  shall have the same  meanings as are given to those
terms in the Uniform  Commercial Code as presently  adopted and in effect in the
State  of  Oklahoma  or  as  otherwise  defined  by  applicable  law.  The  term
"Instruments"  shall also include all forms of chattel paper, including  chattel
paper  involving  related  software  as well as  electronic  chattel  paper  and
tangible chattel paper.

     2. Accounting  terms used and not otherwise  defined in this Agreement have
the meanings  determined by, and all calculations  with respect to accounting or
financial  matters  unless  otherwise  provided  herein  shall  be  computed  in
accordance with GAAP.

     3.  "Affiliate" means as to any Person, each other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
under common control with, such Person.

4. "Agreement" means this Agreement, as the same may from time to time be
amended or supplemented.

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     5.  "Borrowing  Base"  means,  at any time,  the amount  computed  as total
Borrowing Base on the Borrowing Base Certificate most recently delivered to, and
accepted by Bank, in accordance with this Agreement, and equal to the lesser of:

         a.   Four Million Dollars ($4,000,000.00); or

         b.   Eighty  percent (80.00%)  of  Eligible Accounts of Borrower,  plus
     fifty percent  (50.00%) of the Inventory of Borrower at cost, not including
     materials used or consumed in Borrower's  business and except that advances
     on Inventory shall not exceed Five Hundred Thousand Dollars  ($500,000.00).
     In addition,  Bank may in its sole discretion at any time reduce the amount
     that may be advanced on Eligible Accounts to seventy-five  percent (75.00%)
     of  Eligible  Accounts  if at any time the  aggregate  losses  incurred  by
     Borrower  due to unpaid  Accounts  (realized  by  Borrower  utilizing  GAAP
     accounting  principles)  for the then  most  current  consecutive  four (4)
     business  quarters exceed one percent (1.00%) of gross revenues of Borrower
     for the same period,  and shall remain at such limit of l75.00% of Eligible
     Accounts  until  the level of losses  for a four (4)  consecutive  business
     quarter period drops below one percent (1.00%).

     6. "Borrowing Base Certificate" means a fully completed  certificate in the
form of Exhibit  I(6) to this  Agreement  certified  by the  President  or Chief
Financial  Officer or Borrower to be correct and  delivered to, and accepted by,
Bank.

     7. "Business Day" means other than a Saturday,  a Sunday, or a day on which
commercial banks in Oklahoma are authorized to close.

     8. "Closing" has the meaning given to such term in Section III.

     9. "Collateral" has the meaning given to such term in Section IV.

     10. Collateral  Documents" means the Note, financing  statements,  security
agreement,  guaranty agreements, and other documents and instruments required by
Bank as set forth herein.

     11.  "Eligible  Account"  means,  at any time, an Account that conforms and
continues to conform to the following conditions:

         a.   The Account  arose  from a bona  fide  outright  sale of  Goods by
     Borrower or from services  performed by Borrower,  and such Goods have been
     shipped to the appropriate  account debtors or their designees (or the sale
     has otherwise  been  consummated),  or the services have been performed for
     the appropriate account debtors;

         b.   The  Account  is based  upon an  enforceable  order  or  contract,
     written or oral, for Goods shipped or held, or for services performed,  and
     the same were shipped or held, or performed in  accordance  with such order
     or contract;

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         c.   The  title  of  Borrower  to  the  Account  and  except  as to the
     Account  debtor,  to any Goods, is absolute and is not subject to any prior
     assignment, claim, lien, or security interests, except Permitted Liens;

         d.   The amount  shown on the books of Borrower  and on any  invoice or
     statement delivered to Bank is owing to Borrower,  less any partial payment
     that has been made thereon by anyone;

         e.   The Account shall be  eligible  only to the extent  that it is not
     subject to any claim or reduction, counterclaim, setoff, recoupment, or any
     claim or credits,  allowances, or adjustments by the Account debtor because
     of returned,  inferior, or damaged Goods or unsatisfactory services, or for
     any other reason;

         f.   The Account debtor has not returned or otherwise notified Borrower
     of any dispute concerning,  or claimed nonconformity of any of the Goods or
     services from the sale of which the Account arose;

         g.   The Account is due and payable not more than thirty (30) days from
     the statement date, and the statement must be dated contemporaneously  with
     the shipment of goods sold or services performed.

         h.   The  Account  or any portion thereof is  not more than  sixty (60)
     days due from the date of the invoice thereof;

         i.   If more than ten percent (10%) of the amount of all invoices  to a
     particular Account debtor are ineligible, than all invoices to such Account
     debtor shall become ineligible for borrowing purposes;

         j.   Borrower has not received any note,  trade  acceptance, draft,  or
     other  Instrument  with respect to, or in payment of the  Account,  nor any
     Chattel Paper with respect to the Goods giving rise to the Account, unless,
     if any  such  Instrument  or  Chattel  Paper  has been  received,  Borrower
     immediately notified Bank and, at the latter's request, endorses or assigns
     and delivers the same to Bank and Bank agrees to accept an  endorsement  or
     assignment of the same;

         k.   Borrower has  not received any notice of the filing of a  petition
     in bankruptcy or insolvency laws by or against the Account debtor. Upon the
     receipt by  Borrower  of any such  notice,  it will  immediately  give Bank
     written advice thereof;

         l.   The  Account  debtor is not a  subsidiary  or other  Affiliate  of
     Borrower;

         m.   The  Account  is  not  subject to a bond or other  surety  made or
     issued by any third party;

                                      -3-
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         n.   The Account is not due from the  United  States  government or any
     agency thereof or related entity thereto:

         o.   The Account  is not  owed by any  foreign  government  or  foreign
     (non-U.S.)  originated business entity, unless the Account is fully secured
     by a letter of credit  acceptable  in all  respects to Bank and issued by a
     creditworthy United States based financial institution acceptable to Bank;

         p.   The  Account  is not  with an Account  debtor (which  for purposes
     hereof  includes all Affiliates of the Account  debtor) that generates more
     than  thirty-five  percent  (35.00%) of the total annual sales  revenues of
     Borrower,  unless Bank is fully advised as to the  circumstances and agrees
     in writing to waive this  condition,  which waiver may be given or withheld
     by Bank in its sole discretion; and

         q.   Bank has not deemed such Account ineligible because of uncertainty
     about the  creditworthiness of the Account debtor or because Bank otherwise
     reasonably considers the Collateral value thereof to Bank to be impaired or
     its ability to realize such value to be insecure.

     In  addition to the  foregoing,  Eligible  Account  shall  mean any  amount
receivable by Borrower  under any insurance  policy  covering  Goods which have,
within the preceding  forty-five (45) days, been damaged or destroyed by fire or
other  direct  casualty  loss,  provided  that a claim  thereof has been made in
compliance  with such  insurance  policy,  to the extent that such claim has not
been in any way  denied or  contested  by the  insurer  and  provided  that such
insurer,  if such  insurer  were an  Account  debtor  of  Borrower,  would  be a
qualified Account debtor under this paragraph.

     In the event of any dispute, under the foregoing criteria, about whether an
Account is or has ceased to be an Eligible  Account, the decision  of Bank shall
control.

     12. "Event of Default" has the meaning provided for in Section VII.

     13.  "Financial  Statements"  means  the  balance  sheet  of  Borrower  and
statements of income and expenses,  stockholders' equity, and statements of cash
flow, and notes thereto, of Borrower for the years or, as appropriate,  month or
quarter end as prepared, audited and/or reviewed by independent certified public
accountants or recognized standing to present fairly the consolidated  financial
position  and  results  of  operations  of  Borrower  at such dates and for such
periods in accordance with GAAP.

     14.  "GAAP"  means  generally   accepted   accounting   principles  applied
consistently  with such  changes or  modifications  hereto as may be approved in
writing by Bank.

     15.  "Indebtedness"  means,  as to  Borrower,  all  items of  indebtedness,
obligation,   or  liability,   whether  matured  or  unmatured,   liquidated  or
unliquidated, direct or contingent, joint or several.

                                      -4-
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     16.   "Intellectual   Property"   means  all of  Borrower's  now  owned  or
subsequently  acquired  or  developed  designs,   patents,  patent  rights  (and
applications   therefor),   trademarks  and   registrations   (and  applications
therefor), trade names, inventions,  copyrights, software and computer programs,
license  rights,  trade  secrets,  methods,   processes,   know-how,   drawings,
specifications, descriptions, and all memoranda, notes, and records with respect
to any research and development,  whether now owned or subsequently  acquired or
developed by Borrower and whether in tangible or intangible form.

     17. "Laws" means all  ordinances,  statutes,  rules,  regulations,  orders,
injunctions,  writs, or decrees of any  government or political  subdivision  or
agency thereof, or of any court or similar entity established by any thereof.

     18. "Loan  Termination  Date" means the earliest to occur of the following:
(i) as to the Revolving  Loan--June  28, 2006; (ii) the date the Obligations are
accelerated  pursuant to this  Agreement;  and (iii) the date  Bank receives (a)
notice in writing  from  Borrower  of  Borrower's  election  to  terminate  this
Agreement;  and (b)  indefeasible  payment in full of the  Obligations,  or such
other date or dates as may later be agreed to by Bank and  Borrower in a written
amendment to this Agreement.

     19. "Note" means the promissory note referred to in Section II.

     20. "Obligations" means the obligation of Borrower.

         a.   To pay the principal of, and  interest on the  promissory  note in
     accordance  with  the  terms  thereof  and to  satisfy  all  of  its  other
     liabilities to Bank,  whether hereunder or otherwise,  whether now existing
     or hereafter incurred, matured or unmatured, direct or contingent, joint or
     several,  including any extensions,  modifications,  renewals thereof,  and
     substitutions  therefor  and including  but not limited to, any obligations
     under letter of credit agreements;

         b.   To  repay  to Bank  all  amounts  advanced by  Bank  hereunder  or
     otherwise  on  behalf  of  Borrower,  including,  but  without  limitation,
     advances  for  principal  or interest  payments to prior  secured  parties,
     mortgages, or licensors, or taxes, levies, insurance,  rent, or repairs to,
     or maintenance or storage of, any of the collateral; and

         c.   To  reimburse  Bank, on  demand, for  all  of  Bank's expenses and
     costs,  including  the  reasonable  fees and  expenses of its  counsel,  in
     connection with the preparation,  administration,  amendment, modification,
     or  enforcement  of this  Agreement and the documents  required  hereunder,
     including,  without  limitation,  any proceeding brought or threatened,  to
     enforce  payment of any of the  Obligations  referred  to in the  foregoing
     subparagraphs (a) and (b).

                                      -5-
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     21. "Permitted Liens" means:

         a.   Liens for taxes, assessments, or similar charges,  incurred in the
     ordinary course of business that are not yet delinquent;

         b.   Pledges or  deposits  made in the ordinary  course  of business to
     secure payment of workers'  compensation,  or to participate in any fund in
     connection  with workers'  compensation,  unemployment  insurance,  old-age
     pensions or other social security programs;

         c.   Liens of mechanics, materialmen, warehousemen,  carriers, or other
     like  liens,  securing  obligations  incurred  in the  ordinary  course  of
     business that are not yet due and payable; and

         d.   Liens in favor of Bank.

     22. "Person" means any individual, corporation,  partnership,  association,
joint stock company, trust, unincorporated  organization,  joint venture, court,
or government or political subdivision or agency thereof.

         23. "Records" means  correspondence,  memoranda,  tapes, discs, papers,
books and other  documents,  or  transcribed  information  of any type,  whether
expressed in ordinary or machine readable language.

                                   SECTION II
                                    THE LOAN

     1.  REVOLVING  LOAN.  Bank  agrees  to  lend  up to  Four  Million  Dollars
($4,000,000.00) to Borrower pursuant to this facility. Bank will credit proceeds
of this  revolving  loan from  time to time  ("Revolving  Loan") to  "Borrower's
deposit account with Bank.

         a. Subject to the terms hereof,  Bank will lend to Borrower,  from time
     to time until the Revolving Loan  Termination  Date,  such sums in integral
     multiples of One thousand  Dollars  ($1,000.00)  as Borrower may request by
     reasonable  same day notice to Bank,  received by Bank not later than 11:00
     A.M.  of such day,  but which shall not exceed in the  aggregate  principal
     amount at any one time  outstanding,  the  lesser of Four  Million  Dollars
     ($4,000,000.00) ("Loan Commitment") or the Borrowing Base amount.  Borrower
     may borrow, repay without penalty or premium, and re-borrow hereunder, from
     the date of this Agreement until the Loan Termination  Date, up to the full
     amount of the Loan  Commitment,  subject to the limitation of the Borrowing
     Base,  or any lesser sum which is One Thousand  Dollars  ($1,000.00)  or an
     integral  multiple  thereof.  It is the  intention  of the parties that the
     outstanding  principal amount of the Revolving Loan shall at no time exceed
     the  amount of the then  existing  Borrowing  Base and if, at any time,  an
     excess  shall  for any  reason  exist,  the full  amount  of  such  excess,
     together with accrued and unpaid interest thereon as herein provided, shall
     be immediately due and payable in full to Bank.

                                      -6-
<PAGE>

         b.   The Loan  Commitment shall be evidenced  by a Note having a stated
     maturity on the Revolving Loan Termination Date. The Note shall specify the
     manner of principal and interest payments and rate of interest accrual.

     4. PAYMENT TO BANK AND COLLECTIONS.

         a.   AMOUNTS PAYABLE TO BANK. All  sums payable to Bank hereunder shall
     be paid directly to Bank in immediately available funds. Bank shall provide
     Borrower statements of all amounts due hereunder, which statements shall be
     considered  correct and  conclusively  binding on Borrower  unless Borrower
     notifies Bank to the contrary within thirty (30) days of its receipt of any
     statement  that  it  deems  to be  incorrect.  Alternatively,  at its  sole
     discretion,  Bank may charge against any deposit account of Borrower all or
     any portion of any amount due hereunder.

         b.   COLLECTION OF ACCOUNTS.

              i.  Borrower  will  take  usual and  customary  steps  to  collect
         Accounts in full,  and will take such other  action with respect to the
         collection  of  Accounts  and of  the  proceeds  thereof  as  Bank  may
         reasonably request.

              ii. Bank shall have at any time or times  hereafter all the rights
         of a secured  creditor  holding  a valid,  and  indefeasibly  perfected
         security   interest  in  accounts  pursuant  to  the  Oklahoma  Uniform
         Commercial  Code,  as well as the rights  conferred  by the  Collateral
         Documents.

              iii. Borrower  hereby  authorizes  Bank  to  endorse, in  the name
         of Borrower,  any item, howsoever received by Bank representing payment
         on or other proceeds of any Collateral or on any of the Accounts.

              iv.  For purposes  of determining  the amount  of the Obligations,
         including,  without limitation, the  computations of interest which may
         from time to time be owing by  Borrower  to Bank,  the  receipt  of any
         check or other item of payment on any Account or otherwise with respect
         to any of the  Collateral  by Bank shall not be treated as a payment on
         account of the liabilities until such check or other item of payment is
         actually paid in cash or cash equivalent.

                                  SECTION III
                              CONDITIONS PRECEDENT

         The  obligations  of Bank to make the Revolving Loan are subject to the
following conditions precedent:

                                      -7-
<PAGE>

         1.  DOCUMENTS  REQUIRED FOR CLOSING.  Borrower  shall have delivered to
Bank,  prior  to  the  initial  disbursement  of   the  funds  ("Closing"),  the
following:

             a.   The Collateral  Documents and the financing  statements,  duly
         executed by Borrower.

             b.   Corporate resolutions of authority and incumbency, as Bank may
         require.

             c.   A duly executed  Borrowing Base Certificate acceptable to Bank
         and certifying a Borrowing Base of not less than the initial  principal
         amount requested by Borrower to be advanced by Bank.

             d.   Financial statements of Borrower, prepared  according to GAAP,
         showing  no  material  adverse  change in the  financial  condition  of
         Borrower.

             e.   Hazard, fire and extended coverage  insurance  policies on all
         Collateral,  with Bank named as loss payee and in amounts acceptable to
         Bank in its sole  discretion.  Hazard  insurance shall include coverage
         related to fire,  windstorm, lightning,  hail,  explosion,  riot, civil
         commotion, aircraft, vehicle, marine, smoke, and property damage.

             f.   Evidence of payment of all costs and expenses incurred by Bank
         in  connection  with the  Loan,  including,  but not  limited  to,  all
         attorneys'  fees,   environmental   investigation  and/or  audit  fees,
         appraisal fees, inspection fee, and filing fees.

             g.   Evidence of  worker's  compensation  coverage  in  amounts and
         types as required by the laws of the State of Oklahoma.

             h.   A  fully  executed  lockbox  control agreement,  in  form  and
         content acceptable to Bank in all respects.

             i.   A detailed listing, certified by Borrower as true and  correct
         in all material respects, of all  Account  debtors,  including  current
         addresses,  showing the status of the Account  and amount  owed,  which
         list  shall  include  all  Accounts,  whether  or not the same are also
         Eligible Accounts.

         2.  CERTAIN  EVENTS.  At the time of, and as a condition to Closing and
each  disbursement  of any part of the  Revolving  Loan to be made by Bank at or
subsequent to Closing:

             a.   No Event of Default shall have occurred and be continuing, and
         no event shall have occurred and be continuing that, with the giving of
         notice or passage of time or both, would be an Event of Default;

             b.   No material adverse change shall have occurred in the business
         prospects,  financial  condition,  or results of operations of Borrower
         since the dates of any financial statements provided by Borrower at any
         time; and

                                      -8-
<PAGE>

             c.  All of the  Collateral  Documents  shall be in full  force  and
         effect.

                                   SECTION IV
                              COLLATERAL SECURITY

     1. COMPOSITION OF THE COLLATERAL. The property in which a security interest
is granted  pursuant to the provisions of this Agreement is herein  collectively
called  "Collateral." The term "Collateral" shall mean all Accounts,  Inventory,
General Intangibles,  Chattel Paper, Commercial Tort Claims, Contracts, Contract
Rights,   Documents,   Furniture,   Equipment,   Fixtures,  Goods,  Instruments,
Intellectual  Property,  rights  as  seller of  goods,  rights  to  returned  or
repossessed  goods,  Letter of Credit  Rights and all other assets and rights of
any  nature or type  owned by  Borrower  or as to which  Borrower  may  exercise
control or rights. The Collateral,  together with all other property of Borrower
of any kind held by Bank,  shall  stand as one  general,  continuing  collateral
security for all  Obligations  and may be retained by Bank until all Obligations
have been satisfied in full.  This security  interest and Agreement are intended
by the parties to include all  Obligations of Borrower to Bank which have arisen
in the  past or  which  arise  in the  future,  regardless  of form or  purpose,
including,  without  limitation,  loans for  consumer,  agricultural or business
purposes;  Obligations which are primary or secondary,  absolute or  contingent,
sole  or  joint;  and  credit  evidence  by  promissory  notes,  open  accounts,
overdrafts or letters of credit.

     2. RIGHTS IN PROPERTY HELD BY BANK. As security for the prompt satisfaction
of all Obligations Borrower hereby assigns, transfers, and sets over to Bank all
of its right,  title,  and  interest  in and to, and grants Bank a lien on and a
security  interest in, all amounts that may be owing, from time to time, by Bank
to Borrower in any capacity,  including, but without limitation,  any balance or
share belonging to Borrower in any capacity,  including, but without limitation,
any balance or share belonging to Borrower, or any deposit or other account with
Bank, which lien and security  interest shall be independent of, and in addition
to, any right of setoff that Bank has under applicable Laws or otherwise.

     3.  RIGHTS IN  PROPERTY  HELD  EITHER BY  BORROWER  OR BY BANK.  As further
security for the prompt satisfaction of all Obligations, Borrower hereby assigns
to Bank all of its right,  title, and interest in and to, and grants Bank a lien
upon and a security interest in, all Collateral, wherever located, whether owned
or hereafter  acquired,  together  with all  replacements  therefor and proceeds
(including without limitation, insurance proceeds) and products thereof.

     4.  PRIORITY OF LIENS. The  foregoing  liens shall be first and prior liens
except for Permitted Liens to Persons other than Bank.

     5.  FINANCING STATEMENTS.

         a.   Borrower:

              i.  Authorized  Bank  to  file   such   Uniform   Commercial  Code
         Financing  Statements  (which,  together with  amendments  thereto  and
         continuation statements

                                      -9-
<PAGE>

         thereof are called "Financing Statements") in form satisfactory to Bank
         as Bank, from time to time, may determine;

              ii.  Shall pay, or reimburse Bank for paying,  all costs and taxes
         of  filing  or  recording  the same in such  public offices as Bank may
         designate; and

              iii. Shall take such other steps as Bank,  from time to  time, may
         direct,  including the noting of Bank's lien on the  Collateral  and on
         any  certificates of title therefor, all to perfect to the satisfaction
         of Bank, Bank's interest in the Collateral.

         b.   In addition to the foregoing, and not in limitation thereof;

              i.   A  carbon,  photographic, or   other  reproduction   of  this
         Agreement shall be sufficient as a financing statement and may be filed
         in any appropriate office in lieu thereof; and

              ii. To  the extent  lawful, Borrower hereby  appoints Bank  as its
         attorney-in-fact (without requiring Bank to act as such) to prepare and
         file any  financing  statement in the name of Borrower,  and to perform
         all other acts that Bank deems  appropriate to perfect and continue its
         security interest in, and to protect and preserve, the Collateral.

                                   SECTION V
                         REPRESENTATIONS AND WARRANTIES

     1.  REPRESENTATIONS AND WARRANTIES BY BORROWER.  To  induce  Bank  to enter
into this Agreement, Borrower represents and warrants to Bank as follows:

         a.   Borrower is a corporation, duly  organized, validly existing,  and
     in good standing under the Laws of the State of Oklahoma;  Borrower  has no
     subsidiaries;  Borrower has the lawful power to own its  properties  and to
     engage in the  businesses  it conducts  and is duly  qualified  and in good
     standing as a foreign company in the  jurisdictions  wherein the  nature of
     the  business  transacted  by  it  or  property  owned  by  it   make  such
     qualification  necessary;  the states in which Borrower is qualified to  do
     business are  disclosed to Bank in writing;  the addresses of all places of
     business of Borrower are disclosed to Bank in writing; and Borrower has not
     changed its name,  been the  surviving  company in a merger,  acquired  any
     business, or changed its principal  executive  office within five (5) years
     and one (1) month prior to the date hereof,  nor acquired any assets from a
     transferor  which  remain  subject to a security  interest  granted by such
     transferor  within  one (1) year  prior to the date  hereof,  nor moved any
     Collateral to its present  location from another state where it was subject
     to a security interest granted to another entity;

                                      -10-
<PAGE>

            b.    Borrower  is not  directly  or  indirectly  controlled  by, or
      acting on behalf of, any Person which is an  "Investment  Company"  within
      the meaning of the Investment Company Act of 1940, as amended;

            c.    Borrower  is  the  sole  and  exclusive  owner  of  all of the
      Collateral  and no Affiliate  or any other Person has any right,  claim or
      interest in any of the Collateral;

            d.    Borrower is not in default  with respect to any of its debt to
      anyone,  and  the  making  and  performance  of  this  Agreement  and  the
      Collateral  Documents will not  (immediately  or with the passage of time,
      the giving of notice, or both):

                  i.    Violate the  organizational  documents and agreements of
            Borrower,  or  violate  any laws or result  in a  default  under any
            contract,  agreement,  or instrument to which Borrower is a party or
            by which Borrower or its property is bound; or

                  ii.   Result in the  creation or  imposition  of any  security
            interest  in,  or lien or  encumbrance  upon,  any of the  assets of
            Borrower except in favor of Bank;

            e.    Borrower has the power and authority to enter into and perform
      this Agreement,  the Note, and the Collateral Documents,  and to incur the
      obligations  herein and therein  provided  for,  and has taken all actions
      necessary to authorize the execution,  delivery,  and  performance of this
      Agreement, the Note, and the Collateral Documents;

            f.    This Agreement, the Note, and the Collateral Documents are, or
      when delivered will be, valid, binding, and enforceable in accordance with
      their respective terms;

            g.    There is no  pending  order,  notice,  claim,  litigation,  or
      proceeding  against  or  affecting  Borrower,  whether  or not  covered by
      insurance,  that  would  materially  or  adversely  affect  the  financial
      condition or business prospects of Borrower if adversely determined;

            h.    Borrower has good and  marketable  title to all of its assets,
      none of which is subject to any security interest, encumbrance or lien, or
      claim of any third Person except for Permitted Liens;

            i.    The  Financial   Statements  of  Borrower  that  Borrower  has
      previously provided to Bank,  including any schedules and notes pertaining
      thereto,  have,  to the best  knowledge  of  Borrower,  been  prepared  in
      accordance  with GAAP,  and to the best  knowledge of Borrower,  fully and
      fairly  present the  financial  condition of Borrower at the dates thereof
      and the results of operations for the periods covered thereby,  and to the
      best knowledge of Borrower, there have been no material adverse changes in
      the consolidated financial condition or business of Borrower from the date
      of such statements to the date hereof;

                                      -11-
<PAGE>

            j.    As of the date hereof Borrower has no material Indebtedness of
      any nature,  including but without  limitation,  liabilities for taxes and
      any interest or penalties  relating thereto except to the extent reflected
      (in a  footnote  or  otherwise)  in the  financial  statements  previously
      provided to Bank or as disclosed in, or permitted by this  Agreement;  and
      Borrower does not know or have reasonable  ground to know of any basis for
      the  assertion  against  it of any  such  Indebtedness  as of the  date of
      Closing;

            k.    Except as otherwise  permitted herein,  Borrower has filed all
      federal,  state,  and local tax returns and other  reports  required by an
      applicable  Laws to have been filed prior to the date  hereof, has paid or
      caused to be paid all taxes,  assessments,  and other governmental charges
      that are due and payable  prior to the date hereof,  and has made adequate
      provisions  for the payment of such taxes,  assessments,  or other charges
      accruing but not yet payable;  Borrower has no knowledge of any deficiency
      or additional  assessment in a materially  important  amount in connection
      with any taxes, assessments, or charges not provided for on its books;

            l.    Except to the  extent  that the  failure  to comply  would not
      materially  interfere  with  the  conduct  of the  business  of  Borrower,
      Borrower has  complied  with all  applicable  Laws with respect to (i) any
      restrictions, specifications, or other requirements pertaining to products
      that it  manufactures  or sells or to the services it  performs;  (ii) the
      conduct of its business; and (iii) the use, maintenance,  and operation of
      the real and personal  properties  owned or leased by it in the conduct of
      its business;

            m.    No  representation  or warranty by or with respect to Borrower
      contained  herein or in any  certificate  or other  document  furnished by
      Borrower  pursuant hereto contains any untrue statement of a material fact
      or omits to state a material fact necessary to make such representation or
      warranty not misleading in light of the  circumstances  under which it was
      made;

            n.    Each  consent,   approval  or  authorization  of,  or  filing,
      registration or qualification  with, any Person required to be obtained or
      effected by Borrower in connection with the execution and delivery of this
      Agreement,  the Note, and the Collateral  Documents or the  undertaking or
      performance  of any  obligation  hereunder  or  thereunder  has been  duly
      obtained or effected;

            o.    Except as  disclosed  to Bank in writing (1)  Borrower  has no
      material leases, contracts, or commitments of any kind (including, without
      limitation,   employment  agreements,  collective  bargaining  agreements,
      powers of attorney, distribution arrangements,  patent license agreements,
      contracts  for  future  purchase  or  delivery  of goods or  rendering  of
      services,  bonuses,  pension,  and retirement  plans accrued vacation pay,
      insurance  and  welfare  agreements);  (2) to the  best of the  Borrower's
      knowledge,  all parties to all such material  leases,  contracts and other
      commitments to which Borrower is a party have complied with the provisions
      of such leases,  contracts, and other commitments;  and (3) to the best of
      Borrower's knowledge, no party is in default under

                                      -12-
<PAGE>

       any  provisions  thereof  and no event has  occurred  which,  but for the
       giving of notice or the  passage of time,  or both,  would  constitute  a
       default;

            p.    Borrower has not made any  agreement or taken any action which
      may cause anyone to become  entitled to a commission  or finder's fee as a
      result of or in connection with the making of this Agreement;

            q.    Any Employee  Pension Benefit Plans as defined in the Employee
      Retirement Income Security Act of 1974, as amended ("ERISA"),  of Borrower
      meet, as of the date hereof,  the minimum  funding  standards of 29 U.S.C.
      ss. 1082  (Section 302 of ERISA),  and no  Reportable  Event or Prohibited
      Transaction as defined in ERISA, has occurred with respect to any Employee
      Benefit Plans, as defined in ERISA, of Borrower;

            r.    The liens and  security  interests  created  pursuant  to this
      Agreement,  including any separate real estate liens granted in connection
      herewith,  are in all cases  first and prior  liens  except for  Permitted
      Liens;

            s.    Borrower  warrants  (and this shall be a  continuing  warranty
      which shall survive until all of the  Obligations of Borrower to Bank have
      been fully  satisfied) that it is in compliance  with all federal,  state,
      and  local  environmental  laws  and  regulations  and  has  obtained  all
      environmental  permits  necessary  or  appropriate  to the  conduct of its
      business.  There is not  pending or, to the best of  Borrower's  knowledge
      after due  inquiry,  are there any  threatened  environmental  enforcement
      actions,   suits,  or   proceedings   before  any  court,   tribunal,   or
      administrative  body or  official.  Responsible  officers  and  agents  of
      Borrower have made an extensive  investigation  and have  determined  that
      Borrower has not, nor has any former owner of any real  property  occupied
      by Borrower,  stored, used or disposed of any toxic or hazardous substance
      on its  properties  or  transported  any  such  substance  to or from  its
      properties in violation of any presently  existing or previously  existing
      laws, regulations or policies. Borrower will not store, use, or dispose of
      such  substances on its  properties,  except in accordance with applicable
      laws.

            t.    Borrower is not a party to any stock  repurchase or redemption
      agreement,  or any similar type of agreement concerning potential transfer
      of shares of stock in Borrower;

            u.    Borrower  shall permit Bank to conduct such  inspection of the
      Collateral as and when Bank shall require.

      2.    SURVIVAL.  All of the  representations  and  warranties set forth in
this  Agreement  shall survive until all  Obligations  are satisfied in full and
there remain no outstanding commitments hereunder.

                                      -13-
<PAGE>

                                   SECTION VI
                             COVENANTS OF BORROWER

      1.    AFFIRMATIVE COVENANTS.  Borrower does hereby covenant and agree with
Bank that, so long as any portion of the Obligations  remain  unsatisfied or any
commitments  hereunder remain outstanding,  it will comply at all times with the
following covenants:

            a.    Borrower will furnish to Bank:

                  i.    Within  forty-five  (45)  days  after  the close of each
            quarterly accounting period in each fiscal year, commencing with the
            quarter  ending  June 30,  2005,  an  accountant  prepared  compiled
            financial  statement  that includes an income  statement and balance
            sheet of Borrower for such quarter in reasonable  detail as required
            by Bank,  subject to normal year end audit adjustments and certified
            by  Borrower's  President  or Chief  Financial  Officer to have been
            prepared in  accordance  with GAAP and being true and correct in all
            material respects.

                  ii.   Within  thirty  (30) days  after the close of each month
            (and  at any  additional  time in the  discretion  of Bank or if any
            material  deterioration  in the  Borrowing  Base would be  disclosed
            thereby) a Borrowing  Base  Certificate as of the end of such month.
            Each Borrowing Base Certificate  shall be effective only as accepted
            by Bank (and with such  revisions,  if any, as Bank may require as a
            condition  to such  acceptance),  and shall be  accompanied  by such
            detailed Account and Inventory information as Bank shall require.

                  iii.  Within one hundred  twenty (120) days after the close of
            each fiscal year, year end financial  statements  including,  income
            statements,  balance sheets,  and statement of cash flow of Borrower
            for such fiscal year. These financial statements shall be audited by
            independent  certified public accountants of recognized  standing to
            present fairly the  consolidated  financial  position and results of
            operations of Borrower in accordance  with GAAP; and  accompanied by
            such  accountants'  opinion  thereof that such  documents  have been
            reviewed in  compliance  with the  American  Institute  of Certified
            Public Accountants  Statements of Auditing Standards in effect as of
            the execution hereof;  such  accountants'  opinion and certification
            shall be directed to Bank, providing that the client  representation
            of the  accountants  extends to Bank and shall also be  certified by
            Borrower's  President or Chief  Financial  Officer as being true and
            correct in all material respects.

                  iv.   Within  forty-five (45) days  after  the close  of  each
            quarter,  commencing  with the quarter  ending June 30, 2005,  (a) a
            trial  balance  reflecting  an  aging  of all  accounts  payable  of
            Borrower,  and (b) a list containing the names and current addresses
            of all Account  debtors (i.e.  customers  owing payment to Borrower,
            whether or not the Accounts are Eligible Accounts).

                  v.   Annual federal tax returns,  with  all schedules,  within
            thirty  (30)  days  after  submission  of the  same to the  Internal
            Revenue Service.

                                      -14-
<PAGE>

                  iv.   within  forty-five  (45)  days  after  the close of each
            quarter, commencing with the quarter ending June 30, 2005, a written
            certification  to Bank by Borrower's  President  that Borrower is in
            strict compliance with the requirements of all city,  county,  state
            and federal laws and regulations applicable to Borrower,  including,
            but not limited to, worker's compensation and occupational safety.

                  vii.  Inventory  reports in such  detail and when  required by
            Bank from time to time in Bank's discretion.

                  viii. A  detailed  report of any failure of Borrower to comply
            with any audit  standards  of any  state or  federal  government  or
            agency,  including,  but not limited to, the United  States Food and
            Drug Administration or the United States Department of Agriculture.

                  ix.   Commencing March 31, 2006,  and annually  thereafter,  a
            written  certification  by Borrower's  President that Borrower is in
            compliance  with all  covenants and  obligations  of Borrower to the
            Cleveland County Bond Authority (or similar agency).

                  x.    Within ninety (90) days  after the end of each  calendar
            year,  updated  and signed  personal  financial  statements  of each
            guarantor  of the  obligations  of the Note,  certified  as true and
            correct in all material respects by each respective  guarantor,  and
            each  guarantor's  annual  federal tax returns,  with all schedules,
            within  thirty (30) days after  submission  to the Internal  Revenue
            Service.

                  xi.   Such other interim financial statements, projections and
            other information as Bank may reasonably request from time to time.

            b.    Borrower will  maintain a Borrowing  Base such that the amount
      of Borrower's outstanding Revolving Loan will not, at any time, exceed the
      lesser of its Borrowing Base or the maximum amount of the Revolving Loan.

            c.    Borrower will maintain a debt service  coverage  ratio of 1.50
      to 1.00 or  better,  tested and  measured  quarterly,  beginning  with the
      quarter  ended as of March 31,  2006,  with such ratio  defined by Bank in
      accordance with GAAP.

            d.    Borrowing  will  maintain a Long Term Debt to Net Worth Ratio,
      as  defined in  accordance  with GAAP and  computed  as of the end of each
      calendar  quarter,  which  shall not be greater  than 4.00 to 1.00 for any
      quarter, commencing with the quarter ended as of March 31, 2006.

                                      -15-
<PAGE>

            e.    Borrower shall maintain a minimum Current Ratio, as defined in
      accordance with GAAP, and computed quarterly,  commencing with the quarter
      ended March 31, 2006, of at least 1.10 to 1.00.

            f.    Borrower will take all necessary steps to preserve its company
      existence  and business  relationships  and to comply with all present and
      future laws  applicable  to it in the  operation  of its  business and all
      material agreements to which it is subject.

            g.    Borrower  will  give  immediate  notice  to  Bank  of (i)  any
      litigation  or  proceeding  in which it is a party if an adverse  decision
      therein would  require it to pay more than  Twenty-Five  Thousand  Dollars
      ($25,000.00)  or  deliver  assets  the  value  of which  exceeds  such sum
      (whether or not the claim is considered to be covered by  insurance);  and
      (ii) the  institution  of any other suit or  proceeding  involving it that
      might materially and adversely affect its operations, financial condition,
      property, or business prospects.

            h.    Borrower will pay when due all of its  Indebtedness  due third
      persons except when the amount thereof is being contested in good faith by
      appropriate  proceedings  and with adequate  reserves  therefor  being set
      aside on its books.

            i.    Borrower will notify Bank  immediately if (i) it becomes aware
      of the  occurrence of any Event of Default or of any fact,  condition,  or
      event  that only with the  giving  of notice or  passage  of time or both,
      could  become an Event of Default;  (ii) it becomes  aware of any material
      adverse change in the business prospects,  financial condition (including,
      without   limitation,    proceedings   in   Bankruptcy,   insolvency,   or
      reorganization),  or results of operations of Borrower;  or (iii) upon the
      failure  of  Borrower  to  observe  any  of  its  respective  undertakings
      hereunder or under the Collateral Documents.

            j.    Borrower  will (i) fund any of its  Employee  Pension  Benefit
      Plans in accordance with no less than the minimum funding  standards of 29
      U.S.C. ss. 1082 (Section 302 of ERISA);  (ii) furnish Bank, promptly after
      the filing of the same,  with  copies of any  reports or other  statements
      filed with the United States  Department of Labor or the Internal  Revenue
      Service with respect to any such Plan; and (iii)  promptly  advise Bank of
      the  occurrence of any  Reportable  Event or Prohibited  Transaction  with
      respect to any Employee Benefit Plan.

            k.    Borrower  shall  establish  and  maintain  Borrower's  primary
      depository business accounts with Bank.

            l.    If  Borrower  causes new  business  entities  to be created to
      conduct business  activities similar to, or related to, Borrower's current
      business  activities,  such new entities shall  immediately  upon creation
      execute  guaranty  agreements  as to the  Note,  in form  and  content  as
      required by Bank.

                                      -16-
<PAGE>

            m.    Borrower  shall  remain  bound at all times to Bank  under the
      terms of a lockbox  control  agreement  acceptable to Bank  and shall take
      all  actions  required by Bank in its sole  discretion  to maintain at all
      times  Bank's  immediate  access  to the post  office  box  maintained  by
      Borrower as the sole  designated  delivery  address for  payments  made on
      Accounts  owed to  Borrower.  Borrower  shall not change  such  designated
      address and shall  immediately  deliver to Bank all  payments  received by
      Borrower through any other method on any Accounts.

      2.    NEGATIVE  COVENANTS.  Borrower  does hereby  covenant and agree with
Bank that, so long as any portion of the Obligations  remain  unsatisfied or any
commitments  hereunder remain outstanding,  it will comply at all times with the
following  negative  covenants,  unless  Bank  shall  otherwise  have  agreed in
writing:

            a.    Borrower will not mortgage,  pledge, grant, or permit to exist
      a security interest in, or a lien upon, any of its assets of any kind, now
      owned  or  hereafter  acquired,  except  for  liens  in  favor  of Bank or
      Permitted Liens;

            b.    Borrower will not become liable,  directly or  indirectly,  as
      guarantor or otherwise for any Obligation of any other person;

            c.    Borrower  will not declare or pay any  dividends,  or make any
      other payment or distribution on account of its capital stock, or make any
      assignment or transfer of Accounts or ownership of Inventory,  than in the
      ordinary course of business of sale of Inventory to customers of Borrower;

            d.    Borrower will not form or have any entity or subsidiary  which
      will be the  transferee of any Accounts or Inventory from Borrower or make
      any loan in the nature of an investment of any person;

            f.    Borrower  will not make any loan or  advance  to any  officer,
      shareholder, director, or employee of Borrower, except for business travel
      and similar temporary advances in the ordinary course of business;

            g.    Borrower  will not make payments on account of the purchase or
      lease  of  fixed  assets  that,  in  the  aggregate,  in any  fiscal  year
      (commencing  with the current  fiscal  year) will exceed the  depreciation
      taken or to be taken with respect to fixed assets during such year;

            h.    Borrower  will not  redeem,  purchase,  or  retire  any of its
      capital  stock  or  grant  or  issue,   or  purchase  or  retire  for  any
      consideration,  any warrant, right or option pertaining thereto, or permit
      any  redemption,  retirement  or  other  acquisition  by  Borrower  of the
      ownership of capital stock of Borrower;

            i.    Borrower  shall not furnish to Bank any  certificate  or other
      document that contains any untrue statement of material fact or that omits
      to state a material fact

                                      -17-
<PAGE>

      necessary to make it not  misleading in light of the  circumstances  under
      which it was furnished;

            j.    Borrower will not directly or indirectly apply any part of the
      proceeds of the  Obligations  to the purchasing or carrying of any "margin
      stock" within the meaning of Regulation U of the Board of Governors of the
      Federal Reserve System,  or any regulations,  interpretations,  or rulings
      thereunder;

            k.    Borrower  shall  not  suffer  or permit  majority  control  of
      Borrower to be sold, assigned or otherwise transferred,  or make or permit
      any  change  in  its  current  management,   or  otherwise  dispose  of  a
      substantial part of its assets or properties;

            l.    Borrower  shall  not  violate  in  any  material  respect  any
      federal,  state,  county or city  statutes,  orders,  rules or regulations
      concerning occupational safety;

            m.    The  Collateral  shall not be  situated at any time within any
      federal or state designated flood zone;

            n.    Borrower shall not compensate officers and owners more than an
      amount that, when taken together,  will not adversely affect the repayment
      ability of Borrower  with respect to the  Obligations  and the Note.  This
      amount may not be increased  year to year unless (i) an  after-tax  profit
      was made in the preceding fiscal year; (ii) Borrower is and will remain in
      compliance with covenants of this Agreement; (iii) all of Borrower's debts
      are paid on a current  status;  and (iv)  Borrower  has obtained the prior
      written consent of Bank.

                                  SECTION VII
                                    DEFAULT

      1.    EVENTS  OF  DEFAULT.  The  occurrence  of  any  one or  more  of the
following events shall constitute an Event of Default hereunder:

            a.    Borrower  shall  fail to perform  any  covenant,  promise,  or
      payment obligation made in this Agreement or any Collateral Documents, and
      fails to cure such default within any applicable  grace and/or cure period
      as provided in the Note;

            b.    Any  financial   statement,   representation,   warranty,   or
      certificate  made or  furnished  by or with respect to Borrower to Bank in
      connection with this Agreement,  or as an inducement to Bank to enter into
      this Agreement,  or in any separate  statement or document to be delivered
      to Bank hereunder,  shall be materially  false,  incorrect,  or incomplete
      when made.

      2.    ACCELERATION. At the option of Bank upon the occurrence of any Event
of Default, the Obligations,  whether hereunder or otherwise,  shall immediately
become due and payable.

                                      -18-
<PAGE>

      3.    REMEDIES.  After any  acceleration,  Bank shall have, in addition to
the rights and remedies given it by this Agreement and the Collateral Documents,
all those allowed by all applicable Laws, including, but without limitation, the
Uniform  Commercial Code as enacted in the applicable  jurisdiction in which any
Collateral  may be  located.  The  rights of Bank under  this  Agreement  are in
addition to the other rights and remedies (including,  without limitation, other
rights of setoff) which Bank may have.

      4.    RIGHT OF SETOFF.  Upon the occurrence of any Event of Default,  Bank
may, and is hereby authorized by Borrower, at any time and from time to time, to
the fullest  extent  permitted by applicable  Laws,  without  advance  notice to
Borrower (any such notice being expressly waived by Borrower),  setoff and apply
any and all deposits (general or special, time or demand,  provisional or final)
at any time held and any other  indebtedness at any time owing by Bank to or for
the credit or the account of, Borrower  against any or all of the Obligations of
Borrower now or hereafter existing, whether or not such Obligations have matured
and  irrespective  of whether Bank has exercised any other rights that it has or
may have with respect to such  Obligations,  including  without  limitation  any
acceleration  rights.  Bank agrees  promptly to notify  Borrower  after any such
setoff and application,  provided that the failure to give such notice shall not
affect the  validity  of such setoff and  application.  The rights of Bank under
this  Agreement  are in addition to the other  rights and  remedies  (including,
without limitation, other rights of setoff) which Bank may have.

                                  SECTION VIII
                                 MISCELLANEOUS

      1.    CONSTRUCTION.  Nothing  herein  contained  shall  prevent  Bank from
enforcing any or all guaranty, pledge, or security agreements, notes, mortgages,
deeds of trust, other evidences of liability,  or other Collateral  Documents in
accordance with their respective terms.

      2.    ENFORCEMENT  AND  WAIVER BY BANK.  Bank  shall have the right at all
times to enforce the provisions of this  Agreement and the Collateral  Documents
in strict  accordance  with the terms  hereof and thereof,  notwithstanding  any
conduct or custom on the part of Bank in refraining from so doing at any time or
times to enforce its rights under such  provisions,  strictly in accordance with
the same, shall not be construed as having created a custom in any way or manner
contrary to specific  provisions  of this  Agreement  or as having in any way or
manner  modified  or waived  the  same.  All  rights  and  remedies  of Bank are
cumulative  and  concurrent and the exercise of one right or remedy shall not be
deemed a waiver or release of any other right or remedy.

      3.    EXPENSE OF BANK.  Borrower  will, on demand,  reimburse Bank for all
expenses,  including the reasonable fees and expenses of legal counsel for Bank,
incurred by Bank in connection with the preparation, administration,  amendment,
modification,  or enforcement of this Agreement,  the Collateral Documents,  and
the collection or attempted collection of the Obligations.

                                      -19-
<PAGE>

      4.    NOTICES.  Any  notice or  consents  required  or  permitted  by this
Agreement  shall be in writing and shall be deemed  delivered  if  delivered  in
person or if sent by certified mail, postage prepaid,  return receipt requested,
or facsimile transmission, as follows, unless such address is changed by written
notice hereunder:

                  If to Borrower:     Vaughan Foods, Inc.
                                      216 Northest 12th Street
                                      Moore, Oklahoma 73160
                                      Attention: Mark E. Vaughan
                                      Fax No.: __________________

                  If to Bank:         Commercial Federal Bank
                                      777 N.W. Grand Boulevard, Suite 650,
                                      Oklahoma City, Oklahoma 73118
                                      Attention: Alan Schaefer
                                      Fax No.: ___________________

      5.    WAIVER AND RELEASE BY BORROWER.  To the maximum extent  permitted by
applicable laws, Borrower:

            a.    Waives notice of acceleration  and of intention to accelerate;
      and notice and opportunity to be heard,  after  acceleration in the manner
      provided in this  Agreement,  before  exercise by Bank of the  remedies of
      self-help,  setoff, or  of  other  summary  procedures  permitted  by  any
      applicable  laws or by any  agreement  with  Borrower,  and,  except where
      required  hereby or by any applicable law notice of any other action taken
      by Bank; and

            b.    Releases  Bank  and  its  officers,   attorneys,  agents,  and
      employees from all claims for loss or damage caused by any act or omission
      on the part of any of them except willful misconduct or gross negligence.

      6.    APPLICABLE  LAW. This  Agreement is entered into and  performable in
Oklahoma City,  Oklahoma,  and shall be subject to and construed and enforced in
accordance with the laws of the State of Oklahoma.

      7.    BINDING EFFECT,  ASSIGNMENT,  AND ENTIRE  AGREEMENT.  This Agreement
shall  inure to the  benefit  of,  and shall be  binding  upon,  the  respective
successors and permitted assigns of the parties hereto. Borrower has no right to
assign any of its rights or  Obligations  hereunder  without  the prior  written
consent of Bank. This Agreement, including the exhibits hereto, all of which are
hereby  incorporated  herein  by  reference,  and  the  documents  executed  and
delivered  pursuant hereto,  constitute the entire agreement between the parties
and may be amended only by a writing signed on behalf of each party.

                                      -20-
<PAGE>

      8.    SEVERABILITY.  If any  provision  of this  Agreement  shall  be held
invalid under any  applicable  law, such  invalidity  shall not affect any other
provision  of this  Agreement  that  can be given  effect  without  the  invalid
provision, and, to this end the provisions hereof are severable.

      IN WITNESS  WHEREOF,  the parties hereto have duly executed this Agreement
as of the day and first year above written.

                                 COMMERCIAL FEDERAL BANK, A FEDERAL
                                 SAVINGS BANK

                                 By: /s/ Alan Shaefer
                                     ------------------------------
                                 Its: Vice President
                                      -----------------------------

                                 VAUGHAN FOODS, INC., an Oklahoma
                                 corporation, Borrower

                                 By: /s/ Mark E. Vaughan, President
                                     ------------------------------
                                     Mark E. Vaughan

                                      -21-

<PAGE>

[graphic omitted] Commercial
                  Federal Bank

                                EXHIBIT "I (6)"
                           BORROWING BASE CERTIFICATE

To:    Commercial Federal Bank, a FSB ("Bank")
From:  Vaughan Foods, Inc.                           ("Borrower")
       ---------------------------------------------

This Borrowing Base Certificate is delivered pursuant to the Loan and Security
Agreement dated 6/28/2005, between the Borrower and the Bank and accurately
reflects values of the following Collateral as of __________________________.

ACCOUNTS RECEIVABLE
Total Accounts Receivable as of this date
SUBTRACT--INELIGIBLE ACCOUNTS-
(Per attached)                                       LESS        ___________

ELIGIBLE Accounts Receivable Subtotal

Borrowing Base Factor (Receivables)                            X _______80%_
(maximum advance)

TOTAL ELIGIBLE ACCOUNTS RECEIVABLE VALUE                (1)      ___________

INVENTORY
Total Inventory Book Value as of this date
SUBTRACT--INELIGIBLE Inventory
(Obsolete, Inventory with offsetting claims)                LESS ___________

ELIGIBLE Inventory Subtotal

Borrowing Base Factor                                 X          _______50%_

TOTAL ELIGIBLE INVENTORY VALUE                       (2)         ___________

(ELIGIBLE INVENTORY (2) MAY NOT EXCEED $500,000)
AVAILABLE CREDIT BASE (1+2)

CURRENT BALANCE ON REVOLVING LINE OF CREDIT     LESS ___________ INITIAL ADVANCE

TOTAL AVAILABLE OR (OVER) LINE
  (MAXIMUM ALLOWED $4,000,000)                       ___________

AMOUNT REQUESTED                                     ___________

The undersigned represents and warrants that the foregoing is true complete and
correct and that the information reflected in this Borrowing Base complies with
the representations and warranties set forth in the Security Agreement and in
the Loan Agreement between the undersigned and Commercial Federal Bank, a FSB
dated __________ . The undersigned also represents and warrants that all the
payroll taxes are current.

By: _____________________
Mark Vaughan - President
<PAGE>

                        AMENDMENT OF PROMISSORY NOTE AND
                         ACKNOWLEDGMENT OF CROSS-DEFAULT
                        --------------------------------

                                                             Loan No. 3700692743

        THIS AMENDMENT OF PROMISSORY NOTE AND ACKNOWLEDGMENT OF CROSS-DEFAULT is
entered  into by and  between  VAUGHAN  FOODS,  INC.,  an  Oklahoma  corporation
("Borrower"), and COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK ("Lender").

                                R E C I T A L S:
                                ----------------

        A.      On or about March 22, 2005,  Borrower  executed and delivered to
Lender  a  Promissory  Note  in  the  original  principal  sum  of  Two  Hundred
Twenty-Four Thousand One Hundred Dollars  ($224,100.00) which provided financing
to Borrower  related to Borrower's  acquisition  of certain  truck  trailers and
related refrigeration units ("March Note"); and

        B.      On or about an even date herewith, Lender is entering into a new
revolving  credit  line  loan made or to be made by  Lender  to  Borrower  in an
original maximum principal amount of up to Four Million Dollars  ($4,000,000.00)
("Revolving Note"); and

        C.      As an inducement to Lender to enter into the Revolving Note, and
in consideration of Lender actually entering into the same,  Borrower is willing
to modify the March Note to cross-default it with the Revolving Note.

        NOW, THEREFORE, the parties agree as follows:

        1.      The "Default"  section of the March Note is modified by adding a
new subsection, which provides as follows:

                DEFAULT UNDER  REVOLVING NOTE. A default occurs and is not cured
        within the  applicable  cure period under the Revolving  Note or related
        loan documents  with Lender in the original  principal sum of up to Four
        Million Dollars ($4,000,000.00).

        Default  under the March Note that is  produced as a result of a default
in the  Revolving  Note shall  constitute  an  immediate  acceleration,  without
further  notice or right to cure, of the  obligations of the March Note and will
authorize Lender to exercise any and all remedies available with respect to such
default, including, but not limited to, those remedies available to Lender under
Oklahoma law and under the documents and instruments securing the March Note.

        2.      Except as amended herein, the March Note and all other documents
evidencing  and/or securing the  obligations  thereof shall remain in full force
and effect as written.

                                      -1-PROMISSORY NOTE EXTENSION AGREEMENT
                       -----------------------------------

         THIS  PROMISSORY  NOTE EXTENSION  AGREEMENT  ("Agreement")  is made and
entered into effective as of June 28, 2006, by and among VAUGHAN FOODS, INC., an
Oklahoma  corporation  ("Borrower"),  MARK E. VAUGHAN and VERNON J. BRANDT,  JR.
(collectively  "Guarantors"),  and  BANK  OF  THE  WEST,  a  California  banking
corporation,  successor by merger to Commercial  Federal Bank, a Federal Savings
Bank ("Lender").

                                R E C I T A L S:
                                ----------------

         A.       Borrower  and Lender are  parties to a  Promissory  Note dated
June  29,  2005,  in the  original  principal  amount  of Four  Million  Dollars
($4,000,000.00)  ("Note").  By the terms of Unconditional  Guaranties of Payment
dated June 29, 2005, Guarantors  unconditionally guaranteed to Lender Borrower's
payment and performance under the Note.

         B.       The Note matured on June 28, 2006, and the parties hereto have
entered into this  Agreement  for purposes of extending the maturity date of the
Note.

         NOW, THEREFORE, for valuable consideration, the parties hereto agree as
follows:

         1.       PRINCIPAL BALANCE. The outstanding  principal amount due under
the Note is currently Two Million Eight  Hundred  Fourteen  Thousand Two Hundred
Ninety-Three  and 75/100  Dollars  ($2,814,293.75). In  addition,  interest  has
accrued and  continues  to accrue  under the terms of the Note.  Borrower  shall
continue to pay monthly interest  payments to Lender under the terms of the Note
until the Due Date, as amended hereby.

         2.       DUE  DATE.  The Due  Date as  defined  in the  Note is  hereby
extended to October 31, 2006, on which date all principal and interest remaining
outstanding shall be paid in full without further notice or demand.

         3.       MISCELLANEOUS.  Borrower covenants and agrees with Lender that
it has no defenses to the payment of the Note and the  performance of Borrower's
obligations thereunder. Except as expressly modified herein, all other terms and
provisions of the Note shall remain in full force and effect.

                                        VAUGHAN FOODS, INC., an Oklahoma
                                        corporation, Borrower

Date: JULY 19, 2006                     By: /s/ MARK E. VAUGHAN
                                            ------------------------------------
                                            Mark E. Vaughan, President

                                      -1-
<PAGE>

Date: JULY 19, 2006                         /s/ MARK E. VAUGHAN
                                            ------------------------------------
                                            MARK E. VAUGHAN, Guarantor

Date: JULY 19, 2006                         /s/ VERNON J. BRANDT, JR.
                                            ------------------------------------
                                            VERNON J. BRANDT, JR., Guarantor

                                            BANK OF THE WEST, a California
                                            banking corporation, successor by
                                            merger to Commercial Federal Bank, a
                                            Federal Savings Bank, Lender

Date: JULY 21, 2006                         By: /s/ MICHAEL A. WARREN
                                                --------------------------------
                                                    Its: BBC MANAGER
                                                         -----------------------

<PAGE>

             PROMISSORY NOTE (REVOLVING) - ADJUSTABLE INTEREST RATE
             ------------------------------------------------------

$4,000,000.00                                                Loan No. 3700692971
                                                                      ----------

         1.       BORROWER'S  PROMISE TO PAY PRINCIPAL  AND INTEREST.  For value
received,  the  undersigned  Maker  ("Borrower"),  promises to pay to COMMERCIAL
FEDERAL BANK, A FEDERAL SAVINGS BANK, its successors or assigns  ("Lender"),  at
its office at 777 N.W.  Grand  Boulevard,  Suite 650,  Oklahoma  City,  Oklahoma
73118, or at such other place as Lender may from time to time designate, without
offset or deduction,  the principal sum of Four Million Dollars  ($4,000,000.00)
or so much thereof as may be  outstanding  from time to time hereunder and under
the Loan and  Security  Agreement  of even date  herewith  between  Borrower and
Lender  ("Loan  Agreement"),  with  interest  from the date hereof on the unpaid
principal balance at the initial interest rate of six and three-fourths  percent
(6.75%) per annum, interest only payable monthly to Lender beginning on July 28,
2005,  and  continuing on the  twenty-eighth  (28th) day of each and every month
thereafter  (subject to  adjustment as provided  hereafter)  until June 28, 2006
("Due Date"),  on which date any unpaid  principal,  interest and all other sums
due under this Note shall be paid in full.  Advances of principal  shall be made
in accordance with the terms of the Loan Agreement.  This is a revolving line of
credit  loan and  Borrower  shall be  entitled  to  borrow,  repay and  reborrow
principal  under  this  Note,  subject  to the  terms of this  Note and  related
documents and agreements,  including the "Borrowing Base" limitations  contained
in the Loan Agreement.

         Interest payable  under this Note shall be calculated on the basis of a
three hundred  sixty (360) day year with  interest  charged on a daily basis for
the  actual  number  of days  that  principal  is  outstanding  from the date of
disbursement until paid.

         2.       ADJUSTABLE   INTEREST  RATE  PROVISIONS   (MULTIPLE   REQUIRED
ADJUSTMENTS).  Borrower  agrees  that the  interest  rate on this Note  shall be
adjusted on each Interest Rate  Adjustment  Date, as defined below, to be equal,
following such date until the next Interest Rate Adjustable  Date, to the sum of
(i) the Prime Rate of interest quoted periodically by THE WALL STREET JOURNAL as
the  base  rate on  corporate  loans  posted  by at least  seventy-five  percent
(75.00%) of the nation's  thirty (30) largest  banks (such rate being  hereafter
referred to as the "Index");  plus (ii)  three-fourths  of one percentage  point
(0.75%) (or 75 basis points).

                  a.       INTEREST  RATE  ADJUSTMENTS.  Changes in the interest
         rate on this Note will  become  effective  on the date of any change in
         the Index  during the term of this Note,  each of which dates is called
         an "Interest Rate Adjustment Date."

                  b.       NON-WAIVER OF ADJUSTMENTS. If Lender, due to delay or
         oversight,  does not give  Borrower  prompt  notice of an interest rate
         adjustment  following an Interest Rate  Adjustment  Date, this will not
         constitute a waiver of Lender's right and option to make an adjustment,
         and Lender may still at any time within ninety (90) days  following the
         Interest Rate Adjustment Date notify Borrower of such  adjustment.  Any
         interest rate  adjustment  made within  ninety (90) days  following the
         Interest Rate Adjustment Date shall be effective  retroactively  to the
         Interest Rate Adjustment Date, and Borrower agrees

                                      -1-
<PAGE>

         to reimburse  Lender on demand for any interest and  principal due as a
         result of such retroactive adjustment.

                  c.       ALTERNATIVE INDEX. If, at any time during the term of
         this  Note,   the  Index  is  no  longer   available  or  is  otherwise
         unpublished,  Lender may  select an  alternative  published  index over
         which Lender has no control,  in which case such alternative index will
         become the Index provided in this Note. The alternative  index selected
         by Lender  shall be  reasonably  comparable  to the  former  Index with
         respect to rate levels and frequency of fluctuation.

                  d.       NOTICES.  Notice of any change in the  interest  rate
         shall be deemed  given by Lender when such notice is  deposited  in the
         United States mail, postage prepaid, addressed to Borrower.

         3.       NOTICE. Except as may be otherwise specified in this Note, any
notices required to be given hereunder shall be given in the manner specified in
the Loan Agreement executed by Borrower and Lender on an even date herewith.

         4.       CREDITING OF PAYMENTS.  Each installment payment in any amount
received by Lender shall be credited as of its date of receipt by Lender,  first
to interest then due and the remainder to  principal,  and interest  shall cease
upon the principal so credited as of the date that such credit is made.

         5.       DEFAULT BY BORROWER.  Should  Borrower fail to make payment of
any  installment  or other sum within ten (10) days after the date when due,  or
should  Borrower fail to perform any other  provision or condition  contained in
this Note or in any instrument securing this Note, within twenty (20) days after
written notice of default is given by Lender, this Note shall be in default, and
the whole sum of principal  and interest  shall  become  immediately  due at the
option of Lender and regardless of any prior forbearance.  Interest shall accrue
following  any event of  default  hereunder  at the rate set forth in this Note,
plus  five  percentage  points  (5.00%).  As used in this  Note  and in the Loan
Documents (as hereinafter  defined) an event of default shall include, but shall
not be limited to:

                  a.       Any payment or sum required by this  Note or the Loan
         Documents is not received by Lender  within ten (10) days after its due
         date; or

                  b.       Borrower  fails  to  perform  any  other   obligation
         required  under  this  Note or the Loan  Documents,  or does any act or
         allows any condition to occur or exist which is  prohibited  under this
         Note or the Loan Documents,  which is not cured within twenty (20) days
         after written notice of default by Lender; or

                  c.       Borrower fails to comply with any other  agreement in
         any of the documents and agreements  forming a part of the  transaction
         of which this Note is a part,  including the Loan  Documents,  which is
         not cured within  twenty (20) days after  written  notice of default by
         Lender; or

                                      -2-
<PAGE>

                  d.       Any  representation or warranty made herein or in any
         of the Loan Documents,  or otherwise in connection with the application
         for or making  of this  loan,  proves to be  untrue,  or  Borrower  has
         omitted or failed to  disclose  a  material  fact to Lender at any time
         prior to the date of this  Note  which if  disclosed  would  have had a
         significant  impact on  Lender's  decision  whether to approve the loan
         evidenced by this Note and the Loan Documents; or

                  e.       The  commencement  by  or  against  Borrower  of  any
         proceedings  under any  bankruptcy  or  similar  law for the  relief of
         debtors of the  United  States or any state or the  appointment  of any
         receiver, trustee, assignee for the benefit of creditors,  conservators
         or similar  parties for the Borrower or any of its  property,  which in
         the  case  of  proceedings  commenced  against  the  Borrower  are  not
         dismissed within sixty (60) days after commencement; or

                  f.       An    assignment,     transfer,     conveyance,    or
         relinquishment  by Borrower of any of the rights or  obligations  under
         this Note; or

                  g.       The Collateral (as defined in the Loan  Agreement) is
         impaired,  pledged,  or  transferred  in whole or in part such that the
         first lien security of Lender in such  Collateral,  including,  but not
         limited to, the inventory,  accounts receivable or general intangibles,
         is diminished,  altered, impaired or encumbered,  such as by failure of
         Borrower to pay any taxes and  assessments  prior to delinquency or the
         filing of any lien which takes priority over any lien of Lender; or

                  h.       A  material   adverse  change  occurs  in  Borrower's
         financial  condition,  Lender  believes  the  prospect  of  payment  or
         performance of this Note is impaired,  or Lender in good faith believes
         itself insecure;

                  i.       Any of the  preceding  events  occurs with respect to
         any  Guarantor  of  this  Note,  or  any  Guarantor   dies  or  becomes
         incompetent,  or revokes or  disputes  the  validity  of, or  liability
         under, any guaranty of this Note;

                  j.       A  default  occurs  that  is  not  cured  within  any
         applicable  notice  and/or  cure  period  under  any other  note,  loan
         agreement, or obligation of Borrower to Lender, whether now existing or
         hereafter  created,  or to any of Borrower's  affiliates,  whether such
         loan is now existing or hereafter created,  including,  but not limited
         to a term loan made to  Borrower  on or about  March 22,  2005,  in the
         original  principal  amount of Two  Hundred  Twenty-Four  Thousand  One
         Hundred Dollars ($224,100.00) and known as Loan No. 3700692743, and any
         renewal or replacement of such loan; or

                  k.       The death of Mark E.  Vaughan,  provided  that Lender
         will not  exercise  its right to declare this loan to be in default due
         to such death  provided  that (a) at date of death,  Borrower is not in
         default of any of its payment and performance obligations of this Note,
         (b)  Borrower  does not  cause any Event of  Default  specified  in (2)
         through  (i)  inclusive  above to occur,  (c) within  ninety  (90) days
         following  such  death,  Borrower  provides  to Lender a detailed  plan
         for business succession and loan repayment, and (d)

                                       -3-
<PAGE>

         such  plan  is  determined  by  Lender  in its  sole  discretion  to be
         acceptable.  If any of the foregoing conditions is not satisfied,  then
         the unpaid  principal and all accrued  interest and other charges under
         this Note will automatically be fully due and payable,  without written
         notice or demand required of and by Lender.

         6.       LATE CHARGE. Borrower agrees: (a) to pay immediately to Lender
without  demand in the  event any  installment  or other  payment  or sum is not
actually received by Lender within ten (10) days after its due date, and without
regard to the date as of which such payment is credited, an amount equal to five
percent  (5.00%) of the  installment  or other  payment or sum due;  (b) that it
would be  impractical or extremely  difficult to fix Lender's  actual damages in
the event that any  installment,  payment or sum shall not be paid when due; and
(c) that such amount shall be presumed to be the amount of damages for such late
payment.  This  paragraph  and the  amount  which it  provides  shall  not limit
Lender's right under this Note, the Loan Agreement,  or any instrument  securing
this Note, or otherwise, to compel prompt performance hereunder and thereunder.

         7.       PREPAYMENT PRIVILEGE. This Note may be prepaid, in whole or in
part,  at any time without  penalty.  Prepayments  shall be applied  against the
outstanding  principal  balance of the Note and shall not extend or postpone the
due date of any  subsequent  monthly  installments  or change the amount of such
installments, unless Lender shall agree otherwise in writing.

         8.       NOTE PAYABLE IN U.S.  DOLLARS.  Principal,  interest,  and all
charges are payable in lawful money of the United States.

         9.       OBLIGATIONS  OF PERSONS  UNDER THIS  NOTE.  In this Note,  the
singular shall include the plural,  and this Note shall be the joint and several
obligation  of each Maker as Borrower,  in the event that there is more than one
Maker.

         10.      SECURITY/ACCELERATION CLAUSE. This Note is secured by the Loan
Agreement,  a Security Agreement,  one or more Financing  Statements,  and other
instruments,  agreements  and documents or even date herewith which grant Lender
security interests in certain property (the foregoing are collectively  referred
to as "Loan  Documents" and the  collateral  encumbered by the Loan Documents is
referred to as the "Property" or the "Collateral").  The obligations,  covenants
and agreements of each and every of the Loan Documents are hereby made a part of
this Note to the same  extent and with the same effect as if they were fully set
forth herein,  and Borrower does hereby agree to perform and keep each and every
obligation,  covenant and agreement set forth in this Note and in the other Loan
Documents.  This Note shall evidence,  and the Loan Documents shall secure,  the
indebtedness  described herein, any future loans or advances that may be made to
or on behalf of Borrower by Lender at any time or times hereafter under the Loan
Documents,  and any other amounts required to be paid by Borrower under the Loan
Documents,  and any  such  loans,  advances  or  amounts  shall  be added to the
indebtedness  evidenced  by this Note,  and shall bear  interest at the interest
rate then  effective,  unless a greater rate is  expressly  provided for in this
Note or the other Loan Documents.

         11.      ASSUMABILITY OF THIS NOTE. If this Note, any Loan Documents or
any Property encumbered by such Loan Documents is assumed,  assigned or conveyed
by Borrower in whole

                                       -4-
<PAGE>

or in part, or upon a sale,  assignment or conveyance of any ownership  interest
in Borrower,  or upon a sale or conveyance (whether voluntary or involuntary) of
all or a portion of the Property  described in the Loan  Documents,  or upon the
occurrence of any other  transaction  or event  referenced and prohibited in the
Loan  Agreement,  or if any plan or attempt is made to do or perform  any of the
foregoing,  this Note shall  automatically  and  without  notice  from Lender at
Lender's  option be deemed to be in  default,  and Lender may declare all unpaid
principal,  interest  and other sums under this Note to be  immediately  due and
payable in full. The foregoing  acceleration shall not be applicable in the case
of:

                  a.       Transfers by devise or descent or by operation of law
         upon  the  death  of an  individual  owning a  beneficial  interest  in
         Borrower;

                  b.       Sales  of  inventory   in  the  ordinary   course  of
         Borrower's business operations; and

                  c.       Sales or transfers for fair market  consideration  of
         fixtures or any routine personal  property used in the operation of the
         Borrower's  business,   provided  that  such  sales  or  transfers  are
         incidental to the replacement of like fixtures and personal property of
         newer and better quality and condition.

         If Lender  consents  (which  consent may be  withheld in Lender's  sole
discretion)  to an  assignment,  conveyance  or assumption of this Note, or to a
sale or  conveyance  of all or a portion of the  Property,  or to a transfer  or
conveyance of any ownership interest in Borrower except as permitted above, said
consent shall be  conditioned  upon  compliance  with the  following  terms (and
others  as  determined  by  Lender in its sole  discretion):  (a) the  ownership
entity,  acquisition  terms,  financial  condition,  and credit  and  management
expertise  of  buyer or  assignee  are  approved  by  Lender  in  Lender's  sole
discretion;  (b) buyer or assignee  executes a written  assumption  agreement in
form and  content as prepared  by Lender;  (c) buyer or assignee  pays Lender an
assumption fee equal to one percent (1.00%) of the outstanding principal balance
of this Note as of the date of transfer; (d) Borrower, buyer or assignee pays to
Lender on demand all costs and expenses  including,  but not limited to,  credit
report fees, recording fees and attorneys' fees incurred by Lender in connection
with  the  transaction;  and (e)  buyer or  assignee  complies  with  all  other
requirements reasonably deemed necessary by Lender.

         12.      MAXIMUM  INTEREST.  In no event  whatsoever  shall the  amount
paid, or agreed to be paid, to Lender for the use,  forbearance  or retention of
the  money  to be  loaned  hereunder  ("Interest")  exceed  the  maximum  amount
permissible  under  applicable  law. If the  performance  or  fulfillment of any
provision  hereof or of the Loan  Agreement or any other Loan Documents or other
agreement  between  Lender and Borrower  shall result in Interest  exceeding the
limit for interest  prescribed by law, then the amount of such Interest shall be
reduced to the  maximum  rate which may  lawfully  be  charged or  collected  by
Lender. If, from any circumstances whatsoever, Lender should receive as Interest
an amount which would exceed the highest  lawful rate, the amount which would be
excessive  Interest  shall be applied to the reduction of the principal  balance
owing hereunder (or, at the option of Lender,  be paid over to Borrower) and not
to the payment of Interest.

                                       -5-
<PAGE>

         13.      COSTS OF COLLECTION  AND/OR  ENFORCEMENT.  Borrower,  together
with all sureties,  endorsers,  and guarantors of this Note, if any, jointly and
severally  promise to pay: (a) all reasonable  costs and expenses of enforcement
and/or collection, including without limitation,  reasonable attorneys' fees, in
the event this Note or any  portion of this Note after  default is placed in the
hands of attorneys for enforcement  and/or  collection and such is effected with
or without suit; (b) reasonable  attorneys'  fees, as determined by the judge of
the court if such  determination  is required by law,  and all other  reasonable
costs,  expenses and fees  incurred by Lender in the event suit is instituted to
collect or enforce  this Note or any  portion of this Note;  (c) all  reasonable
costs and expenses  provided for in the Loan Agreement and other Loan Documents,
or in any other instrument given as security for this Note and/or incurred by or
on behalf of Lender in connection  with  collecting or otherwise  enforcing  any
right of Lender under this Note, the Loan Agreement,  the Loan Documents, or any
other  instrument  given as security for this Note; and (d) all reasonable costs
and expenses, including, without limitation, reasonable attorneys' fees incurred
by  Lender in  connection  with any  bankruptcy,  insolvency  or  reorganization
proceeding or  receivership  in which Borrower is involved,  including,  without
limitation, reasonable attorneys' fees incurred in making any appearances in any
such  proceeding or in seeking  relief from any stay or injunction  issued in or
arising out of any such proceeding.

         14.      CERTAIN WAIVERS. Except to the extent provided to the contrary
in this Note,  Borrower and all co-makers,  sureties and endorsers of this Note,
if any, jointly and severally waive diligence,  grace,  demand,  presentment for
payment,  exhibition  of this  Note,  protest,  notice  of  protest,  notice  of
dishonor,  notice of demand,  notice of  nonpayment,  and any and all  exemption
rights against the indebtedness evidenced by this Note, and agree to any and all
extensions  or  renewals  from time to time  without  notice and to any  partial
payments of this Note made before or after maturity and that no such  extension,
renewal  or  partial  payment  shall  release  any one or all of them  from  the
obligation of payment of this Note or any  installment of this Note, and consent
to offsets of any sums owed to any one or all of them by Lender at any time.

         15.      EXERCISE OF RIGHTS.  No single or partial  exercise by Lender,
or delay or omission in the  exercise  by Lender,  of any right or remedy  under
this Note,  Loan  Agreement,  or other Loan Documents or authorized by law shall
preclude,  waive or limit the exercise  thereof,  any other or further  exercise
thereof, or the exercise of any right or remedy.  Lender shall at all times have
the right to  proceed  against  Borrower  and/or  any  portion  of the  Property
securing  this Note in such manner as Lender may deem fit,  without  waiving any
other rights or remedies with respect to the Property,  any portion thereof,  or
interest therein.

         16.      NO  MODIFICATIONS.  This Note may not be  changed,  amended or
modified,  except in a writing expressly  intended for such purpose and executed
by Borrower and Lender.

         17.      GOVERNING   LAW.  The  loan  contract   between  the  parties,
including  this  Note,  the Loan  Agreement  and other Loan  Documents,  is made
pursuant to and shall be construed and governed by the laws of the United States
and the rules and  regulations  promulgated  thereunder,  and, to the extent the
laws of a state are applicable  (including laws regarding usury), by the laws of
the State of Oklahoma.

                                       -6-
<PAGE>

         18.      CONSTRUCTION.  The  words  "Borrower"  and  "Lender"  shall be
deemed to include the respective heirs, personal representatives, successors and
assigns of each, and shall denote and singular and/or plural,  and the masculine
and/or feminine,  and natural and/or artificial  persons,  whenever and wherever
the context so requires.  The captions  herein are inserted only for convenience
of reference and in no way define, limit or describe the scope or intent of this
Note or any particular  paragraph or section hereof, or the proper  construction
thereof.

         19.      TIME OF THE ESSENCE. Time shall be of the essence in this Note
with respect to all of Borrower's obligations hereunder.

         20.      CONSENT TO RELIEF FROM STAV.  Borrower  hereby  agrees that in
the event on or  before  the date all sums  under  this Note are paid in full to
Lender,  Borrower (by Borrower's  own action or the action of any  shareholders,
officers,  directors  or  creditors),  (i) files  with any  bankruptcy  court of
competent  jurisdiction or is the subject of any petition for relief under Title
11 of the U.S.  Code,  as  amended,  (ii) is the subject of any order for relief
issued under such Title 11 of the U.S.  Code, as amended,  (iii) files or is the
subject of any petition seeking any  reorganization,  arrangement,  composition,
readjustment,  liquidation,  dissolution, or similar relief under any present or
future federal or state act or law relating to bankruptcy,  insolvency, or other
relief for debtors, (iv) seeks, consents to, or acquiesces in the appointment of
any trustee, receiver,  conservator, or liquidator, or (v) is the subject of any
order,  judgment,  or  decree  entered  by any court of  competent  jurisdiction
approving  a  petition   filed  against  such  party  for  any   reorganization,
arrangement,  composition,  readjustment,  liquidation,  dissolution, or similar
relief  under any  present  or future  federal or state act or law  relating  to
bankruptcy,  insolvency,  or  relief  for  debtors,  which  in  the  case  of an
involuntary  proceeding  brought against  Borrower is not dismissed within sixty
(60) days after  commencement,  then all sums under this Note shall thereupon be
deemed to be immediately  due and payable in full, and Lender shall thereupon be
entitled to relief from any  automatic  stay imposed by Section 362 and Title 11
of the U.S.  Code, as amended,  or otherwise,  on or against the exercise of the
rights and remedies  otherwise  available to Lender as provided in this Note and
in all other  documents made to secure the  obligations  under this Note, and as
otherwise  provided by law,  and  Borrower  hereby  waives the  benefits of such
automatic stay and consents and agrees to raise no objection to such relief.

         21.      SEVERABILITY.   If  any   provision   hereof  should  be  held
unenforceable  or void, then such provision  shall be deemed  separable from the
remaining  provisions  and shall in no way  affect  the  validity  of this Note,
except that if such  provision  relates to the payment of any monetary sum, then
Lender may, at is options, declare the indebtedness evidenced hereby immediately
due and payable.

         EXECUTED this 29th day of June, 2005.

                                        VAUGHAN FOODS, INC., an Oklahoma
                                        corporation, Borrower

                                        By: /s/ Mark E. Vaughan
                                        ----------------------------------------
                                        Mark E. Vaughan, President

                                       -7-
<PAGE>

                                        BORROWER'S ADDRESS:
                                        216 Northeast 12th Street
                                        Moore, Oklahoma 73160

STATE OF OKLAHOMA  )
                   )SS.
COUNTY OF OKLAHOMA )

         The foregoing  instrument was executed and acknowledged  before me this
29th day of June,  2005,  by Mark E. Vaughan,  the  President of VAUGHAN  FOODS,
INC., an Oklahoma corporation, Borrower, for and on behalf of Borrower.

                                        /s/ TARA CHAVEZ
                                        ----------------------------------------
                                        Notary Public

                                          -----------------------------------
                                                      TARA CHAVEZ
                                                     NOTARY PUBLIC
                                                   STATE OF OKLAHOMA
                                                   CLEVELAND COUNTY
                                              COMMISSION NUMBER: 02020623
                                          -----------------------------------
                                          My Commission Expires Dec. 19, 2006

                                      -8-

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