Document:

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                               INDENTURE OF TRUST

                    -----------------------------------------

                                     Between

                      CLEVELAND COUNTY INDUSTRIAL AUTHORITY

                                       and

                 J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION

                          Dated as of December 1, 2004

                      CLEVELAND COUNTY INDUSTRIAL AUTHORITY
                      INDUSTRIAL DEVELOPMENT REVENUE BONDS
                          (VAUGHAN FOODS, INC. PROJECT)
                                   SERIES 2004

<PAGE>

                               INDENTURE OF TRUST

         This INDENTURE OF TRUST, dated as of December 1, 2004, (as supplemented
and amended, this "Indenture"),  is executed by and between the CLEVELAND COUNTY
INDUSTRIAL  AUTHORITY  (the  "Issuer"),  a public trust,  and J.P.  MORGAN TRUST
COMPANY,  NATIONAL  ASSOCIATION,  a  national  banking  association,   having  a
corporate trust office in Oklahoma City,  Oklahoma,  duly organized and existing
under the laws of the State of  Oklahoma,  as  Trustee  (the  "Trustee"),  being
authorized to accept and execute  trusts of the  character  herein set out under
and by virtue of the laws of the State of Oklahoma.

                                   WITNESSETH:

         WHEREAS, Vaughan Foods, Inc., a corporation duly organized and existing
under the laws of the State of  Oklahoma  (the  "Company"),  requested  that the
Issuer  finance  the   acquisition,   construction   and  equipping  of  certain
manufacturing  facilities  and certain solid waste disposal  facilities  located
within Cleveland County,  Oklahoma, in accordance with that certain Mortgage and
Loan  Agreement,   dated  as  of  December  1,  2004,  (as  amended,  the  "Loan
Agreement"), between the Issuer and the Company; and

         WHEREAS,  the provisions of Title 60 Oklahoma Statutes 2001 Section 176
et seq., as amended,  (the "Act"),  authorizes the Issuer to finance such costs;
and

         WHEREAS,  in order to  finance  such  costs,  the Issuer has issued its
Cleveland  County  Industrial  Authority  Industrial  Development  Revenue Bonds
(Vaughan Foods, Inc. Project) Series 2004, (the "Bonds"),  same to be secured by
this Indenture; and

         WHEREAS,  the rights of the Issuer in the underlying  Mortgage and Loan
Agreement dated as of December 1, 2004, between the Company as Mortgagor and the
Issuer as Mortgagee,  pursuant to which the Issuer will loan the proceeds of the
Bonds to the Company and the Company shall obligate itself to repay such loan to
the Issuer; and

         WHEREAS, the Bonds shall be secured additionally as provided herein and
in the Loan Agreement; and

         WHEREAS, the Bonds and the Trustee's authentication  certificate are to
be  substantially  in the following  form,  with such  necessary or  appropriate
variations, omissions and insertions as permitted or required by this Indenture:

                                     - 1 -
<PAGE>

                           (FORM OF SERIES 2004 BOND)

**Unless  this  Bond  is  presented  by  an  authorized  representative  of  The
Depository Trust Company, a New York corporation  ("DTC"),  to the Issuer or its
agent for registration of transfer, exchange, or payment, and any Bond issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized  representative  of DTC (and any  payment is made to Cede & Co. or to
such other entity as is requested by an authorized  representative  of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the Registered Owner hereof, Cede & Co., has an interest
herein.**

Except as provided in the  Indenture  herein  described,  upon any transfer of a
Beneficial  Ownership  Interest (as defined in the  Indenture) in the Bond,  the
purchaser  thereof  shall  be  deemed  to  have  certified  to the  Trustee  and
acknowledged,  represented  and agreed with the Company and the  Underwriter (as
such terms are defined in the Indenture described herein) that such purchaser is
acquiring  the  Bond  for its  owns  account  and  that  it is (i) a  "qualified
institutional  buyer"  within  the  meaning of Rule 144A  promulgated  under the
Securities  Act of 1933, as amended (the "1933 Act"),  or (ii) an  institutional
"accredited  investor,"  as defined in Rule  501(a)(1),  (2), (3), or (7) of the
1933 Act.

                      CLEVELAND COUNTY INDUSTRIAL AUTHORITY

                      INDUSTRIAL DEVELOPMENT REVENUE BONDS

                          (VAUGHAN FOODS, INC. PROJECT)

                                   SERIES 2004

<TABLE>
<CAPTION>
No.  R-                                                                                       $____________________

------------------------------ ---------------------------- --------------------------- ----------------------------
                                                                     Original
        Interest Rate                 Maturity Date                 Issue Date                     CUSIP
        -------------                 -------------                 ----------                     -----
------------------------------ ---------------------------- --------------------------- ----------------------------
              <S>                                               <C>
              %                                                 December __, 2004
------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

REGISTERED OWNER: CEDE & CO.

PRINCIPAL AMOUNT:

         THE CLEVELAND COUNTY INDUSTRIAL  AUTHORITY,  a public trust,  organized
and existing under the laws of the State of Oklahoma (the  "Issuer"),  for value
received,  hereby promises to pay, from the sources hereinafter  described,  the
Principal  Amount stated above, in

                                     - 2 -
<PAGE>

lawful money of the United  States of America,  to the  Registered  Owner stated
above or the registered  assigns, on the Maturity Date stated above (unless this
Bond  shall  have  been  called  for  prior  redemption,  in which  case on such
redemption  date),  upon the presentation and surrender hereof at the designated
corporate trust office of J.P. Morgan Trust Company,  National  Association,  as
Trustee (the "Trustee"),  in Oklahoma City, Oklahoma, or at the principal office
of its  successor in trust under an Indenture of Trust,  dated as of December 1,
2004, (the  "Indenture"),  between the Issuer and the Trustee,  and to pay, from
like sources,  to the  Registered  Owner stated above as of the fifteenth day of
the  calendar  month  prior to an Interest  Payment  Date (the  "Regular  Record
Date"),  by check or draft mailed by the Trustee on the Interest Payment Date to
such  Registered  Owner at his  address as it last  appears on the  registration
books kept for that purpose at the office of the  Trustee,  interest on said sum
in like coin or currency  from the Original  Issue Date stated above or from the
most recent date from which  interest has been paid or duly provided for, at the
Interest Rate stated  above,  payable  semiannually  on June 1 and December 1 of
each year,  commencing  June 1, 2005, on the basis of a 360-day year composed of
twelve 30-day  months,  until  payment of the principal  hereof has been made or
provided for.  Such  Interest  Rate shall be subject to adjustment  upon certain
events as described in the  Indenture  and more  specifically  an Interest  Rate
Step-up as defined in the Indenture could be  implemented.  The Trustee may make
payments of principal at maturity or upon  redemption and payment of interest by
wire transfer  within the United  States to any owner of at least  $1,000,000 in
aggregate principal amount of the Bonds requesting the same in writing addressed
to the Trustee as provided in this  Indenture.  Any  interest not timely paid or
duly  provided for shall cease to be payable to the  Registered  Owner hereof at
the close of business on the applicable Regular Record Date and shall be payable
to the Registered Owner hereof at the close of business on a Special Record Date
(as defined in the  Indenture) for the payment of any defaulted  interest.  Such
Special  Record  Date  shall be  fixed by the  Trustee  whenever  monies  become
available  for payment of the  defaulted  interest,  and notice of such  Special
Record Date shall be given to the Registered Owner hereof not less than ten days
prior  thereto.  If the  date  for  making  any  payment  or the  last  day  for
performance  of any act or the exercise of any right,  as provided in this Bond,
shall not be a "Business Day" as defined in this Indenture,  such payment may be
made or act  performed or right  exercised on the next  succeeding  Business Day
with the same force and effect as if done on the nominal  date  provided in this
Bond.  Notwithstanding  anything  herein  to the  contrary,  when  this  Bond is
registered  in the name of a Depository  (as defined in this  Indenture)  or its
nominee,  the principal and redemption  price of and interest on this Bond shall
be  payable  in same  day or  federal  funds  delivered  or  transmitted  to the
Depository or its nominee.

         This Bond is one of a duly  authorized  series  of bonds of the  Issuer
designated as "Cleveland  County  Industrial  Authority  Industrial  Development
Revenue Bonds (Vaughan  Foods,  Inc.  Project)  Series 2004" (the "Bonds").  The
Bonds have been issued under the provisions of Title 60 Oklahoma  Statutes 2001,
Section 176 et seq.,  as amended (the  "Act"),  to finance  costs of  acquiring,
constructing  and equipping  certain  manufacturing  facilities  and solid waste
disposal facilities (the  "Facilities");  to fund a reserve fund with respect to
the Bonds; and to fund certain costs of issuing the Bonds.

                                     - 3 -
<PAGE>

         This Bond is a limited obligation of the Issuer payable solely from and
secured by (a) a pledge of certain  rights of the Issuer  under and  pursuant to
the  Mortgage  and Loan  Agreement  dated as of  December  1,  2004,  (the "Loan
Agreement"),  between the Issuer and Vaughan Foods, Inc., (the "Company"); (b) a
pledge of the Funds and  Pledged  Revenues  other than the  Rebate  Fund (all as
defined in the  Indenture);  (c) an assignment  of the Issuer's  mortgage on the
Property  (as  defined  in  the  Indenture)  (including  personal  property  and
equipment)  and of the Issuer's  security  interest in the Pledged  Revenues (as
defined in the Indenture) of the Company; the personal Guaranty of Mark Vaughan,
as an individual;  and benefits payable under a key-man life insurance policy in
the amount of $1,000,000 on the life of Mark Vaughan.

         This Bond shall not constitute or become an  indebtedness,  a debt or a
liability of or a charge against the general credit or taxing power of the State
of Oklahoma or any county,  city, city and county,  town,  school  district,  or
other subdivision of the State of Oklahoma or of any other political subdivision
or body corporate and politic within the State of Oklahoma other than the Issuer
(but only to the extent of the revenues pledged in this Indenture),  and neither
the State of  Oklahoma,  nor any county,  city,  city and county,  town,  school
district or other subdivision of the State of Oklahoma, except the Issuer to the
extent  provided above,  shall be liable hereon;  nor shall this Bond constitute
the  giving,  pledging,  or  loaning  of the  faith  and  credit of the State of
Oklahoma,  or any county,  city, city and county, town, school district or other
subdivision  of the State of Oklahoma or of any other  political  subdivision or
body  corporate and politic  within the State of Oklahoma,  but shall be payable
solely from the funds  pledged  therefor.  The  issuance of this Bond shall not,
directly or  indirectly or  contingently,  obligate the State of Oklahoma or any
subdivision  of the State of Oklahoma  nor empower the Issuer to levy or collect
any form of taxes or assessments  therefor or to create any indebtedness payable
out of taxes or  assessments or make any  appropriation  for the payment of this
Bond, and such  appropriation or levy is prohibited.  The Bonds and the interest
thereon do not  constitute an  indebtedness  of the Issuer within the meaning of
any constitutional or statutory limitation.

         Reference is hereby made to the Indenture and the Loan  Agreement for a
description of the revenues pledged, the nature and extent of the security,  the
rights,  duties and  obligations  of the Issuer,  the Trustee and the Registered
Owners of the Bonds and the terms and  conditions  upon which the Bonds are, and
are to be,  secured,  and a statement  of the  rights,  duties,  immunities  and
obligations of the Issuer and the Trustee.

          The Bonds  maturing  December 1, 2024,  shall be subject to redemption
prior to maturity, in whole or in part, at the written direction of the Company,
on December 1, 2014, and on any date thereafter, at a redemption price set forth
below  (expressed  as a percentage of the  principal  amount so redeemed),  plus
accrued interest to the redemption date:

                        REDEMPTION DATE                REDEMPTION PRICE
                        ----------------               ----------------
                  Dec.1, 2014 to Nov. 30, 2015                102%
                  Dec.1, 2015 to Nov. 30, 2016                101%
                  Dec.1, 2016 and thereafter                  100%

                                     - 4 -
<PAGE>

         The Bonds are  subject to  optional  redemption  by the Issuer upon the
written  direction  of the Company  Representative  as a whole or in part at any
time, at a redemption price equal to the principal amount thereof to be redeemed
and  accrued  interest  to the  redemption  date,  in  certain  event of damage,
destruction  or  condemnation  to the property of the Company  located in Moore,
Cleveland County, Oklahoma. The Bonds are also subject to optional redemption by
the Issuer upon the written direction of the Company Representative, as a whole,
but not in part,  at  redemption  prices equal to 110% of the  principal  amount
thereof to be  redeemed  and  accrued  interest  to the  redemption  date,  as a
condition precedent to the acquisition of substantially all of the assets of the
Company  or in the  event of the  merger or  consolidation  of the  Company,  as
provided in the Loan Agreement. The Bonds are also redeemable by the Issuer upon
the direction of the Company Representative at any time after July 1, 2005, at a
redemption  price  equal  to the  principal  amount  of each  Series  2004  Bond
redeemed,  and accrued  interest thereon to the redemption date, from unexpended
proceeds of the Bonds.

         The Bonds are also subject to mandatory  sinking fund redemption by lot
in such manner as the  Trustee may  determine  pursuant to the  Indenture,  at a
redemption  price  equal to 100  percent of the  principal  amount  thereof  and
accrued interest to the redemption date.

         Upon the occurrence of a  Determination  of  Taxability,  as defined in
this  Indenture,  the Bonds are subject to  mandatory  redemption  in whole at a
redemption price equal to 105% of the Outstanding principal amount thereof, plus
interest  accrued to the  redemption  date,  at the  earliest  practicable  date
selected by the Trustee,  after  consultation with the Company,  but in no event
later than 45 days following the Trustee's  notification of the Determination of
Taxability.  The occurrence of a Determination of Taxability with respect to the
Bonds will not  constitute an Event of Default under this Indenture and the sole
remedy of the  Holders  of the Bonds is the  mandatory  redemption  of the Bonds
pursuant to this paragraph.

         In the event  less than all Bonds are to be  redeemed  pursuant  to the
optional  or special  redemption  provisions  of this  Indenture,  they shall be
redeemed in such order of maturity as the Company Representative shall determine
(less than all of the Bonds of a single  maturity  to be selected by lot in such
manner as the Trustee may determine).  Except as hereinafter provided, notice of
the call for redemption  shall be given by the Trustee by mailing by first class
mail a copy of the redemption notice not more than 45 days nor less than 30 days
prior to the redemption date to the Registered Owners of Bonds to be redeemed in
whole or in part at the  address of such  Registered  Owner last  showing on the
registration books.  Failure to give such notice or any defect therein shall not
affect the  validity of any  proceedings  for the  redemption  of such Bonds for
which no such failure or defect  occurs.  All Bonds called for  redemption  will
cease to bear interest after the specified  redemption date,  provided collected
funds for their  payment  are on  deposit at the place of payment at the time of
redemption.

                                     - 5 -
<PAGE>

         Notwithstanding  the foregoing,  no additional notice shall be required
with  respect to  mandatory  sinking  fund  redemption  unless  requested by the
holders  of 100% of the  principal  amount of the  Bonds,  and Bonds need not be
presented for mandatory sinking fund redemption payment.

         The Bonds are issuable  only as fully  registered  bonds in the minimum
denominations  of  $100,000  and in any  integral  multiple  of $5,000 in excess
thereof.  The Bonds shall  initially be registered in the name of Cede & Co., as
nominee for The  Depository  Trust Company  ("DTC"),  to be held in a book entry
system  and:  (i) such Bonds shall be  registered  in the name of the DTC or its
nominee,  as  Bondholder,  and  immobilized  in the custody of DTC;  (ii) unless
otherwise  requested by DTC, there shall be a single Bond  certificate  for each
maturity; and (iii) such Bonds shall not be transferable or exchangeable, except
for transfer to another  depository or another nominee of a depository,  without
further  action by the Issuer.  The owners of  beneficial  interest in the Bonds
shall not have any right to receive Bonds in the form of physical  certificates.
If any  depository  determines  not to continue to act as a  depository  for the
Bonds for use in a book entry system, the Issuer may attempt to have established
a securities  depository/book  entry system  relationship with another qualified
depository  under this Indenture.  If the Issuer does not or is unable to do so,
the  Issuer  and  the  Trustee,   after  the  Trustee  has  made  provision  for
notification to the owners of book entry interests by the then depository, shall
permit withdrawal of the Bonds from the depository, and authenticate and deliver
Bond  certificates in fully registered form (in authorized  denominations of not
less than $100,000 in excess  thereof) to the assignees of the depository or its
nominee.

         While a  depository  is the  sole  holder  of the  Bonds,  delivery  or
notation of partial redemption of Bonds shall be effected in accordance with the
provisions of the Letter of Representations, as defined in this Indenture.

         In addition to the words and terms defined  elsewhere in this Bond, the
following terms shall have the following meanings:

         "BENEFICIAL  OWNER" means, with respect to the Bonds, a person owning a
Beneficial  Ownership Interest therein,  as evidenced to the satisfaction of the
Trustee.

         "BENEFICIAL  OWNERSHIP  INTEREST" means the beneficial right to receive
payments  and notices  with  respect to the Bonds which are held by a Depository
under a book entry system.

         "BOOK ENTRY FORM" or "BOOK ENTRY  SYSTEM"  means,  with  respect to the
Bonds, a form or system, as applicable, under which (i) the Beneficial Ownership
Interests  may be  transferred  only through a book entry and (ii) physical Bond
certificates  in  fully  registered  form are  registered  only in the name of a
Depository  or its  nominee  as  holder,  with the  physical  Bond  certificates
"immobilized" in the custody of the Depository. The book entry system maintained
by and the  responsibility  of the  Depository  (and  not  maintained  by or the
responsibility of the

                                     - 6 -
<PAGE>

Issuer or the Trustee) is the record that  identifies,  and records the transfer
of the  interests  of, the owners of  beneficial  (book entry)  interests in the
Bonds.

         "DEPOSITORY" means any securities  depository that is a clearing agency
under federal law operating and maintaining, with its participants or otherwise,
a book entry system to record ownership of book entry interests in Bonds, and to
effect  transfers  of book entry  interests  in Bonds,  and  includes  and means
initially The Depository  Trust Company (a limited purpose trust  company),  New
York, New York.

         "DIRECT  PARTICIPANT"  means a Participant  as defined in the Letter of
Representations.

         "INDIRECT  PARTICIPANT"  means a Person utilizing the book entry system
of the Depository by, directly or indirectly,  clearing through or maintaining a
custodial relationship with a Direct Participant.

         NEITHER  THE  ISSUER,  THE  COMPANY,  NOR THE  TRUSTEE  WILL  HAVE  ANY
RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANT,  INDIRECT PARTICIPANT OR
ANY BENEFICIAL OWNER OR ANY OTHER PERSON NOT SHOWN ON THE REGISTRATION  BOOKS OF
THE TRUSTEE AS BEING A HOLDER WITH  RESPECT TO: (1) THE BONDS;  (2) THE ACCURACY
OF  ANY  RECORDS  MAINTAINED  BY  DTC  OR ANY  DIRECT  PARTICIPANT  OR  INDIRECT
PARTICIPANT; (3) THE TIMELY OR ULTIMATE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT
OR INDIRECT  PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF
THE PRINCIPAL OR REDEMPTION  PRICE OF OR INTEREST ON THE BONDS; (4) THE DELIVERY
BY  ANY  DIRECT  PARTICIPANT  OR  INDIRECT  PARTICIPANT  OF  ANY  NOTICE  TO ANY
BENEFICIAL  OWNER  WHICH  IS  REQUIRED  OR  PERMITTED  UNDER  THE  TERMS OF THIS
INDENTURE TO BE GIVEN TO REGISTERED  OWNERS; (5) THE SELECTION OF THE BENEFICIAL
OWNERS TO RECEIVE  PAYMENT IN THE EVENT OF ANY PARTIAL  REDEMPTION OF THE BONDS;
OR (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS REGISTERED OWNER.

         Except  for the 15  days  next  preceding  the  mailing  of  notice  of
redemption  of the Bonds (and,  if this Bond or portion  thereof is called,  the
period following the giving of such notice),  this Bond is fully transferable by
the Registered Owner hereof in person or by his duly authorized  attorney on the
registration books kept at the principal office of the Trustee upon surrender of
this  Bond,  together  with a  duly  executed  written  instrument  of  transfer
satisfactory to the Trustee.  Upon such transfer, a new fully registered bond or
bonds  of  authorized  denomination  or  denominations  for the  same  aggregate
principal  amount and  maturity  will be issued to the  transferee  in  exchange
therefor,  all  upon  payment  of the  charges  and  subject  to the  terms  and
conditions set forth in this Indenture.  The Issuer and the Trustee may deem and
treat the person in whose name this Bond is  registered  as the  absolute  owner
hereof,  whether or not this Bond shall be overdue, for the purpose of receiving
payment  (except as provided  above with  respect to

                                     - 7 -
<PAGE>

Regular and Special  Record Dates) and for all other  purposes,  and neither the
Issuer nor the Trustee  shall be affected by any notice to the  contrary.  Bonds
which are  reissued  upon  transfer,  exchange or other  replacement  shall bear
interest from the most recent  Interest  Payment Date to which interest has been
paid or duly  provided  for,  or if no  interest  has been  paid,  then from the
Original Issue Date.

         To  the  extent  permitted  by,  and  as  provided  in  the  Indenture,
modifications or amendments of the Indenture,  or of any indenture  supplemental
thereto,  and of the rights and  obligations  of the Issuer and of the owners of
the Bonds may be made with the consent of the Issuer and, in certain  instances,
with  the  consent  of the  owners  of not less  than a  majority  in  aggregate
principal amount of the Bonds then Outstanding;  provided, however, that no such
modification  or amendment  shall be made which will affect the terms of payment
of the principal of, premium,  if any, or interest on any of the Bonds which are
unconditional,  unless consented to by all Bondholders.  Any such consent by the
owner of this Bond shall be conclusive  and binding upon such owner and upon all
future  owners of this Bond and of any bond issued upon the transfer or exchange
of this Bond whether or not notation of such consent is made upon this Bond.

         The owner of this Bond shall have no right to enforce the provisions of
the  Indenture,  the  provisions  of  which  are  incorporated  herein  by  this
reference, or to institute action to enforce the pledge, assignment or covenants
made therein or to take any action with respect to an Event of Default under the
Indenture  or to  institute,  appear  in or  defend  any  suit,  action or other
proceeding at law or in equity with respect thereto,  except as provided in this
Indenture.  In case an Event of Default  under the  Indenture  shall occur,  the
principal of all the Bonds at any such time Outstanding  under the Indenture may
be declared or may become due and payable, upon the conditions and in the manner
and with the effect provided in this Indenture. The Indenture provides that such
declaration may in certain events be rescinded and annulled by the Trustee under
certain circumstances.

         Neither  the  Chairman  and  Secretary  of the  Issuer,  nor any person
executing the Bonds shall be liable personally on the Bonds or be subject to any
personal liability or accountability by reason of the issuance thereof.

         It is hereby certified,  recited and declared that all conditions, acts
and things required by the  Constitution or statutes of the State of Oklahoma or
by the Act or the Indenture to exist, to have happened or to have been performed
precedent to or in the issuance of this Bond exist,  have happened and have been
performed.

         This Bond shall not be entitled to any benefit under this  Indenture or
any  indenture  supplemental  thereto,  or become  valid or  obligatory  for any
purpose until the Trustee shall have signed the  certificate  of  authentication
hereon.

                                     - 8 -
<PAGE>

         IN WITNESS  WHEREOF,  the  CLEVELAND  COUNTY  INDUSTRIAL  AUTHORITY has
caused  this Bond to be signed  in its name and on its  behalf by the  manual or
facsimile signature of its Chairman,  and an imprint of its corporate seal to be
affixed  hereon  and  attested  by the  manual  or  facsimile  signature  of its
Secretary.

[SEAL]

                                        CLEVELAND COUNTY INDUSTRIAL
                                        AUTHORITY

                                        By:
                                           -------------------------------------
Attest:                                       Charles Thompson,
                                              Chairman

By:
   -------------------------------------
      Donna Roberts
      Secretary

                                     - 9 -
<PAGE>

                              (FORM OF ASSIGNMENT)

FOR VALUE RECEIVED, _________________ the undersigned, hereby sells. assigns and
transfers unto:

--------------------------------------------------------------------------------
             PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE

--------------------------------------------------------------------------------
                    TAX IDENTIFICATION OR SOCIAL SECURITY NO.

the within Bond and all rights thereunder,  and hereby  irrevocably  constitutes
and  appoints  attorney  to  transfer  the  within  Bond on the  books  kept for
registration thereof, with full power of substitution in the premises.

Dated:
      ----------------     -----------------------------------------------------
                           NOTICE:   The  signature  to  this   assignment  must
                           correspond  with the name as it appears upon the face
                           of the  within  Bond  in  every  particular,  without
                           alteration  or  enlargement  or any change  whatever.
                           Signature  must  be  guaranteed  by  a  member  of  a
                           Medallion Signature Program.

                (FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)

 This is one of the Bonds described in the within mentioned Indenture of Trust.

                                        J.P.  MORGAN TRUST COMPANY,
                                        NATIONAL ASSOCIATION

                                        By
                                          --------------------------------------
                                          Authorized Officer

Date of Authentication:

-----------------------

                                     - 10 -
<PAGE>

         WHEREAS,  all things necessary to make the Bonds, when authenticated by
the Trustee and issued as in this  Indenture  provided,  the valid,  binding and
legal  obligations  of the  Issuer and to  constitute  this  Indenture  a valid,
binding and legal  instrument  for the security of the Bonds in accordance  with
its terms, have been done and performed;

         NOW, THEREFORE, THIS INDENTURE WITNESSETH:

         That the Issuer,  in  consideration  of the  premises and of the mutual
covenants  herein  contained and of the purchase and  acceptance of the Bonds by
the owners  thereof  and of the sum of One Dollar to it duly paid by the Trustee
at or before the  execution and delivery of these  presents,  and for other good
and  valuable  consideration,  the receipt of which is hereby  acknowledged,  in
order to secure the payment of the principal of,  premium,  if any, and interest
on all Bonds at any time  Outstanding  under this  Indenture  according to their
tenor and  effect  and to  secure  the  performance  and  observance  of all the
covenants and conditions in the Bonds and herein  contained,  and to declare the
terms and conditions upon and subject to which the Bonds are issued and secured,
has executed and  delivered  this  Indenture and has granted,  bargained,  sold,
alienated, assigned, pledged, set over and confirmed, and by these presents does
grant, bargain,  sell, alienate,  assign, pledge, set over and confirm unto J.P.
Morgan Trust Company,  National  Association,  as Trustee, and to its successors
and  assigns  forever,  all  and  singular  the  following  described  property,
franchises and income:

                  A. The Loan  Agreement,  including  the  rights of the  Issuer
under and  pursuant to the Loan  Agreement  (other than the rights of the Issuer
under  Sections  5.1(f),  8.5 and 10.4 of the Loan  Agreement and other than the
rights of the Issuer to perform  certain  discretionary  acts as reserved in the
Loan Agreement) and the rights, title and interests granted, pledged, bargained,
sold, conveyed and mortgaged by the Company therein,  including Pledged Revenues
(as herein defined).

                  B. All Funds (except the Rebate Fund)  established  under this
Indenture,  except  for monies  deposited  with or paid to the  Trustee  for the
redemption of Bonds,  notice of the  redemption or tender of which has been duly
given,  and all Pledged Revenues payable to the Trustee by or for the account of
the Issuer  pursuant to the Loan Agreement and this  Indenture,  subject only to
the provisions of this  Indenture  permitting  the  application  thereof for the
purposes and on the terms and conditions set forth in this Indenture.

                  C. The Principal Guaranty.

                  D. Key-Man Life Insurance Policy

                  E. Any and all other interests in real or personal property of
every name and nature from time to time  hereafter  by delivery or by writing of
any kind specifically mortgaged, pledged or hypothecated,  as and for additional
security  hereunder by the Issuer or by anyone in its behalf or with its written
consent in favor of the Trustee,  which is hereby  authorized to

                                     - 11 -
<PAGE>

receive any and all such property at any and all times and to hold and apply the
same subject to the terms hereof.

         TO HAVE AND TO HOLD the same  with  all  privileges  and  appurtenances
hereby  conveyed and  assigned,  or agreed or intended to be, to the Trustee and
its successors in said trust and assigns forever;

         IN TRUST,  NEVERTHELESS,  upon the terms herein set forth for the equal
and  proportionate  benefit,  security and protection of all owners of the Bonds
issued  under and  secured by this  Indenture  without  privilege,  priority  or
distinction  as to the lien or  otherwise  of any of the Bonds over any other of
the Bonds except as specifically provided herein:

         PROVIDED,  HOWEVER, that if the Issuer, its successors or assigns shall
well and truly  pay,  or cause to be paid,  the  principal  of the Bonds and the
premium, if any, and the interest due or to become due thereon, at the times and
in the manner  mentioned  in the Bonds  according to the true intent and meaning
thereof,  and shall cause the payments to be made into the Bond  Principal  Fund
and the  Bond  Interest  Fund as  hereinafter  required  or  shall  provide,  as
permitted  hereby,  for the payment  thereof by depositing  with the Trustee the
entire  amount due or to become due  thereon,  or certain  securities  as herein
permitted,  and shall well and truly keep, perform and observe all the covenants
and conditions pursuant to the terms of this Indenture to be kept, performed and
observed  by it,  and shall pay or cause to be paid to the  Trustee  all sums of
money due or to become  due to it in  accordance  with the terms and  provisions
hereof,  then upon such final  payments,  this  Indenture  and the rights hereby
granted shall cease, terminate and be void; otherwise,  this Indenture to be and
remain in full force and effect.

         THIS INDENTURE FURTHER WITNESSETH and it is expressly declared that all
Bonds  issued  and  secured  hereunder  are  to  be  issued,  authenticated  and
delivered,  and all said  property,  rights,  interests  and  revenues and funds
hereby pledged and assigned are to be dealt with and disposed of under, upon and
subject to the terms, conditions,  stipulations,  covenants, agreements, trusts,
uses and  purposes  as  hereinafter  expressed,  and the  Issuer  has agreed and
covenanted,  and does hereby  agree and  covenant  with the Trustee and with the
respective owners from time to time of the Bonds as follows:

                                     - 12 -
<PAGE>

                                    ARTICLE I

               DEFINITIONS; BOND INDENTURE TO CONSTITUTE CONTRACT

         Section 1.1  DEFINITIONS.  All words and phrases not otherwise  defined
herein  shall have the same  meanings  as  assigned to such words and phrases in
Article I of the Loan Agreement and in Article I of this Indenture. In addition,
the following terms,  except where the context indicates  otherwise,  shall have
the respective meanings set forth below:

         "Act" means,  Title 60 Oklahoma Statutes 2001,  Section 176 et seq., as
amended.

         "Additional  Indebtedness"  means all Indebtedness of the Company other
than the Loan.

         "Assignment" means the Assignment of Mortgage and Loan Agreement, dated
as of December 1, 2004, from the Issuer to the Trustee.

         "Audited  Financial  Statements"  means,  as to the Company,  financial
statements  for a Fiscal  Year,  or for such other period for which an audit has
been  performed,  prepared in  accordance  with  generally  accepted  accounting
principles,  which have been audited and reported upon by independent  certified
public accountants.

         "Balloon  Long-Term   Indebtedness"  means  Long-Term  Indebtedness  20
percent  or more of the  principal  payments  of which  are due in any  12-month
period, which portion of the principal is not required by the documents pursuant
to which such Indebtedness is issued to be amortized by redemption prior to such
date.

         "Beneficial Owner" means, with respect to any Bonds in Book Entry Form,
a Person owning a Beneficial  Ownership  Interest  therein,  as evidenced to the
satisfaction of the Trustee.

         "Beneficial  Ownership  Interest" means the beneficial right to receive
payments  and notices  with  respect to the Bonds which are held by a Depository
under a book entry system.

         "Board" means the Board of Directors of the Company.

         "Bonds"  or "Series  2004  Bonds"  means  Cleveland  County  Industrial
Authority  Industrial  Development  Revenue Bonds (Vaughan Foods,  Inc. Project)
Series 2004.

         "Bond  Interest  Fund"  means the Bond  Interest  Fund  created in this
Indenture.

         "Bond  Principal  Fund" means the Bond  Principal  Fund created in this
Indenture.

         "Bondholder" or "holder" or "owner" of Bonds means the Registered Owner
of any Bond.

                                     - 13 -
<PAGE>

         "Book Entry Form" or "book entry  system"  means,  with  respect to any
Bonds, a form or system, as applicable, under which (i) the Beneficial Ownership
Interests  may be  transferred  only through a book entry and (ii) physical Bond
certificates  in  fully  registered  form are  registered  only in the name of a
Depository  or its  nominee  as  Holder,  with the  physical  Bond  certificates
"immobilized" in the custody of the Depository. The book entry system maintained
by and the  responsibility  of the  Depository  (and  not  maintained  by or the
responsibility of the Issuer or the Trustee) is the record that identifies,  and
records the transfer of the interests of, the owners of book entry  interests in
such Bonds.

         "Business  Day"  means any day other than a  Saturday,  a Sunday or any
other day on which  the New York  Stock  Exchange  or banks  are  authorized  or
obligated by law or executive  order to close in New York, New York, or any city
in which the principal corporate trust office of the Trustee is located.

         "Code" means the Internal  Revenue  Code of 1986,  as amended,  and the
regulations issued from time to time thereunder.

         "Commitment  Indebtedness" means the obligation of the Company to repay
amounts  disbursed  pursuant to a  commitment  from a financial  institution  to
refinance when due other  Indebtedness  (including  accrued and unpaid  interest
thereon) of the Company or to purchase  when tendered for purchase by the holder
thereof in  accordance  with the terms  thereof  other  Indebtedness  (including
accrued and unpaid interest  thereon) of the Company,  which other  Indebtedness
was incurred in accordance with the provisions of the Loan  Agreement,  plus any
fees payable to such  financial  institution  for such  commitment and any other
expenses  (including  collection)  thereunder,  including,  without  limitation,
amounts  disbursed and fees and expenses  payable in connection  with any Credit
Facility.

         "Company" or  "Corporation"  means  Vaughan  Foods,  Inc.,  an Oklahoma
corporation, and its successors and assigns.

         "Company  Representative"  or  "Corporation  Representative"  means the
executive director or chief financial officer of the Company or any other person
designated as such by an  instrument in writing  delivered to the Issuer and the
Trustee  by the  chief  executive  officer  of the  Company  or chief  financial
officer.

         "Completion  Date" means the date of the completion of the acquisition,
construction, improvement and equipping of the Facilities described in Exhibit B
to the Loan Agreement, as evidenced by the certificate of the Company filed with
the Trustee as required by the Loan Agreement.

         "Completion  Indebtedness" means any Long-Term Indebtedness incurred by
the Company for the purpose of  financing  the  completion  of the  acquisition,
construction or

                                     - 14 -
<PAGE>

equipping of the facilities for which  Long-Term  Indebtedness  has  theretofore
been incurred in accordance  with the provisions of the Loan  Agreement,  to the
extent  necessary to provide a completed  and equipped  facility of the type and
scope  contemplated  at the time that such  Long-Term  Indebtedness  theretofore
incurred  was  originally  incurred,  and,  to the  extent  the  same  shall  be
applicable,  in accordance  with the general plans and  specifications  for such
facility  as  originally  prepared  with only such  changes as have been made in
conformance  with the documents  pursuant to which such  Long-Term  Indebtedness
theretofore incurred was originally incurred.

         "Consultant"  means a firm or firms  designated in a certificate of the
Company  Representative  which is not,  and no  member,  stockholder,  director,
officer,  trustee or  employee  of which is, an  officer,  director,  trustee or
employee of the Company,  and which is a professional  management  consultant of
national  repute  for having the skill and  experience  necessary  to render the
particular  report required by the provision of the Loan Agreement in which such
requirement appears.

         "Cost of  Issuance  Fund"  means  the  Cost of  Issuance  Fund  created
pursuant to this Indenture.

         "Cost  of the  Project"  means  the  sum  total  of all  reasonable  or
necessary costs  incidental to the financing of the Facilities  described in the
Loan Agreement.

         "Credit  Facility"  means a line of credit,  letter of credit,  standby
bond purchase  agreement or similar  credit  enhancement  or liquidity  facility
established in connection with the issuance of Indebtedness to provide credit or
liquidity support for such Indebtedness.

         "Current Assets" means unrestricted cash of the Company or other assets
of the Company  which are expected to be converted  into cash or consumed in the
production  of income  within the  greater of one year and the normal  operating
cycle of the Company,  all  determined  in  according  with  generally  accepted
accounting principles.

         "Current  Liabilities"  means liabilities of the Company expected to be
liquidated  in the  greater  of one year and the normal  operating  cycle of the
Company,  excluding any liability otherwise  classified as current which will be
settled  from other than  Current  Assets,  all  determined  in  according  with
generally accepted accounting principles.

         "Current   Ratio"  means  the  ratio  of  Current   Assets  to  Current
Liabilities.

         "Debt to Equity  Ratio"  means the  ratio of (i)  Indebtedness  to (ii)
excess of total assets of the Company over total liabilities.

         "Depository" means any securities  depository that is a clearing agency
under federal law operating and maintaining, with its participants or otherwise,
a book entry system to record

                                     - 15 -
<PAGE>

ownership  of book entry  interests  in bonds,  and to effect  transfers of book
entry  interests in bonds in book entry form,  and includes and means  initially
The Depository  Trust Company (a limited purpose trust  company),  New York, New
York.

         "Determination  of  Taxability"  means and shall  occur  when,  (i) the
Trustee  receives  written notice from the Company or a majority of Bondholders,
supported by an Opinion of Bond Counsel  which shall be a nationally  recognized
firm with  expertise in the area of federal  taxation of municipal  bonds,  that
interest on the Bonds is  includable in the gross income of Holders of the Bonds
of any series for  federal  income tax  purposes  or (ii) the  Internal  Revenue
Service  shall  claim in  writing  that  interest  on the Bonds of any series is
includable  in the gross income of Holders of such Bonds for federal  income tax
purposes.

         "Direct  Participant"  means a Participant  as defined in the Letter of
Representations.

         "Environmental Law" means (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1976, 42 U.S.C.  ss.ss. 9601 ET SEQ.; (ii) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by SARA, 42 U.S.C.  ss.ss.  1820 ET SEQ.; (iii) the Hazardous  Materials
Transportation  Act, 49 U.S.C.  ss.ss.  1810 ET SEQ.; (iv) the Toxic  Substances
Control Act, 15 U.S.C.  ss.ss.  2601 ET SEQ.; (v) the Resource  Conservation and
Recovery Act, as amended,  42 U.S.C.  ss.ss.  9601 ET SEQ.; (vi) the Clean Water
Act, 33 U.S.C.  ss.ss.  1251 ET SEQ.; (vii) the Clean Air Act, 42 U.S.C.  ss.ss.
7412 ET SEQ.;  and  (viii);  and any  related  laws of the State of  Oklahoma or
ordinances or resolutions of the Issuer, as any such acts, powers and duties may
be amended, modified or supplemented and any regulations promulgated pursuant to
any of the foregoing statutes.

         "Escrowed  Interest"  means  amounts  (but not  including  any interest
earnings thereon,  except as otherwise provided in the Loan Agreement) deposited
in escrow in connection with the issuance of Long-Term  Indebtedness  and either
held as cash or invested in noncallable  Government  Obligations to pay interest
on such Long-Term  Indebtedness  (but shall not include  capitalized or borrowed
interest).

         "Equipment" means those items of machinery, equipment or other personal
property  installed in the Improvements and pledged to the repayment of the Loan
pursuant to the Loan  Agreement,  and any item of machinery,  equipment or other
personal  property  or  fixtures  acquired  and  installed  in  substitution  or
replacement thereof,  less such machinery,  equipment or other personal property
or fixtures as may be released from such pledge  pursuant to the Loan  Agreement
or taken by  exercise  of the power of eminent  domain as  provided  in the Loan
Agreement, as such items may at any time exist.

         "Event of Default" or "event of default" means those defaults specified
in this Indenture or the Loan Agreement, as appropriate.

                                     - 16 -
<PAGE>

         "Facilities" means collectively, the manufacturing facilities and solid
waste  disposal  facilities of the Company  financed with proceeds of the Bonds,
located in Moore, Cleveland County,  Oklahoma, as more particularly described in
Exhibit B to the Loan Agreement.

         "Fiscal Year" means the fiscal year of the Company.

         "Funds"  means the Project  Fund,  the Bond  Principal  Fund,  the Bond
Interest  Fund, the Cost of Issuance Fund, the Reserve Fund and the Rebate Fund,
and  any  account  created  therein,  all as  established  and  created  by this
Indenture.

         "Governing Body" means the Board of Directors of the Company.

         "Government Obligations" means:

                  1.       (a)  Direct  obligations  (other  than an  obligation
subject to variation in principal repayment) of the United States of America;

                           (b) obligations fully and unconditionally  guaranteed
as to timely payment of principal and interest by the United States of America;

                           (c) obligations fully and unconditionally  guaranteed
as to timely payment of principal and interest by any agency or  instrumentality
of the United  States of America  when such  obligations  are backed by the full
faith and credit of the United States of America;

                           (d) evidences of ownership or proportionate interests
in future interest and principal payments on obligations described above held by
a bank or trust company as custodian, under which the owner of the investment is
the  real  party  in  interest  and  has  the  right  to  proceed  directly  and
individually against the obligor and the underlying  government  obligations are
not  available  to any person  claiming  through  the  custodian  or to whom the
custodian may be  obligated,  provided,  however,  that  Government  Obligations
described  in this  subsection  (d)  may  only  be  used  in  connection  with a
defeasance of the Bonds under this Indenture; or

                           (e) securities of or other  interests in any open-end
or closed-end  management type investment company or investment trust registered
under the federal "Investment Company Act of 1940," 15 U.S.C. Section 80(a)-1 ET
SEQ., if the portfolio of such investment company or investment trust is limited
to United States of America  obligations  which are backed by the full faith and
credit of the  United  States of  America  and to  repurchase  agreements  fully
collateralized  by  such  obligations  and if any  such  investment  company  or
investment trust actually takes delivery of such collateral,  either directly or
through an authorized custodian.

                                     - 17 -
<PAGE>

                  2. Pre-refunded  municipal obligations rated "AAA" by Standard
& Poor's  Rating  Services and "Aaa" by Moody's  Investors  Service  meeting the
following requirements:

                           (a) the municipal  obligations are (i) not subject to
redemption  prior to maturity or (ii) the bond  trustee  therefor has been given
irrevocable  instructions concerning their call and redemption and the issuer of
the  municipal   obligations   has  covenanted  not  to  redeem  such  municipal
obligations other than as set forth in such instructions;

                           (b) the municipal  obligations are secured by cash or
obligations  described in paragraphs  (1)(a),  (b), (c), (d) or (e) above, which
may be applied only to payment of the principal of, interest and premium on such
municipal obligations;

                           (c) the principal of and interest on the  obligations
described in paragraphs (1)(a), (b), (c), (d) or (e) above (plus any cash in the
escrow)  has  been  verified  by the  report  of  independent  certified  public
accountants  to be  sufficient  to pay in full all  principal  of,  interest and
premium,   if  any,  due  and  to  become  due  to  the  municipal   obligations
("Verification");

                           (d) the cash or  obligations  described  in paragraph
(1) above  serving as  security  for the  municipal  obligations  are held by an
escrow agent or trustee in trust for owners of the municipal obligations;

                           (e) no  substitution  of an  obligation  described in
paragraph (1) above shall be permitted except with another obligation  described
in paragraph (1) above and upon delivery of a new Verification; and

                           (f) the cash or  obligations  described  in paragraph
(1) above are not available to satisfy any other claims,  including  those by or
against the bond trustee or escrow agent.

         "Guarantor"  means  Mark  Vaughan,  as  guarantor  under the  Principal
Guaranty.

         "Guaranty"  means any  obligation  of the Company  guaranteeing  in any
manner,  directly or indirectly,  any obligation of any Person, which obligation
of such other  Person  would,  if such  obligation  were the  obligation  of the
Company,  constitute Indebtedness under the Loan Agreement.  For the purposes of
the Loan  Agreement,  so long as no payments  are required to be made under such
Guaranty and so long as such Guaranty  constitutes a contingent  liability under
generally accepted accounting principles,  the aggregate principal amount of any
indebtedness  in respect of which the Company  shall have executed and delivered
its Guaranty  shall be deemed to be equal to 20 percent of the principal  amount
borrowed  under  such  guaranteed  indebtedness  Outstanding  at  the  time  any
computation  is being made,  and the  aggregate  annual  principal  and interest
payments on any indebtedness in respect of which the Company shall have executed
and  delivered  its  Guaranty  shall be deemed to be equal to 20  percent of the
amount  which  would  be

                                     - 18 -
<PAGE>

payable  as  principal  of and the  interest  on the  indebtedness  for  which a
Guaranty shall have been issued during the Fiscal Year for which any computation
is being made,  provided  that if there shall have  occurred a default under the
guaranteed  obligation of any direct or indirect  payment by the Company on such
Guaranty,  then,  during the period  commencing  on the date of such  default of
payment and ending as the case may be on the day on which such  default is cured
or on the day which is two years  after such  other  Person  resumes  making all
payments  on  such  guaranteed  obligation,   100  percent  of  such  guaranteed
indebtedness shall be taken into account.

         "Hazardous  Material" means:  (i) any substances  defined as "hazardous
substances,"  "pollutants,"  "contaminants,"  "hazardous  materials," "hazardous
wastes," or  "hazardous  or toxic  substances"  or related  materials  as now or
hereafter  defined in any  Environmental  Law, (ii) those  substances  listed or
otherwise  identified  as  substances  of the type  referred to in the preceding
subsection  (i)  in  the   regulations   adopted  and  issued  pursuant  to  any
Environmental Law, as the same may be amended,  modified or supplemented;  (iii)
any friable asbestos, airborne asbestos in excess of that generally found in the
atmosphere,  respectively,  where the facilities of the Company are located,  or
any substance or material  containing  asbestos,  excluding  any such  materials
located on the solid waste disposal or  manufacturing  facilities of the Company
prior to the date of the Loan Agreement so long as such materials are contained,
maintained,  abated, or removed in compliance with all applicable  Environmental
Laws;  and (iv) any  substance  the  presence  of  which  on the  Facilities  is
prohibited by any applicable Environmental Law; provided that Hazardous Material
shall not include any such  substances  used in or  resulting  from the ordinary
operation of a facility constituting solid waste recycling facilities or for the
cleaning of the Facilities;  provided that such  substances are stored,  handled
and disposed of in compliance with all applicable  Environmental  Laws and other
applicable laws and regulations.

         "Improvements" means the real property improvements located on the Site
and pledged pursuant to the Loan Agreement.

         "Income  Available  for Debt Service"  means,  as to any Fiscal Year or
other  specified  period,  (i) excess of revenues  over  expenses of the Company
before   depreciation,   amortization   and   interest   expense  on   Long-Term
Indebtedness,  as  determined  from  the  Audited  Financial  Statements  or  as
otherwise  herein  provided,  provided  that  unrealized  gains  and  losses  on
investments  will not be recognized in the  calculation of Income  Available for
Debt  Service,  plus (ii)  capitalized  or  funded  interest  available  for and
scheduled  to be applied to interest  obligations  accrued  during such  period;
provided, however, that (1) no determination thereof shall take into account any
gain or loss resulting from either the  extinguishment  of  Indebtedness  or the
sale,  exchange or other  disposition of capital assets not made in the ordinary
course of  business,  and (2)  revenues  shall  not  include  earnings  from the
investment of Escrowed Interest or earnings constituting Escrowed Interest.

         "Indebtedness"  means (i) all  obligations  of the Company for borrowed
money  including,  but not limited  to, the Loan,  (ii) all  installment  sales,
conditional  sales and  capital  lease  obligations  incurred  or assumed by the
Company as purchaser,  and (iii) all Guaranties,  whether

                                     - 19 -
<PAGE>

constituting  Long-Term  Indebtedness or Short-Term  Indebtedness.  Indebtedness
shall not include any other  obligation  incurred by the Company in the ordinary
course of business,  any obligation to contribute to self-insurance,  pension or
other  risk  management  programs,  indemnification  obligations  incurred  with
respect  to  Commitment  Indebtedness,  or  any  fees  or  expenses  payable  in
connection with the incurrence of Indebtedness.

         "Indenture"  means this  Indenture of Trust  between the Issuer and the
Trustee,  including  any  indentures  supplemental  thereto  made in  conformity
therewith, pursuant to which the Bonds are authorized to be issued and secured.

         "Independent  Architect"  means  an  architect,  engineer  or  firm  of
architects and engineers selected by the Company with the approval of a majority
in principal amount of the Bondholders.

         "Indirect  Participant"  means a Person utilizing the book entry system
of the Depository by, directly or indirectly,  clearing through or maintaining a
custodial relationship with a Direct Participant.

         "Initial  Bondholder"  means  Oppenheimer  Limited Term  Municipal Fund
and/or  Oppenheimer  Rochester National  Municipals or any successor  beneficial
holder of the Bonds that is an affiliate of Oppenheimer Funds, Inc.

         "Insurance  Consultant"  means a firm or Person selected by the Company
Representative  and  approved by a majority  of the  Bondholders  or  Beneficial
Owners which is not, and no member,  stockholder,  director, trustee, officer or
employee of which is, an officer,  director,  trustee or employee of the Company
and which is qualified to survey risks and to recommend  insurance  coverage for
solid waste recycling facilities and services and organizations  engaged in such
operations and which may provide insurance coverage for the Company.

         "Interest  Payment  Dates"  means  June 1 and  December 1 of each year,
commencing June 1, 2005.

         "Interest  Rate  Step-up"  means  that,  under  certain   circumstances
relating to compliance with financial covenants set forth in Section 8.16 of the
Loan  Agreement,  the interest rate on the Bonds will increase one per cent (1%)
commencing thirty (30) days following the quarterly report disclosing failure to
maintain the  specified  ratios,  until such time as the Company shall return to
compliance with the required ratios.

         "Issuer" means the Cleveland County Industrial  Authority,  an Oklahoma
public trust.

         "Issuer  Representative"  means the  Chairman  or other  officer of the
Issuer,  and,  when used with  reference to an act or  document,  also means any
other person  authorized by resolution of the Issuer to perform such act or sign
such document.

                                     - 20 -
<PAGE>

         "Key-Man Life Insurance  Policy means the Key-Man Life Insurance policy
on the life of Mark Vaughan in an amount of not less than $1,000,000  reflecting
the beneficiary as Trustee herein.

         "Letter of  Representations"  means any Letter of Representations  from
the  Issuer  and the  Trustee to the  Depository  which may be  entered  into in
connection  with  the  issuance  of  the  Bonds  in  a  book  entry  system,  as
supplemented and amended from time to time.

         "Lien"  means  any  mortgage,  deed of trust  or  pledge  of,  security
interest  in, or  encumbrance  on, the assets of the Company or sale of accounts
receivable with recourse of, the Company which secures any Indebtedness.

         "Loan" means the loan by the Issuer to the Company of the proceeds from
the  sale of the  Bonds  (exclusive  of  accrued  interest  paid by the  initial
purchasers of any Bonds) pursuant to the Loan Agreement.

         "Loan  Agreement"  means the  Mortgage and Loan  Agreement  between the
Issuer and the Company,  dated as of December 1, 2004,  and any  amendments  and
supplements thereto made in conformity with the requirements thereof and of this
Indenture.

         "Loan Payments" means those payments required to be paid by the Company
identified as Loan Payments pursuant to the Loan Agreement.

         "Long-Term  Debt Service  Coverage  Ratio"  means,  except as otherwise
provided in the Loan Agreement,  for any Fiscal Year or other specified  period,
the ratio  determined  by  dividing  the Income  Available  for Debt  Service by
Maximum  Annual Debt  Service.  When  calculating  the  Long-Term  Debt  Service
Coverage Ratio,  (i) capitalized  interest shall not be counted as income unless
it will be  available  and applied in the same year as the  Maximum  Annual Debt
Service will occur,  and (ii)  payments to be made in respect of  principal  and
interest on any revolving credit or similar agreement secured solely by a pledge
of accounts  receivable  and  inventory  shall not be  included  in  determining
Maximum Annual Debt Service.

         "Long-Term  Debt  Service  Requirement"  means,  for any Fiscal Year or
other specified  period,  the aggregate of the payments to be made in respect of
principal  and  interest  (whether  or not  separately  stated)  on  Outstanding
Long-Term  Indebtedness  of the  Company  during such  period,  also taking into
account:

                           (i) with respect to Balloon  Long-Term  Indebtedness,
(a) the  amount of  principal  which  would be  payable  in such  period if such
principal were amortized from the date of incurrence thereof over a period of 20
years on a level debt service  basis at an interest rate equal to the rate borne
by  such  Indebtedness  on the  date  calculated,  except  that  if the  date of
calculation is within 12 months of the actual maturity of such Indebtedness, the
full  amount  of  principal  payable  at  maturity  shall  be  included  in such
calculation,  or (b) principal

                                     - 21 -
<PAGE>

payments or deposits  with  respect to  Indebtedness  secured by an  irrevocable
letter of credit issued by, or an irrevocable  line of credit with a bank having
a  combined  capital  and  surplus  of at least  $50,000,000,  or  insured by an
insurance policy issued by any insurance company rated at least "A" by Alfred M.
Best Company or its  successors  in BEST'S  INSURANCE  REPORTS or its  successor
publication,  nominally  due in the last Fiscal Year in which such  Indebtedness
matures may, at the option of the Company Representative,  be treated as if such
principal  or interest  payments or deposits  were due as  specified in any loan
agreement  issued in  connection  with such letter of credit,  line of credit or
insurance  policy or  pursuant  to the  repayment  provisions  of such letter of
credit,  line of credit or insurance  policy,  and interest on such Indebtedness
after such Fiscal  Year shall be assumed to be payable  pursuant to the terms of
such loan agreement or repayment provisions;

                           (ii) with respect to Long-Term  Indebtedness which is
Variable  Rate  Indebtedness,   the  interest  on  such  Indebtedness  shall  be
calculated  at the rate which is equal to the  average  of the  actual  interest
rates  which  were in effect  (weighted  according  to the  length of the period
during which each such interest rate was in effect) for the most recent 12-month
period immediately  preceding the date of calculation for which such information
is available  (or such  shorter  period,  but not less than six months,  if such
information is not available for a 12-month period), except that with respect to
new Variable Rate Indebtedness, and Variable Rate Indebtedness issued within the
last  six  months,  the  interest  rate for such  Indebtedness  for the  initial
interest  rate  period  shall be such  interest  rate as  determined  in writing
delivered to the Trustee by a banking,  investment banking or financial advisory
firm,  which  shall be  knowledgeable  in matters  relating to finance for solid
waste recycling facilities; and

                           (iii)  with  respect to any  Commitment  Indebtedness
providing  for  payment of other  Long-Term  Indebtedness,  to the  extent  that
amounts  are not then due and  owing  for  advances  made by the  creditor  with
respect  thereto,  the  principal  and  interest  relating  to  such  Commitment
Indebtedness  shall not be included in any  computations  with respect to Income
Available for Debt Service or the Long-Term Debt Service Requirement;  provided,
however,  that interest  shall be excluded from the  determination  of Long-Term
Debt Service  Requirement  to the extent that Escrowed  Interest is available to
pay such interest (but the amount excluded shall not take into account  interest
earnings on such Escrowed Interest unless there shall have been delivered to the
Trustee a report  of an  independent  firm of  nationally  recognized  certified
public  accountants  verifying  that such amount of interest  can be timely paid
from such escrow).

         "Long-Term  Indebtedness"  means  all  Indebtedness  having a  maturity
longer than one year incurred or assumed by the Company, including:

                           (i) money borrowed for an original term, or renewable
at the option of the  borrower for a period from the date  originally  incurred,
longer than one year;

                                     - 22 -
<PAGE>

                           (ii) leases which are required to be  capitalized  in
accordance  with generally  accepted  accounting  principles  having an original
term,  or  renewable  at the  option of the  lessee  for a period  from the date
originally incurred, longer than one year;

                           (iii)  installment sale or conditional sale contracts
incurred  or assumed by the  Company as  purchaser  having an  original  term in
excess of one year;

                           (iv)  Short-Term  Indebtedness  if a commitment  by a
financial  lender  exists  to  provide   financing  to  retire  such  Short-Term
Indebtedness  and such  commitment  provides  for the  repayment of principal on
terms which would,  if such commitment were  implemented,  constitute  Long-Term
Indebtedness; and

                           (v) the current portion of Long-Term Indebtedness.

         "Maximum Annual Debt Service" means the highest  Long-Term Debt Service
Requirement for any current or succeeding Fiscal Year or other specified period.

         "Monthly  Payments"  means  monthly  payments to be made by the Company
pursuant  to the Loan  Agreement  in an  amount  equal to (a) the sum of (i) the
quotient obtained by dividing the amount of principal and redemption premium, if
any,  of the Bonds  due and  payable  on the next  succeeding  payment  date for
principal  (whether  at  their  stated  maturities,  date  called  for  optional
redemption or by mandatory sinking fund redemption) by twelve (12), and (ii) the
quotient  obtained by dividing  the interest due and payable on the Bonds on the
next  succeeding  Interest  Payment Date by six (6), and (b) any deposits to the
Reserve Fund required pursuant to the Loan Agreement as follows:

         (a) for the  period  from  January  15,  2005  through  June 14,  2005,
inclusive, an amount equal to the quotient obtained by dividing the interest due
and payable on the Bonds on the next  succeeding  Interest  Payment Date by five
(5),  plus any  deposits  to the  Reserve  Fund  required  pursuant  to the Loan
Agreement;

         (b) for the  period  from June 15,  2005  through  December  14,  2005,
inclusive, an amount equal to the quotient obtained by dividing the interest due
and payable on the Bonds on the next  succeeding  Interest  Payment  Date by six
(6),  plus any  deposits  to the  Reserve  Fund  required  pursuant  to the Loan
Agreement; and

         (c) for the period from  December 15, 2005 and  thereafter,  the sum of
(i) the quotient  obtained by dividing the amount of  principal  and  redemption
premium,  if any,  of the Bonds due and payable on the next  succeeding  payment
date for principal (whether at their stated  maturities,  date called for option
redemption or by mandatory sinking fund redemption) by twelve (12), and (ii) the
quotient  obtained by dividing  the interest due and payable on the Bonds on the
next  succeeding  Interest  Payment Date by six (6), and (b) any deposits to the
Reserve Fund required pursuant to the Loan Agreement.

                                     - 23 -
<PAGE>

         "Net Book  Value"  when used in  connection  with  Property,  Plant and
Equipment or other property means the value of such property, net of accumulated
depreciation  or  amortization,  if applicable  and as the case may be, as it is
carried  on the books of the  Company  in  conformity  with  generally  accepted
accounting principles.

         "Net   Proceeds"   means  the  gross   proceeds  of  any  insurance  or
condemnation  awards  or the  gross  proceeds  received  pursuant  to any  title
insurance  policy with respect to any Property,  Plant and Equipment  pledged to
the  payment  of the Loan  pursuant  to the Loan  Agreement,  less such fees and
expenses incurred in collecting the same.

         "Nonrecourse  Indebtedness" means any Indebtedness  incurred to finance
the  purchase by the Company of tangible  property  secured  solely by a Lien on
such  property,  the liability  for which is limited to the property  subject to
such Lien with no recourse,  directly or indirectly,  to any other assets of the
Company.

         "Notice Beneficial Owners" means those Beneficial Owners who have given
their addresses and facsimile numbers to the Company.

         "Officer's  Certificate"  means a  certificate  signed  by the  Company
Representative.  Each  Officer's  Certificate  presented  pursuant  to the  Loan
Agreement shall state that it is being delivered pursuant to (and shall identify
the section or subsection of), and shall incorporate by reference and use in all
appropriate instances all terms defined in, the Loan Agreement.

         "Operating  Expenses"  shall  mean  all  expenditures  required  in the
operation and  maintenance of the  Improvements  including  those that result in
both current period  expenses as well as current  assets or current  liabilities
under generally accepted  accounting  principles,  and including,  the following
items, without intending to limit the generality of the foregoing:

                           (a)   expenditures   for  operation   (including  all
utilities  and fees  payable  under  management  and/or  operating  agreements),
maintenance, repair, alterations, insurance and inspection;

                           (b)  salaries  and  expenditures  for   professional,
managerial,  supervisory,  administrative,  engineering,  architectural,  legal,
financial,  auditing and consulting  services,  including the reasonable  annual
compensation and expenses of the officers and directors of the Company allocable
to the  Improvements  and including the fees of and other amounts payable to the
Trustee and the Issuer;

                           (c) all taxes or  contributions  or  payments in lieu
thereof,  assessments  and charges,  including,  without  intending to limit the
generality of the foregoing,  income, profits, sales, use, property,  franchise,
and excise taxes;

                                     - 24 -
<PAGE>

                           (d)   obligations   under   contracts  for  supplies,
services and pensions and other employee benefits;

                           (e)  purchases  of  merchandise  and other  inventory
items; and

                           (f) rentals  payable under leases not intended by the
Company  to  evidence  the  acquisition  of capital  assets,  as  determined  in
accordance with generally accepted  accounting  principles;  provided,  however,
that rentals  payable under leases which,  under generally  accepted  accounting
principles  would be treated as evidencing  the  acquisition  of a capital asset
shall  be  includable  within  Operating  Expenses,  if  so  designated  by  the
Company,provided,  however, the term "Operating Expenses" shall not be construed
to include (i) depreciation,  (ii) amortization,  and (iii) the annual Long-Term
Debt Service Requirement.

         "Opinion  of Bond  Counsel"  means an opinion  in writing  signed by an
attorney or firm of attorneys  acceptable to the Trustee and  experienced in the
field of municipal bonds whose opinions are generally  accepted by purchasers of
municipal bonds.

         "Opinion of Counsel"  means an opinion in writing signed by an attorney
or firm of  attorneys,  acceptable  to the  Trustee,  who may be counsel for the
Company or other counsel acceptable to the Trustee.

         "Outstanding"  means,  as of any particular  time, all Bonds which have
been duly  authenticated  and  delivered  by the Trustee  under this  Indenture,
except:

                           (a) Bonds  theretofore  canceled  by the  Trustee  or
delivered to the Trustee for  cancellation  after purchase in the open market or
because of payment at or redemption prior to maturity;

                           (b) Bonds for the payment or redemption of which cash
funds (or securities to the extent  described in this Indenture) shall have been
theretofore deposited with the Trustee (whether upon or prior to the maturity or
redemption  date of any such  Bonds);  provided  that,  if such  Bonds are to be
redeemed prior to the maturity  thereof,  notice of such  redemption  shall have
been given or  arrangements  satisfactory  to the  Trustee  shall have been made
therefor,  or waiver of such notice  satisfactory  in form to the Trustee  shall
have been filed with the Trustee; and

                           (c)  Bonds in lieu of which  other  Bonds  have  been
authenticated under this Indenture.

         Bonds which do not pay  interest  currently  in  accordance  with their
terms shall be deemed to be  Outstanding  in an amount  equal to their  accreted
value at the applicable time.

                                     - 25 -
<PAGE>

         "Parity  Indebtedness"  means  Indebtedness of the Company secured on a
parity  basis with the Bonds,  except to the extent  provided in Section 8.13 of
the Loan Agreement.

         "Permitted  Investments"  means any of the following  which at the time
are legal  investments  under the laws of the State of Oklahoma  for moneys held
under this Indenture and then proposed to be invested therein:

                           (a) Government Obligations;

                           (b) negotiable  certificates of deposit issued by, or
banker's  acceptances drawn on and accepted by, any bank, including the Trustee,
the certificate of deposit or debt obligations of which (or if such bank, is the
principal bank in a bank holding  company,  debt obligations of the bank holding
company) are rated, at the time such  certificates or acceptances are issued, in
one of the two highest Rating Categories;

                           (c) repurchase  agreements  with any U.S.  commercial
bank, or with any United States Government securities dealer, provided that such
repurchase agreements are fully secured by Government Obligations,  and provided
further  that (i) such  collateral  is held by the  Trustee or any agent  acting
solely for the Trustee during the term of such repurchase  agreement,  (ii) such
collateral  is not  subject to liens or claims of third  parties and the Trustee
has a perfected first security interest in the collateral, (iii) such collateral
has a market  value  (determined  at least once every 14 days) at least equal to
102% of the amount invested in the repurchase agreement, and (iv) the failure to
maintain such  collateral at the level  required in (iii) above will require the
Trustee to liquidate the collateral;

                           (d)  certificates  of  deposit  issued  by any  bank,
savings institution or trust company,  including the Trustee,  and time deposits
in any bank, savings institution or trust company,  including the Trustee, as to
which  principal is fully  insured by a federally  sponsored  deposit  insurance
program; and

                           (e)  guaranteed  investment  contracts  issued  by  a
provider  rated  "AA" or better or "Aa" or better by  Standard  & Poor's  Rating
Services or Moody's Investor's Services, Inc., respectively

                           (f) money market funds which are rated in the highest
Rating Category and are fully collateralized by Government Obligations.

         "Permitted  Liens"  shall have the  meaning  assigned  to it in Section
8.10(b) of the Loan Agreement.

         "Person" means an individual, association, unincorporated organization,
corporation,  partnership,  joint venture,  business trust or a government or an
agency or a political subdivision thereof, or any other entity.

                                     - 26 -
<PAGE>

         "Pledged  Revenues"  means the  rights  to  receive  all the  receipts,
revenues,  cash and income of the Company from whatever source derived,  whether
in the form of accounts  receivable,  contract  rights,  chattel paper,  general
intangibles,  profits  and income,  or other  rights,  and the  proceeds of such
rights, whether now owned or held or hereafter coming into existence.

         "Pledged Property" means the Improvements,  the Site and the Equipment,
pledged pursuant to the Loan Agreement.

         "Principal  Guaranty"  means the Guaranty  Agreement,  executed by Mark
Vaughan, dated as of the date hereof.

         "Project"  means  collectively,   the  acquisition,   construction  and
equipping of the Company's  manufacturing  facilities  and solid waste  disposal
facilities located in Moore, Cleveland County, Oklahoma.

         "Project  Fund"  means  the  Project  Fund  created  pursuant  to  this
Indenture.

         "Property" means collectively the Improvements and the Site.

         "Property,  Plant and Equipment" means real and personal,  tangible and
intangible property owned by the Company which is property,  plant and equipment
under generally accepted accounting principles.

         "Rating  Agency" means Moody's  Investors  Service,  Inc. or Standard &
Poor's Ratings  Services,  a Division of the  McGraw-Hill  Companies,  Inc., and
their respective successors and assigns.

         "Rating  Category"  or  "Categories"   means  the  rating  category  or
categories respectively of each Rating Agency.

         "Rebate  Analyst"  means an attorney or firm of attorneys or accountant
or firm of  accountants  or other  Person  hired by the  Company  to assist  the
Company in compliance with the arbitrage  rebate  requirements of Section 4.6 of
the Loan Agreement.

         "Rebate Fund" means the Rebate Fund created in this Indenture.

         "Registered  Owner" or "Registered Owner" means the Registered Owner of
any Bonds, as shown on the registration books of the Trustee.

         "Regular  Record Date" means the  fifteenth  day of the calendar  month
prior to a regularly scheduled Interest Payment Date for the Bonds.

                                     - 27 -
<PAGE>

         "Reserve  Fund"  means  the  Reserve  Fund  created  pursuant  to  this
Indenture.

         "Reserve Fund Credit  Enhancement"  means any letter of credit credited
to the Reserve Fund or any account  therein as provided in the Loan Agreement in
lieu of cash or Permitted Investments on deposit in the Reserve Fund.

         "Reserve Requirement" means $500,000.

         "Senior Loan" means the loan to the Company from CNL Commercial Finance
Inc., secured as of the date hereof by an interest in the Pledged Property,  and
any  Indebtedness  of the Company  incurred to pay,  discharge or refinance  the
Senior Loan.

         "Short-Term  Indebtedness"  means Indebtedness with a term of less than
one year.

         "Significant Bondholder" shall mean any one Beneficial Owner of greater
than 50% of the Beneficial Ownership Interest in Bonds then Outstanding,  and if
no one  Beneficial  Owner  owns  greater  than 50% of the  Beneficial  Ownership
Interest  in  Bonds  then  Outstanding,  then  the  provisions  relating  to the
Significant Bondholder shall not apply

         "Site"  means  the  real  property  described  as the  Site in the Loan
Agreement, less any such real property released under the provisions of the Loan
Agreement.

         "Special  Record  Date" means a special  record date fixed to determine
the names and addresses of Registered  Owners for purposes of paying interest on
a special  Interest Payment Date for the payment of defaulted  interest,  all as
further provided in this Indenture.

         "Subordinated  Debt"  means any  Indebtedness  the  payment of which is
specifically  subordinated to the payment of principal and interest on the Bonds
and evidenced by a writing which contains  provisions  substantially as provided
in the Loan  Agreement  and for which the  Company  has  received  an Opinion of
Counsel to the effect that such Indebtedness constitutes Subordinated Debt.

         "Tax Certificates"  means the certificates of the Issuer or the Company
relating to the  tax-exempt  status of the Bonds and including any amendments or
supplements thereto.

         "Transfer"  means  any act or  occurrence  the  result  of  which is to
dispossess any Person of any asset or interest therein,  including specifically,
but  without  limitation,  the  forgiveness  of any debt,  but shall not include
leases and operating contracts governed by the Loan Agreement.

         "Trust  Estate" means the property  pledged,  assigned and mortgaged to
the Trustee pursuant to the granting clauses of this Indenture.

                                     - 28 -
<PAGE>

         "Trustee"  means  J.P.  Morgan  Trust  Company,  National  Association,
Oklahoma City, Oklahoma, as trustee, and its successors and assigns.

         "Underwriter" means Gates Capital Corporation,  New York, New York, and
its  successors  and  assigns;  provided  that any  purchaser of a Bond from the
Underwriter shall not be considered as successor or assign thereof.

         "Variable  Rate  Indebtedness"  means any portion of  Indebtedness  the
interest rate on which has not been  established  at a fixed or constant rate to
maturity.

         Section 1.2 INDENTURE TO CONSTITUTE  CONTRACT.  In consideration of the
purchase  and  acceptance  of any or all of the Bonds by those who shall own the
same from time to time, the  provisions of this  Indenture  shall be part of the
contract of the Issuer  with the owners of the Bonds,  and shall be deemed to be
and shall constitute contracts among the Issuer, the Trustee and the owners from
time to time of the Bonds. The pledge made in this Indenture and the provisions,
covenants and agreements herein set forth to be performed by or on behalf of the
Issuer shall be for the equal benefit,  protection and security of the owners of
any and all of the Bonds  except as  specifically  provided  herein.  All of the
Bonds,  regardless of the time or times of their issuance or maturity,  shall be
of equal rank without  preference,  priority or  distinction of any of the Bonds
over any other  thereof,  except as  expressly  provided  in or pursuant to this
Indenture.

                                     - 29 -
<PAGE>

                                   ARTICLE II

                              AUTHORIZATION, TERMS,

         Section 2.1  AUTHORIZED  AMOUNT OF BONDS.  No Bonds may be issued under
this  Indenture  except in  accordance  with this Article.  The total  principal
amount of Bonds that may be issued hereunder is hereby expressly limited to, and
the amount hereby authorized to be issued shall be, $5,000,000.

         Section  2.2 ALL BONDS  EQUALLY  AND  RATABLY  SECURED BY TRUST  ESTATE
EXCEPT AS EXPRESSLY  PROVIDED  HEREIN;  LIMITED  OBLIGATION OF BONDS AND PLEDGES
SECURING  THE SAME.  All  Bonds  issued  under  this  Indenture  and at any time
Outstanding shall in all respects be equally and ratably secured hereby, without
preference,  priority or  distinction  as to date or dates or the actual time or
times of the  issue or  maturity  of the  Bonds,  so that all  Bonds at any time
issued and Outstanding  hereunder shall have the same right, lien and preference
under and by virtue of this  Indenture,  and shall all be  equally  and  ratably
secured hereby,  except as otherwise  expressly provided herein. The Bonds shall
be  limited  obligations  of the  Issuer  payable  solely  out  of the  security
specified  in this  Indenture.  The  Bonds  shall  not  constitute  or become an
indebtedness, a debt or a liability of or a charge against the general credit or
taxing power of the State of Oklahoma,  or of any county, city, city and county,
town, school district or other  subdivision of the State of Oklahoma,  or of any
other  political  subdivision  or body corporate and politic within the State of
Oklahoma  other  than  the  Issuer  (but  only to the  extent  provided  in this
Indenture)  and neither the State of Oklahoma,  nor any county,  city,  city and
county,  town,  school  district or other  subdivision of the State of Oklahoma,
except the Issuer to the extent  provided above,  shall be liable  thereon;  nor
shall the Bonds  constitute  the  giving,  pledging  or loaning of the faith and
credit of the State of Oklahoma,  or any county,  city,  city and county,  town,
school  district or other  subdivision  of the State of Oklahoma or of any other
political subdivision or body corporate and politic within the State of Oklahoma
but  shall be  payable  solely  from the funds  herein  provided  therefor.  The
issuance  of the Bonds  shall  not,  directly  or  indirectly  or  contingently,
obligate the State of Oklahoma or any  subdivision  of the State of Oklahoma nor
empower the Issuer to levy or collect any form of taxes or assessments  therefor
or to create any  indebtedness  payable out of taxes or  assessments or make any
appropriation for their payment,  and such  appropriation or levy is prohibited.
Nothing in the Act shall be construed  to authorize  the Issuer to create a debt
of the State of Oklahoma  within the meaning of the  Constitution or statutes of
the State of  Oklahoma  or  authorize  the  Issuer to levy or  collect  taxes or
assessments.  Neither  the  members of the Issuer nor any person  executing  the
Bonds  shall be liable  personally  on the Bonds or be subject  to any  personal
liability  or  accountability  by reason of the issuance  thereof.  The State of
Oklahoma  shall not in any event be liable for the payment of the  principal of,
premium,  if any, or interest on the Bonds or for the performance of any pledge,
mortgage,  obligation  or agreement  of any kind  whatsoever  undertaken  by the
Issuer.  No breach of any such pledge,  mortgage,  obligation or agreement shall
impose any pecuniary liability upon the State of Oklahoma or any charge upon its
general credit or against its taxing power.

                                     - 30 -
<PAGE>

         Section 2.3  AUTHORIZATION OF BONDS.  There is hereby  authorized to be
issued  hereunder  and  secured  hereby  an issue of  bonds,  designated  as the
"Cleveland  County Industrial  Authority  Industrial  Development  Revenue Bonds
(Vaughan Foods,  Inc Project) Series 2004." They shall be issuable only as fully
registered bonds in the minimum denomination of $100,000 plus integral multiples
of $5,000 in excess  thereof.  The Bonds shall be  separately  lettered  "R" and
shall be numbered separately from 1 upward.

                  The  Bonds  shall  be  dated  as of  their  date  of  original
issuance,  and shall  mature  serially  on  December 1 in each of the  principal
amounts and years,  and shall bear interest  payable  semiannually on June 1 and
December 1,  commencing  June 1, 2005,  at the interest rate per annum set forth
below:

                Maturity             Principal          Interest Rate
              (December 1)            Amount             (Per Annum)
              ------------            -------            -----------

                  2012              $2,635,000              6.750%
                  2024              $2,365,000              7.100%

         Notwithstanding the foregoing, in the event that (i) the Long-Term Debt
Service  Coverage  Ratio of the Company  reported to the Trustee  under  Section
8.16(a)  of the Loan  Agreement  shall be less  than  1.50 to 1.00,  or (ii) the
Current  Ratio  reported  to the  Trustee  under  Section  8.12(b)  of the  Loan
Agreement  above shall be less than less than 1.10 to 1.00, or (iii) the Debt to
Equity Ratio reported to the Trustee under Section 8.12(c) of the Loan Agreement
shall to be more than 4.00 to 1.00, the failure to satisfy any such  requirement
shall not result in an Event of Default  hereunder.  Unless  the  Company  shall
notify the Trustee  within  thirty days  following the date of any such reported
failure that the Company is then in  compliance  with each of such  ratios,  the
interest rate on each of the Bonds shall increase one percent (100 basis points)
as of the end of such  thirty-day  period,  until  the  date the  Company  shall
certify to the Trustee that each of such requirements has been satisfied.

         Interest  shall be computed on the basis of a 360-day year  composed of
twelve  30-day  months,  payable  semiannually  on June 1 and December 1 of each
year,  with the first interest  payment to be made on June 1, 2005,  except that
Bonds which are reissued upon transfer, exchange or other replacement shall bear
interest from the most recent  Interest  Payment Date to which interest has been
paid, or if no interest has been paid, from the date of the Bonds.

         The Bonds shall be originally  issued in Book Entry Form,  and shall be
registered  in the  name of  Cede & Co.,  as  nominee  of The  Depository  Trust
Company.  While the Bonds are held in Book Entry  Form,  (i) such Bonds shall be
registered in the name of the  Depository  or its nominee,  as  Bondholder,  and
immobilized in the custody of the Depository; (ii) unless otherwise requested by
the Depository, there shall be a single Bond certificate for each Bond maturity;
and

                                     - 31 -
<PAGE>

(iii) such Bonds shall not be transferable or exchangeable,  except for transfer
to another Depository or another nominee of a Depository, without further action
by the  Issuer.  While the Bonds are in Book  Entry  Form,  Bonds in the form of
physical certificates shall only be delivered to the Depository.

                  So long as a book entry system is in effect for the Bonds, the
Issuer and Trustee shall recognize and treat the Depository,  or its nominee, as
the Holder of the Bonds for all  purposes,  including  payment of debt  service,
giving of notices,  and  enforcement  of remedies.  The crediting of payments of
debt   service  on  the  Bonds  and  the   transmittal   of  notices  and  other
communications  by the Depository to the Direct  Participant in whose Depository
account the Bonds are  recorded and such  crediting  and  transmittal  by Direct
Participants  to  Indirect  Participants  or  Beneficial  Owners and by Indirect
Participants  to Beneficial  Owners are the respective  responsibilities  of the
Depository and the Direct Participants and the Indirect Participants and are not
the  responsibility of the Issuer or the Trustee;  provided,  however,  that the
Issuer and the Trustee  understand  that neither the  Depository nor its nominee
shall provide any consent  requested of the Registered  Owners of Bonds pursuant
to this Indenture, and that the Depository will mail an omnibus proxy (including
a list  identifying  the Direct  Participants)  to the Issuer which  assigns the
Depository's,  or its  nominee's,  voting rights to the Direct  Participants  to
whose  account at the  Depository  the Bonds are credited (as of the record date
for mailing of requests for such consents).  Upon receipt of such omnibus proxy,
the Issuer  shall  promptly  provide  such  omnibus  proxy  (including  the list
identifying the Direct Participants  attached thereto) to the Trustee, who shall
then  treat  such  owners as  Registered  Owners of the  Bonds for  purposes  of
obtaining any consents pursuant to the terms of this Indenture.

                  As  long  as  the  Bonds  are  registered  in  the  name  of a
Depository,  or its  nominee,  the  Trustee  agrees to comply with the terms and
provisions  of the Letter of  Representations  including  the  provisions of the
Letter of  Representations  with  respect  to any  delivery  of the Bonds to the
Trustee shall supersede the provisions of this Indenture with respect thereto.

                  If  any  Depository  determines  not to  continue  to act as a
Depository for the Bonds held in a book entry system,  the Issuer may attempt to
have established a securities  depository/book  entry system  relationship  with
another Depository under this Indenture.  If the Issuer does not or is unable to
do so, the Issuer and the  Trustee,  after the  Trustee has made  provision  for
notification  of the  Beneficial  Owners  by  appropriate  notice  to  the  then
Depository,  shall permit  withdrawal of the Bonds from the Depository and shall
authenticate  and deliver Bonds  certificates  in fully  registered  form to the
assignees  of the  Depository  or its  nominee or to the  Beneficial  Owners.  A
majority of the  Beneficial  Owners also may request that the Bonds be withdrawn
from  the  Depository  and that  the  Trustee  authenticate  and  deliver  Bonds
certificates in fully registered form to the Beneficial Owners. Such withdrawal,
authentication and delivery shall be at the cost and expense (including costs of
printing or otherwise  preparing and delivering such  replacement  Bonds) of the
Company.  Such replacement Bonds shall be in the denominations  specified in the
first paragraph of this Section 2.3.

                                     - 32 -
<PAGE>

                  NEITHER THE ISSUER,  THE COMPANY NOR THE TRUSTEE WILL HAVE ANY
RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANT,  INDIRECT PARTICIPANT OR
ANY BENEFICIAL OWNER OR ANY OTHER PERSON NOT SHOWN ON THE REGISTRATION  BOOKS OF
THE TRUSTEE AS BEING A HOLDER WITH  RESPECT TO: (1) THE BONDS;  (2) THE ACCURACY
OF  ANY  RECORDS  MAINTAINED  BY  DTC  OR ANY  DIRECT  PARTICIPANT  OR  INDIRECT
PARTICIPANT; (3) THE TIMELY OR ULTIMATE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT
OR INDIRECT  PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF
THE PRINCIPAL OR REDEMPTION  PRICE OF OR INTEREST ON THE BONDS; (4) THE DELIVERY
BY  ANY  DIRECT  PARTICIPANT  OR  INDIRECT  PARTICIPANT  OF  ANY  NOTICE  TO ANY
BENEFICIAL  OWNER  WHICH  IS  REQUIRED  OR  PERMITTED  UNDER  THE  TERMS OF THIS
INDENTURE TO BE GIVEN TO REGISTERED  OWNERS; (5) THE SELECTION OF THE BENEFICIAL
OWNERS TO RECEIVE  PAYMENT IN THE EVENT OF ANY PARTIAL  REDEMPTION OF THE BONDS;
OR (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS HOLDER.

                  Proceeds  of the Bonds  shall be  applied as  provided  in the
Indenture and the Loan Agreement.

                  The  principal of and  premium,  if any, on the Bonds shall be
payable at the principal corporate trust office of the Trustee currently located
in Oklahoma City, Oklahoma, or at the principal office of its successor in trust
upon  presentation  and surrender of the Bonds.  Payment of interest on any Bond
shall be made to the  Registered  Owner  thereof by check or draft mailed on the
Interest  Payment Date by the Trustee to the Registered  Owner at his address as
it last  appears on the  registration  books kept by the Trustee at the close of
business on the Regular Record Date for such Interest Payment Date, but any such
interest  not so timely paid or duly  provided  for shall cease to be payable to
the Registered Owner thereof at the close of business on the Regular Record Date
and shall be payable to the Registered Owner thereof at the close of business on
a Special  Record  Date for the  payment of any such  defaulted  interest.  Such
Special  Record  Date  shall be  fixed by the  Trustee  whenever  monies  become
available  for payment of the  defaulted  interest,  and notice of such  Special
Record Date shall be given to the  Registered  owners of the Bonds not less than
10 days prior thereto by first-class mail to each such Registered owner as shown
on the Trustee's registration books on the date selected by the Trustee, stating
the date of the  Special  Record Date and the date fixed for the payment of such
defaulted  interest.  Notwithstanding  the  foregoing,  at the  written  request
addressed to the Trustee of any  Bondholder of at least  $1,000,000 in aggregate
principal  amount of the  Bonds,  payments  of  principal  at  maturity  or upon
redemption  and  payments of interest  may be paid by wire  transfer  within the
United States to the bank account  number filed no later than the Regular Record
Date with the Trustee for such purpose.  All payments on the Bonds shall be made
in lawful money of the United States of America upon  collection of  immediately
available funds.

                                     - 33 -
<PAGE>

                  The Bonds are subject to prior redemption as herein set forth.
The Bonds shall be substantially in the form and tenor hereinabove  recited with
such  appropriate  variations,  omissions  and  insertions  as are  permitted or
required by this Indenture.

                  Notwithstanding anything herein to the contrary, when any Bond
is  registered  in the name of a Depository  or its nominee,  the  principal and
redemption  price of and  interest  on such Bond shall be payable in same day or
federal funds delivered or transmitted to the Depository or its nominee.

         Section 2.4 EXECUTION OF BONDS. The Bonds shall be executed in the name
and on  behalf  of the  Issuer,  by the  manual or  facsimile  signature  of the
Chairman of the Issuer,  and its corporate seal or a facsimile  thereof shall be
thereunto  affixed,  imprinted,  engraved or  otherwise  reproduced  thereon and
attested by the manual or facsimile signature of the Secretary.  Any Bond may be
signed (manually or by facsimile), sealed or attested on behalf of the Issuer by
any  person  who,  at the  date of such  act,  shall  hold  the  proper  office,
notwithstanding that at the date of authentication,  issuance or delivery,  such
person may have ceased to hold such office.

         Section 2.5  REGISTRATION,  TRANSFER  AND  EXCHANGE  OF BONDS,  PERSONS
TREATED AS OWNER.  The Issuer shall cause books for the registration and for the
transfer of the Bonds as provided  in this  Indenture  to be kept by the Trustee
which is hereby  appointed  the  transfer  agent of the  Issuer  for the  Bonds.
Notwithstanding  such appointment,  the Trustee is hereby authorized to make any
arrangements  with other  institutions  that it deems  necessary or desirable in
order that such  institutions  may perform the duties of transfer  agent for the
Bonds.  Subject to the  provisions  of Section 2.03 hereof,  upon  surrender for
transfer of any Bond at the  designated  corporate  trust office of the Trustee,
duly endorsed for transfer or accompanied by an assignment  duly executed by the
Registered  Owner or his attorney duly  authorized in writing,  the Issuer shall
execute  and the  Trustee  shall  authenticate  and  deliver  in the name of the
transferee  or  transferees  a new  fully  registered  Bond or Bonds  for a like
aggregate principal amount of the same maturity.

                  Bonds  may be  exchanged  at the  designated  corporate  trust
office of the Trustee for a like aggregate  principal amount of fully registered
Bonds of the same maturity in authorized  denominations,  which shall be no less
than $100,000.  The Issuer shall execute and the Trustee shall  authenticate and
deliver Bonds which the  Bondholder  making the exchange is entitled to receive,
bearing numbers not contemporaneously  Outstanding.  The execution by the Issuer
of any fully registered Bond of any  denomination  shall constitute full and due
authorization  of such  denomination and the Trustee shall thereby be authorized
to authenticate and deliver such fully registered Bond.

                  The Trustee  shall not be required to transfer or exchange any
Bond during the period from the Regular  Record Date next  preceding the mailing
of notice of redemption as herein  provided.  After the giving of such notice of
redemption,  the Trustee shall not be required to transfer or exchange any Bond,
which Bond or portion thereof has been called for redemption.

                                     - 34 -
<PAGE>

                  Payment  of  either   principal   or  interest  on  any  fully
registered  Bond  shall  be made  only  to or  upon  the  written  order  of the
Registered Owner thereof or his legal representative, on the Regular Record Date
or the Special Record Date but such  registration  may be changed as hereinabove
provided.  All such  payments  shall be valid  and  effectual  to  satisfy,  and
discharge the liability upon such Bond to the extent of the sum or sums paid. As
to any Bond, for all other purposes and on any other date, the Registered  Owner
shall be regarded as the absolute owner hereof.

                  The  Trustee  shall  require  the  payment  by any  Bondholder
requesting exchange or transfer of any tax or other governmental charge required
to be paid with respect to such exchange or transfer.  The Company shall,  under
the Loan Agreement,  be liable to pay all expenses and charges of the Issuer and
of the Trustee in connection with such exchange or transfer.

         Section 2.6 LOST,  STOLEN,  DESTROYED AND MUTILATED BONDS. Upon receipt
by the Issuer and the Trustee of evidence  satisfactory to them of the ownership
of and the loss,  theft,  destruction or mutilation of any Bond and, in the case
of a lost, stolen or destroyed Bond, of indemnity satisfactory to them. and upon
surrender  and  cancellation  of the Bond,  if  mutilated,  (i) the Issuer shall
execute,  and the Trustee shall authenticate and deliver, a new Bond of the same
maturity,  series and  denomination in lieu of such lost,  stolen,  destroyed or
mutilated Bond or (ii) if such lost,  stolen,  destroyed or mutilated Bond shall
have  matured  or have been  called for  redemption,  in lieu of  executing  and
delivering a new Bond as aforesaid,  the Issuer may pay such Bond.  Any such new
Bond shall bear a number not  contemporaneously  Outstanding.  The applicant for
any such new Bond may be required to pay all  expenses and charges of the Issuer
and of the Trustee in connection with the issuance of such Bond. All Bonds shall
be held and owned upon the express  condition  that, to the extent  permitted by
law, the foregoing  conditions are exclusive with respect to the replacement and
payment of mutilated, destroyed, lost or stolen bonds, negotiable instruments or
other securities.

         Section 2.7 DELIVERY OF BONDS.  Upon the execution and delivery of this
Indenture,  the Issuer shall  execute and deliver to the Trustee and the Trustee
shall  authenticate the Bonds and deliver them to the initial purchasers thereof
as directed by the Issuer and as hereinafter in this Section provided.

                  Prior to the delivery by the Trustee of any of the Bonds,  all
conditions  precedent to the disbursal of proceeds of the Bonds from the Project
Fund, as specified in Section 3.9 hereof, shall have been satisfied or waived by
the  holders  of 100% of the  Bonds,  and there  shall  have been  filed with or
delivered to the Trustee the following:

                           (a)  a   resolution   duly  adopted  by  the  Issuer,
certified by the Secretary thereof, authorizing the financing of the Cost of the
Project, the execution and delivery of the Loan Agreement and this Indenture and
the issuance of the Bonds;

                                     - 35 -
<PAGE>

                           (b) a duly executed copy of this Indenture;

                           (c) a duly executed copy of the Loan Agreement;

                           (d) a duly executed copy of the Assignment;

                           (e) a duly executed  copy of the Principal  Guaranty;
and

                           (f)  the  written  order  of  the  Issuer  as to  the
delivery of the Bonds signed by an Issuer Representative.

                           (g) a  duly  executed  copy  of the  application  for
key-man life insurance in the amount of $1,000,000 on the life of Mark Vaughan.

         Section  2.8  TRUSTEE'S  AUTHENTICATION   CERTIFICATE.   The  Trustee's
authentication certificate upon the Bonds shall be substantially in the form and
tenor hereinbefore  provided. No Bond shall be secured hereby or entitled to the
benefit  hereof,  or shall be valid or  obligatory  for any purpose,  unless the
certificate  of  authentication,  substantially  in such  form,  has  been  duly
executed by the Trustee; and such certificate of the Trustee upon any Bond shall
be conclusive  evidence and the only competent  evidence that such Bond has been
authenticated   and   delivered   hereunder.   The  Trustee's   certificate   of
authentication  shall be deemed to have been  duly  executed  by it if  manually
signed by an  authorized  officer of the Trustee,  but it shall not be necessary
that the same person sign the signed certificate of authentication on all of the
Bonds issued hereunder.

         Section  2.9  CANCELLATION  AND  DESTRUCTION  OF BONDS BY THE  TRUSTEE.
Whenever  any  Outstanding  Bonds  shall be  delivered  to the  Trustee  for the
cancellation  thereof pursuant to this Indenture,  upon payment of the principal
amount or interest  represented  thereby, or for replacement pursuant to Section
2.6 hereof such Bonds shall be promptly  canceled  and  destroyed by the Trustee
and  counterparts of a certificate of destruction  evidencing  such  destruction
shall be furnished by the Trustee to the Issuer and the Company.

         Section 2.10  TEMPORARY  BONDS.  Pending the  preparation of definitive
Bonds,  the Issuer may execute and the Trustee  shall  authenticate  and deliver
temporary  Bonds.  Temporary Bonds shall be issuable as fully  registered  Bonds
without  coupons,  of any  denomination,  and  substantially  in the form of the
definitive  Bonds but with such  omissions,  insertions and variations as may be
appropriate for temporary Bonds,  all as may be determined by the Issuer.  Every
temporary  Bond shall be  executed  by the Issuer  and be  authenticated  by the
Trustee upon the same conditions and in substantially the same manner,  and with
like effect,  as the definitive  Bonds.  As promptly as  practicable  the Issuer
shall execute and shall furnish  definitive Bonds and thereupon  temporary Bonds
may be surrendered in exchange  therefor at the principal  office of the Trustee
and the Trustee shall  authenticate  and deliver in exchange for such  temporary

                                     - 36 -
<PAGE>

Bonds a like aggregate  principal amount of definitive Bonds. Until so exchanged
the temporary  Bonds shall be entitled to the same benefits under this Indenture
as definitive Bonds.

         Section  2.11  TRANSFER  RESTRICTIONS.  Upon a transfer of a Beneficial
Ownership  Interest  in a  Series  2003  Bond  (other  than  a  transfer  by the
Underwriter  pursuant  to the  initial  sale of the  Series  2003  Bonds),  each
purchaser  of  such  Beneficial  Ownership  Interest  shall  be  deemed  to have
certified  to the  Trustee  and  acknowledged,  represented  and agreed with the
Company and the  Underwriter  that such  purchaser is acquiring the Bond for its
own account,  and that it is (i) a "qualified  institutional  buyer"  within the
meaning of Rule 144A  promulgated  under the Securities Act of 1933, as amended,
or (ii) an  institutional  "accredited  investor," as defined in Rule 501(a)(1),
(2),  (3),  or (7) of the  Securities  Act of 1933,  as amended.  The  foregoing
transfer  restrictions  shall  not  apply  if (i) the  Trustee  has  received  a
municipal bond  insurance  policy or other form of credit  enhancement  securing
payment  of  principal  and  interest  on the  Bonds,  provided  that the policy
provider or credit enhancer is rated in one of the three highest categories by a
Rating Agency and such  insurance  policy or credit  enhancement  has a term not
less than the final maturity of the Bonds (or, if shorter,  may be drawn upon in
full upon its  expiration),  or (ii) a Rating  Agency has  assigned  the Bonds a
rating of at least  "Baa3"  or "BBB,"  without  any form of third  party  credit
enhancement.  A legend shall be printed on the face of each Bond  indicating the
foregoing.

                                     - 37 -
<PAGE>

                                   ARTICLE III

                               REVENUES AND FUNDS

         Section 3.1 PLEDGE OF TRUST  ESTATE.  Subject only to the rights of the
Issuer to apply  amounts  under the  provisions of this Article III, a pledge of
the Trust Estate to the extent  provided  herein is hereby made, and the same is
pledged to secure the payment of the principal of, premium, if any, and interest
on the  Bonds.  The  Issuer  hereby  covenants  that it has not,  as of the date
hereof,  granted  and shall not grant any  pledge on the Trust  Estate  which is
prior to the pledge in favor of the Bonds. The pledge hereby made shall be valid
and binding  from and after the time of the delivery by the Trustee of the first
Bond  authenticated and delivered under this Indenture.  The security so pledged
and then or thereafter  received by the Issuer shall  immediately  be subject to
the lien of such pledge and the obligation to perform the contractual provisions
hereby  made  shall  have  priority  over  any  or  all  other  obligations  and
liabilities  of the  Issuer,  and the lien of such  pledge  shall  be valid  and
binding as against all parties  having  claims of any kind in tort,  contract or
otherwise  against the Issuer  irrespective  of whether such parties have notice
thereof.

         Section 3.2  ESTABLISHMENT  OF FUNDS AND  ACCOUNTS.  The Issuer  hereby
establishes  and  creates  the  following  Funds for the  Bonds  and may  create
accounts  within  such  Funds,  all of which  shall be special  trust  funds and
accounts held by the Trustee:

                           (a) Bond Principal Fund;

                           (b) Bond Interest Fund;

                           (c) Reserve Fund;

                           (d) Project Fund;

                           (e) Cost of Issuance Fund; and

                           (f) Rebate Fund.

         Section 3.3 PAYMENTS INTO THE BOND PRINCIPAL FUND AND THE BOND INTEREST
FUND. There shall be deposited into the Bond Interest Fund all accrued interest,
if any. In addition,  there shall be deposited  into the Bond  Principal Fund or
the  Bond  Interest  Fund,  as  appropriate,  and as and when  received  (i) all
required  Monthly  Payments  pursuant  to the Loan  Agreement,  (ii) all  moneys
transferred  to the Bond  Interest  Fund and the Bond  Principal  Fund  from the
Project Fund pursuant to this  Indenture,  (iii) all moneys  transferred  to the
Bond Interest Fund and the Bond Principal Fund from the Reserve Fund pursuant to
this Indenture, (iv) all other moneys required

                                     - 38 -
<PAGE>

or permitted to be deposited  into the Bond Principal Fund or Bond Interest Fund
pursuant to the Loan Agreement or this  Indenture,  including any supplements to
the Indenture, and (v) all other moneys received by the Trustee when accompanied
by directions  not  inconsistent  with the Loan  Agreement or the Indenture that
such moneys are to be paid into the Bond  Principal  Fund or Bond Interest Fund.
There shall also be retained in the Bond  Principal Fund and Bond Interest Fund,
interest and other income received on investment of moneys in the Bond Principal
Fund and Bond Interest Fund to the extent provided in Section 6.3 hereof.

         Section 3.4  USE OF  MONIES  IN THE  BOND  PRINCIPAL  FUND AND THE BOND
INTEREST FUND.  Except as provided in this Section and in Sections  3.11,  3.16,
6.3 and 8.5 hereof,  monies in the Bond  Principal Fund shall be used solely for
the payment of the principal of and premium, if any, on the Bonds, and monies in
the Bond  Interest  Fund shall be used solely for the payment of the interest on
the Bonds.  Whenever  the total amount in the Bond  Principal  Fund and the Bond
Interest Fund is sufficient  to redeem all of the Bonds  Outstanding  and to pay
interest to accrue thereon prior to such redemption,  and redemption premium, if
any, the Issuer, subject to the requirements of the Loan Agreement, covenants to
take and cause to be taken the necessary steps to redeem all of the Bonds on the
redemption date for which the required redemption notice has been given.

         Section 3.5  CUSTODY OF THE BOND PRINCIPAL  FUND AND THE BOND  INTEREST
FUND. The Bond Principal Fund and the Bond Interest Fund shall be in the custody
of the  Trustee  but in the name of the Issuer,  and the Issuer  authorizes  and
directs the Trustee to withdraw sufficient funds from the Bond Principal Fund to
pay the  principal of and  premium,  if any, on the Bonds as the same become due
and payable, and to withdraw sufficient funds from the Bond Interest Fund to pay
the  interest  on the  Bonds  as the same  becomes  due and  payable  or to make
transfers to the Rebate Fund pursuant to Section 3.16 hereof.

         Section 3.6  PAYMENTS INTO THE RESERVE  FUND.  There shall be deposited
into the Reserve Fund $500,000 of proceeds of the Bonds.

                  There shall also be  deposited  into the Reserve  Fund (i) all
moneys  required to be deposited  therein  pursuant to the Loan Agreement or the
Indenture, and (ii) all other moneys received by the Trustee when accompanied by
directions not inconsistent  with the Loan Agreement or this Indenture that such
moneys are to be paid into such account.

                  Income from  investment  of the Reserve Fund shall be retained
in the Reserve Fund to the extent  described in Section 6.3 hereof.  Anything in
this Indenture to the contrary notwithstanding, moneys on deposit in the Reserve
Fund shall be invested so as not to be in  violation  of the yield  restrictions
set forth in the Tax Certificates.  Permitted  Investments relating to moneys in
the Reserve  Fund shall be valued by the Trustee in the manner  contemplated  in
the Indenture.  If any such  valuation  reveals that the value of such Permitted
Investments is less than the Reserve  Requirement with respect to the Bonds then
Outstanding,  the Trustee shall immediately notify the Company and the Issuer of
the amount of the difference between the

                                     - 39 -
<PAGE>

amount derived by such valuation and the Reserve  Requirement,  which difference
shall be  deposited  by the Company in the Reserve  Fund by making the  deposits
required by the Loan Agreement.

         Section 3.7  USE OF MONEYS IN THE RESERVE FUND. Except as required with
respect to Section 3.16 hereof,  moneys in the Reserve Fund shall be used solely
for the payment of the principal of, premium,  if any, and interest on the Bonds
in the  event  moneys  in the Bond  Principal  Fund and Bond  Interest  Fund are
insufficient  to make such  payments  when due,  whether on an Interest  Payment
Date, redemption date, sinking fund redemption date, maturity date or otherwise.
Notwithstanding  the  foregoing,  in  the  event  that  the  Initial  Bondholder
beneficially owns 100% of the Bonds, the Trustee shall apply monies  transferred
from the Debt Service Reserve Fund by the Trustee to satisfy unpaid installments
of interest or principal  due under the Bonds (i) first to the  satisfaction  of
unpaid  installments of interest and then principal due under the bonds maturing
December 1, 2012,  and then, to the extent monies remain  thereafter  available,
(ii) to the  satisfaction of unpaid  installments of interest and then principal
due under the Bonds maturing December 1, 2024.

                  (a) Upon the occurrence of an Event of Default hereunder,  any
moneys in the Reserve Fund shall be  transferred  by the Trustee,  but only upon
the direction of a Significant  Bondholder to the Bond Interest  Fund,  and with
respect to any moneys in excess of the amount  required to be transferred to the
Bond Interest Fund, to the Bond  Principal  Fund and applied in accordance  with
this Indenture,  provided,  however,  that the amounts on deposit in the Reserve
Fund  shall be used to pay only the  respective  series  of Bonds  for which the
Issuer  has  determined  that a deposit  to the  Reserve  Fund  shall be made in
accordance with this Indenture.

                  (b) Any  moneys  in the  Reserve  Fund  may be used to pay the
principal of and interest on such Bonds on the final maturity date.

                  (c) In the event of the redemption of the Bonds in whole,  any
moneys in the Reserve Fund shall be  transferred  to the Bond Principal Fund and
applied to the payment of the principal of and premium, if any, on such Bonds.

         Section 3.8 CUSTODY OF THE RESERVE  FUND.  The Reserve Fund shall be in
the custody of the Trustee but for the benefit of the Bondholders and the Issuer
hereby authorizes and directs the Trustee to withdraw  sufficient funds from the
Reserve Fund to pay the principal of, premium, if any, and interest on the Bonds
and for the purpose  described in Section 3.16 hereof,  which  authorization and
direction the Trustee hereby accepts.

         Section 3.9 PROJECT  FUND.  The proceeds of the Bonds,  after  required
deposits to the Reserve Fund and the Cost of Issuance  Fund,  shall be deposited
in the Project Fund.  In addition,  there shall be deposited in the Project Fund
any moneys  required  to be  transferred  to the  Project

                                     - 40 -
<PAGE>

Fund  pursuant to the  investment  provisions of this  Indenture,  and all other
moneys the Company may make available in its discretion to pay the reasonable or
necessary  costs  incidental to the  acquisition,  construction,  improvement or
equipping of the Facilities and all other  necessary and incidental  expenses in
connection with the foregoing.

                  The  Trustee   shall  keep  and  maintain   adequate   records
pertaining to the Project Fund, and all payments therefrom,  which shall be open
to inspection by the Company,  Registered  Owners of the Bonds,  the  Beneficial
Owners or their duly  authorized  agents  during  normal  business  hours of the
Trustee. After the Completion Date, the Trustee shall file a statement of income
and disbursements with respect to the Project Fund with the Company.  Any moneys
then  remaining in the Project Fund shall be  transferred  to the Bond Principal
Fund or Bond Interest Fund and used, at the option and written  direction of the
Company,  (i) to redeem Bonds on the next  succeeding  Interest  Payment Date on
which  the  Bonds  shall  be  subject  to  redemption,  or (ii) to  provide  for
additional solid waste disposal or manufacturing improvements to the Facilities.

                  At or prior to the  initial  disbursement  of  proceeds of the
Series 2004 Bonds from the Project Fund hereof,  the Company  shall  deliver the
following to the Trustee:

                           (a)  a  detailed   estimate   of  the  costs  of  the
Facilities,  indicating  the gross  costs,  including  all hard and soft  costs,
including,  without limitation,  all equipment to be acquired,  showing that the
moneys in the Project Fund,  together with the Company's  reasonable estimate of
the investment earnings to be deposited therein, are sufficient to pay all costs
of completing the  Facilities,  certified by the Company  Representative  to the
best of his or her knowledge and belief, upon due inquiry, to be correct;

                           (b) a  satisfactory  commitment for an ALTA policy of
mortgagee's  title insurance with liability not less than the maximum  principal
amount  of the  Outstanding  Bonds,  showing  the Loan  Agreement  to be a valid
second, junior and inferior lien on the Property subject only to Permitted Liens
in such form,  containing only such exceptions and containing such  endorsements
as are  satisfactory  to the  Trustee.  The expense of such policy  endorsements
shall be borne by the Company;

                           (c) a property survey on the Site;

                           (d) appraisal of the Property;

                           (e) certificates satisfactorily evidencing continuing
compliance with the insurance requirement of the Loan Agreement;

                           (f) Phase One Environmental Survey of the Site; and

                                     - 41 -
<PAGE>

                           (g) such  other  certificates  of the  Trustee or the
Company as may  reasonably  be required by Bond  Counsel to evidence  compliance
with the terms of this Indenture.

                           (h) a copy of Mark Vaughan's application from Key-Man
Life Insurance and a copy of the policy when it becomes available,  but no later
than ninety days after delivery of the Bonds.

                  Delivery of any of the  foregoing may be waived by the holders
of 100% of the Bonds.

                  Upon the occurrence of an Event of Default under the Indenture
and the exercise by the Trustee of the remedies  specified in the Loan Agreement
and the  Indenture,  any moneys in the Project Fund shall be  transferred by the
Trustee to the Bond Interest Fund and thereafter,  with respect to any moneys in
excess of the amount required to pay interest on the Bonds, to the Reserve Fund,
and, with respect to any moneys in excess of the Reserve Requirement to the Bond
Principal Fund, and applied in accordance with the Indenture.

         Section 3.10  CUSTODY OF THE PROJECT FUND. The Project Fund shall be in
the  custody  of the  Trustee  but in the  name of the  Issuer,  and the  Issuer
authorizes  and  directs  the  Trustee,   on  the  requisition  of  the  Company
Representative,  to withdraw  sufficient  funds from the Project Fund to pay the
Cost of the Project,  and without such requisition to make required transfers to
the Rebate  Fund  pursuant  to Section  3.16  hereof,  which  authorization  and
direction the Trustee hereby accepts.

         Section 3.11  NONPRESENTMENT OF BONDS. In the event any Bonds shall not
be  presented  for payment when the  principal  thereof  becomes due,  either at
maturity,  the date fixed for  redemption  thereof,  or otherwise,  if collected
funds  sufficient for the payment  thereof shall have been deposited in the Bond
Principal  Fund and the Bond  Interest Fund or otherwise  made  available to the
Trustee for deposit therein,  all liability of the Issuer to the owner or owners
thereof for the payment of such Bonds shall  forthwith  cease,  terminate and be
completely discharged, and thereupon it shall be the duty of the Trustee to hold
such fund or funds in a separate  trust  account for the benefit of the owner or
owners of such Bonds,  who shall  thereafter be restricted  exclusively  to such
fund or funds for any claim of whatever  nature on his,  her or their part under
this  Indenture  with respect to said Bond or on, or with respect to, said Bond.
The  Trustee  shall be under no  obligation  to, and shall not be  required  to,
invest  such  funds  pending  payment  of the  Bonds.  If any Bond  shall not be
presented  for payment  within the period of five years  following the date when
such Bond  becomes  due,  whether by maturity or  otherwise,  the Trustee  shall
return to the Company the funds theretofore held by it for payment of such Bond,
and such Bond  shall,  subject  to the  defense  of any  applicable  statute  of
limitation, thereafter be an unsecured obligation of the Company.

                                     - 42 -
<PAGE>

         Section 3.12   MONIES TO BE HELD IN TRUST.  All monies  required  to be
deposited  with or paid to the Trustee  under any  provision  of this  Indenture
shall  be held by the  Trustee  in  trust  for the  purposes  specified  in this
Indenture and,  except for monies  deposited with or paid to the Trustee for the
redemption  of Bonds for which the  notice of  redemption  has been duly  given,
shall,  while held by the Trustee,  constitute  part of the Trust Estate  (other
than the  Rebate  Fund) and be subject  to the lien  hereof  and not  subject to
attachment  or any other lien by any other  creditor in the event of  bankruptcy
nor available for general operations of the Company in the event of bankruptcy.

         Section 3.13  REPAYMENT  FROM THE FUNDS.  Any amounts  remaining in the
Funds after  payment in full of the Bonds (or making  provision for such payment
in accordance  with Article VII), the fees and expenses of the Trustee,  and all
other amounts  required to be paid hereunder and under the Loan Agreement to the
Issuer and all other  amounts  required to be paid  hereunder and under the Loan
Agreement shall, upon the expiration of the term of the Loan Agreement,  be paid
as the Company Representative shall direct in writing.

         Section 3.14 CREATION OF ADDITIONAL ACCOUNTS AND SUBACCOUNTS; TRANSFERS
OF MONIES  AMONG  FUNDS.  The Trustee  may,  and at the  written  request of the
Company  Representative and the Issuer, shall establish such additional accounts
within any of the Funds established under this Indenture, and subaccounts within
any of the accounts  established under this Indenture,  as shall be specified in
such written request,  for the purpose of identifying more precisely the sources
of payments into and  disbursements  from such Funds,  accounts and subaccounts;
but the  establishment of any such additional  accounts or subaccounts shall not
alter or modify any of the  requirements  of this  Indenture with respect to the
deposit or use of the monies in any Fund established hereunder.

         Section 3.15  REBATE FUND. There is hereby created and established with
the Trustee for the benefit of the United States of America a Rebate Fund in the
name of the Issuer  which shall be expended in  accordance  with the  provisions
hereof,  the Tax  Certificates.  The Company shall be responsible for making all
such deposits to the Rebate Fund as required in the Tax Certificates and Section
5.1(g) of the Loan  Agreement.  The Trustee  shall invest the Rebate Fund at the
written direction (or by oral instruction  promptly confirmed in writing) of the
Company   Representative   and  shall  deposit  income  from  said   investments
immediately upon receipt thereof in the Rebate Fund. For purposes of determining
rebate  calculations  that may be required with respect thereto  pursuant to the
Tax Certificates,  the Company may employ, at its own expense, a Rebate Analyst.
The Tax  Certificates  may be  superseded  or  amended by a  certificate  of the
Company, accompanied by an Opinion of Bond Counsel addressed to, the Company and
the  Trustee  to the  effect  that  the use of said  new  certificate  will  not
adversely affect the exclusion of interest on the Bonds from gross income of the
recipients thereof for purposes of federal income taxation.

         Section 3.16 REBATE DEPOSITS. The Trustee shall make the rebate deposit
described in the Tax  Certificates  based upon the written  instructions  of the
Company  Representative.  If a

                                     - 43 -
<PAGE>

withdrawal  from the Rebate Fund is  permitted  as a result of such  computation
because no rebate  payments are required to be made, the amount  withdrawn shall
be deposited in the Bond Principal Fund in accordance with written  instructions
furnished to the Trustee.  Record of the determinations required by this Section
must be retained by the Company  Representative  and the Trustee until six years
after the final retirement of the Bonds.

                  If the monies on deposit in the Rebate  Fund are  insufficient
for the purposes  thereof,  the Trustee shall transfer monies to the Rebate Fund
from the following Funds in the following  order of priority:  the Project Fund,
the Reserve Fund, the Bond Principal Fund and the Bond Interest Fund.

         Section  3.17  REBATE  DISBURSEMENTS.  Not later than 60 days after the
last day of the fifth Bond Year, as defined in the Tax  Certificates,  and every
five years thereafter,  the Trustee shall pay to the United States 90 percent of
the amount,  at the written  direction of the Rebate Analyst,  on deposit in the
Rebate  Fund as of such  payment  date.  No later  than 60 days  after the final
retirement of the Bonds,  the Trustee shall pay to the United States 100 percent
of the balance  remaining in the Rebate Fund (or such lesser  amount as shall be
due and owing to the United States). Nothing herein shall relieve the Company of
its obligation to pay the rebate amount in accordance with Section 5.1(g) of the
Loan Agreement.  Each payment  required to be paid to the United States pursuant
to this  Section  shall  be filed  with the  Internal  Revenue  Service  Center,
Philadelphia, Pennsylvania 19255. Each payment shall be accompanied by a copy of
the  Internal  Revenue  Form 8038  originally  filed with  respect to the Bonds,
Internal  Revenue Form 8038-T and, if  necessary,  a statement  summarizing  the
determination of the amount to be paid to the United States.

         Section 3.18  TAX CERTIFICATES. The use and investment of monies in any
of the Funds shall be subject to the provisions of the Tax Certificates, and the
Issuer and the Trustee, in the performance of their duties thereunder,  agree to
comply  with  the  same.   Trustee  shall  have  no  responsibility  for  rebate
calculations  and shall have no liability  for actions taken at the direction of
the Company or Rebate Analyst

         Section 3.19  (Reserved).

         Section 3.20  COST OF ISSUANCE FUND.  The Company  shall deposit to the
Cost of  Issuance  Fund an  amount  sufficient  to pay a  portion  of the  costs
incurred in connection with the  authorization,  issuance and sale of the Bonds,
to the extent the same are approved by the Company.  The Trustee shall  transfer
amounts from the Cost of Issuance  Fund as directed by the Company.  The Trustee
shall keep and  maintain  adequate  records  pertaining  to the Cost of Issuance
Fund,  and all  payments  therefrom,  which shall be open to  inspection  by the
Company,  Registered  Owners of the Bonds,  the Beneficial  Owners or their duly
authorized agents during normal business hours of the Trustee.

                                     - 44 -
<PAGE>

         Section 3.21 CUSTODY OF THE COST OF ISSUANCE FUND. The Cost of Issuance
Fund shall be in the custody of the  Trustee but in the name of the Issuer,  and
the Issuer authorizes and directs the Trustee, on the requisition of the Company
Representative,  to withdraw  sufficient funds from the Cost of Issuance Fund to
pay a portion  of the  costs  incurred  in  connection  with the  authorization,
issuance and sale of the Bonds,  which  authorization  and direction the Trustee
hereby accepts.

                                     - 45 -
<PAGE>

                                   ARTICLE IV

                             COVENANTS OF THE ISSUER

         Section 4.1 PERFORMANCE OF COVENANTS. The Issuer covenants that it will
faithfully   perform  at  all  times  any  and  all   covenants,   undertakings,
stipulations and provisions  contained in this Indenture,  in any and every Bond
and in all proceedings of the Issuer pertaining  thereto.  The Issuer covenants,
represents, warrants and agrees that it is duly authorized under the laws of the
State of Oklahoma,  including  particularly and without limitation,  the Act, to
issue the Bonds and to execute this Indenture,  to pledge the property described
herein and  pledged  hereby and to pledge the Trust  Estate in the manner and to
the extent  herein  set forth,  that all  actions on its part  required  for the
issuance of the Bonds and the execution and delivery of this Indenture have been
duly and effectively  taken or will be duly taken as provided  herein,  and that
this Indenture is a valid and enforceable  instrument of the Issuer and that the
Bonds in the hands of the owners  thereof are and will be valid and  enforceable
obligations of the Issuer according to the terms thereof.

         Section 4.2 INSTRUMENTS OF FURTHER ASSURANCE. The Issuer covenants that
it will do,  execute,  acknowledge  and  deliver or cause to be done,  executed,
acknowledged and delivered, such indentures supplemental hereto and such further
acts,  instruments  and transfers as the Trustee may reasonably  require for the
better assuring,  transferring,  pledging and hypothecating unto the Trustee all
and singular the Trust Estate to the payment of the  principal of,  premium,  if
any, and interest on the Bonds.

                  Promptly after any filing,  registration  or recording  (other
than  the  filing  of the  Loan  Agreement,  this  Indenture  and any  financing
statements  in  connection  with the  issuance  of the Bonds) or any  re-filing,
re-registration  or  re-recording of this Indenture or the Loan Agreement or any
filing, registration,  recording, re-filing,  re-registration or re-recording of
any  supplement  to either  of said  instruments,  any  financing  statement  or
instrument  of similar  character  relating  to any of said  instruments  or any
instrument  of further  assurance  which is required  pursuant to the  preceding
paragraph,  the Issuer will cause the Company  Representative  to deliver to the
Trustee an  opinion of  independent  counsel  to the  effect  that such  filing,
registration,  recording,  re-filing,  re-registration  or re-recording has been
duly accomplished and setting forth the particulars thereof.

         Section 4.3  PAYMENT OF PRINCIPAL, PREMIUM,  IF ANY, AND INTEREST.  The
Issuer will promptly pay or cause to be paid the principal of, premium,  if any,
and interest on all Bonds issued  hereunder  according to the terms hereof.  The
principal,  premium,  if any, and interest  payments are payable solely from the
Trust Estate, which is hereby specifically pledged to the payment thereof in the
manner  and to the  extent  herein  specified.  Nothing  in the Bonds or in this
Indenture  shall be  considered  or construed as pledging any funds or assets of
the Issuer  other

                                     - 46 -
<PAGE>

than those pledged  hereby or creating any  liability of the Issuer's  trustees,
employees or other agents.

         Section 4.4  CONDITIONS PRECEDENT.  Upon the date of issuance of any of
the Bonds,  the Issuer hereby  covenants  that all  conditions,  acts and things
required of the Issuer by the  Constitution or statutes of the State of Oklahoma
or by the Act or by this  Indenture to exist,  to have  happened or to have been
performed  precedent  to or in the  issuance  of the  Bonds  shall  exist,  have
happened and have been performed.

         Section 4.5  SUPPLEMENTAL INDENTURES; RECORDATION OR FILING OF SECURITY
INSTRUMENTS.  As set forth in  Section  12.9 of the Loan  Agreement,  the Issuer
shall cause the Trustee to cause such continuation statements under the Oklahoma
Uniform Commercial Code at all times to be recorded, registered and filed by the
Trustee  and to be kept,  recorded,  registered  and filed in such manner and in
such places as may be required by law in order fully to preserve and protect the
security of the Bondholders and all rights of the Trustee hereunder.

         Section 4.6  RIGHTS UNDER THE LOAN  AGREEMENT.  The Issuer will observe
all of the obligations, terms and conditions required on its part to be observed
or performed  under the Loan  Agreement.  The Issuer agrees that wherever in the
Loan  Agreement it is stated that the Issuer will notify the  Trustee,  whenever
the Loan  Agreement  gives the Trustee  some right or  privilege,  or in any way
attempts  to confer  upon the Trustee the ability for the Trustee to protect the
security for payment of the Bonds, that such part of the Loan Agreement shall be
as though it were set out in this Indenture in full.

                  The Issuer  agrees  that the  Trustee as  assignee of the Loan
Agreement,  to the extent provided  herein,  may enforce,  in its name or in the
name of the  Issuer,  all  rights of the  Issuer  (other  than the rights of the
Issuer under Sections 5.1(f),  8.5 and 10.4 of the Loan Agreement and other than
the rights of the Issuer to perform certain  discretionary  acts reserved in the
Loan  Agreement)  and all  obligations  of the Company under and pursuant to the
Loan Agreement for and on behalf of the  Bondholders,  whether or not the Issuer
is in default hereunder.

                                     - 47 -
<PAGE>

                                    ARTICLE V

                      REDEMPTION OF BONDS PRIOR TO MATURITY

                  Section 5.1  Optional REDEMPTION.  Series 2004 Bonds  maturing
December 1, 2024, shall be subject to redemption prior to maturity,  in whole or
in part, at the written  direction of the Company  ("Optional  Redemption"),  on
December 1, 2014, and on any date  thereafter,  at a redemption  price set forth
below  (expressed  as a percentage of the  principal  amount so redeemed),  plus
accrued interest to the redemption date:

                        Redemption Date              Redemption Price
                        ---------------              ----------------

                  Dec.1, 2014 to Nov. 30, 2015              102%
                  Dec.1, 2015 to Nov. 30, 2016              101%
                  Dec.1, 2016 and thereafter                100%

Section 5.2  REDEMPTION OF BONDS UPON OCCURRENCE OF CERTAIN EVENTS.

         (a) The Bonds are  redeemable  by the Issuer upon the  direction of the
Company  Representative  in whole or in part at any time at a  redemption  price
equal to the  principal  amount  of each Bond  redeemed,  and  accrued  interest
thereon to the  redemption  date,  upon the  occurrence  of events  described in
Section 7.1 of the Loan Agreement.

         (b) The Bonds are also  redeemable  by the Issuer upon the direction of
the Company  Representative in whole but not in part at any time at a redemption
price  equal to 110% of the  principal  amount  thereof,  and  accrued  interest
thereon to the redemption  date, as a condition  precedent to the acquisition by
any Person of  substantially  all of the assets of the Company or as a condition
precedent of the merger or consolidation of the Company,  as provided in Section
8.14 of the Loan Agreement.

         (c) The Bonds are  redeemable  by the Issuer upon the  direction of the
Company  Representative in whole or in part at any time after July 1, 2005, at a
redemption  price  equal to the  principal  amount  of each Bond  redeemed,  and
accrued interest thereon to the redemption date, from unexpended proceeds of the
Bonds on deposit in the Project Fund.

         Section 5.3  REDEMPTION OF BONDS UPON A  DETERMINATION  OF  TAXABILITY.
Upon the occurrence of a Determination  of Taxability,  the Bonds are subject to
mandatory  redemption  in  whole  at a  redemption  price  equal  to 105% of the
Outstanding  principal amount thereof, plus interest accrued to redemption date,
at the earliest  practicable  date selected by the Trustee,  after  consultation
with the Company,  but in no event later than 45 days  following  receipt by the
Trustee  of notice of the  Determination  of  Taxability.  The  occurrence  of a
Determination  of

                                     - 48 -
<PAGE>

Taxability  with  respect to the Bonds will not  constitute  an Event of Default
under  this  Indenture  and the sole  remedy of the  Holders  will be  mandatory
redemption  of the  Bonds in  accordance  with this  Section  5.2.  Within  five
Business Days after receipt by the Trustee of written notice of a  Determination
of  Taxability,  the Trustee shall give written notice thereof to the Holders of
all Bonds then Outstanding and shall also give written notice to the Company and
the Issuer.

         Section 5.4  SINKING FUND.  The Bonds  maturing  December 1, 2012,  are
subject to mandatory  sinking fund redemption at a redemption price equal to 100
percent of the principal  amount thereof and accrued  interest to the redemption
date. As and for a sinking fund for the redemption of such Bonds, there shall be
deposited pursuant to Section 5.1(a) of the Loan Agreement in the Bond Principal
Fund and Bond Interest Fund a sum which is sufficient to redeem (after credit as
provided  below) the  following  principal  amounts  of such  Bonds and  accrued
interest to the redemption date:

               December 1       Principal      December 1      Principal
               of the Year       Amount        of the Year      Amount
               -----------       ------        -----------      ------

                   2006         $310,000           2010        $400,000
                   2007          325,000           2011         425,000
                   2008          350,000           2012         455,000
                   2009          370,000

         The Bonds maturing  December 1, 2024, are subject to mandatory  sinking
fund  redemption  at a  redemption  price equal to 100 percent of the  principal
amount thereof and accrued interest to the redemption date. As and for a sinking
fund for the  redemption  of such Bonds,  there shall be  deposited  pursuant to
Section  5.1(a)  of the  Loan  Agreement  in the  Bond  Principal  Fund and Bond
Interest  Fund a sum which is  sufficient  to redeem  (after  credit as provided
below) the following principal amounts of such Bonds and accrued interest to the
redemption date:

               December 1       Principal      December 1      Principal
               of the Year       Amount        of the Year      Amount
               -----------       ------        -----------      ------
                   2013         $485,000           2019        $130,000
                   2014          515,000           2020         140,000
                   2015          100,000           2021         150,000
                   2016          105,000           2022         160,000
                   2017          110,000           2023         170,000
                   2018          120,000           2024         180,000

                                     - 49 -
<PAGE>

                  Not more than 45 days nor less than 30 days prior to a sinking
fund  payment  date for the  Bonds,  the  Trustee  shall  proceed  to select for
redemption (by lot in such manner as the Trustee may  determine)  from all Bonds
Outstanding  which  are  subject  to  sinking  fund  redemption  on such  date a
principal amount of such Bonds equal to the aggregate  principal amount of Bonds
redeemable with the required sinking fund payment, and shall call such Bonds for
redemption  from the  particular  sinking fund on the next  December 1, and give
notice of such call.

                  At the  option of the  Company  Representative  (so long as no
Event of Default has occurred and is  continuing) to be exercised by delivery of
a written  certificate  to the Trustee and the Issuer not less than 45 days next
preceding  any sinking fund  redemption  date, it may (i) deliver to the Trustee
for cancellation Bonds which are subject to sinking fund redemption on such date
in an aggregate  principal amount designated by the Company  Representative,  or
(ii) specify a principal amount of such Bonds which prior to said date have been
redeemed  (otherwise  than  through  the  operation  of such  sinking  fund) and
canceled  by the  Trustee and not  theretofore  applied as a credit  against any
sinking fund  redemption  obligation  for such Bonds.  Each Bond so delivered or
previously  redeemed  shall be credited by the Trustee at 100% of the  principal
amount  thereof  against  the  obligation  of the Company on such  sinking  fund
redemption date, and any excess shall be so credited against future sinking fund
redemption  obligations for Bonds  proportionately to all remaining sinking fund
payments.  In the event the Company  Representative  shall  avail  itself of the
provisions of clause (i) of the first sentence of this paragraph the certificate
required by the first  sentence of this  paragraph  shall be  accompanied by the
Bonds to be canceled.

                  Notwithstanding   any  provision  of  this  Indenture  to  the
contrary,  in the event all Bonds  are held by a single  holder,  no  additional
notice  shall be required  with respect to  mandatory  sinking  fund  redemption
unless  requested by the holders of 100% of the  principal  amount of the Bonds,
and Bonds need not be presented for mandatory sinking fund redemption payment.

         Section 5.5  METHOD OF SELECTING BONDS. Except in the case of mandatory
sinking fund redemption  pursuant to Section 5.4 hereof,  in the event that less
than all of the Outstanding Bonds shall be redeemed, the Bonds redeemed shall be
redeemed in inverse  order of  maturity  (less than all of the Bonds of a single
maturity to be selected by lot in such manner as the Trustee may determine).

         Section 5.6  NOTICE OF REDEMPTION. Bonds shall be called for redemption
by the Trustee as herein provided but only if funds have been deposited with the
Trustee  on or  before  the date  fixed  for  redemption  sufficient  to pay the
applicable  redemption  price of the Bonds to be  redeemed.  Except as otherwise
herein  provided,  the Company  shall  provide to the Trustee,  at least 45 days
prior to the  redemption  date,  a  Certificate  of the  Company  Representative
specifying the principal  amount of the Bonds to be called for  redemption,  the
applicable  redemption  price or prices and the  provision or provisions of this
Indenture pursuant to which

                                     - 50 -
<PAGE>

such Bonds are to be called for redemption, provided that such certificate shall
not be required  with respect to a sinking fund  redemption  pursuant to Section
5.3 hereof and Bonds shall be called for  redemption by the Trustee  pursuant to
such Section  without the  necessity of any action by the Issuer or the Company.
In the case of any  redemption  or tender  other than as provided in Section 5.3
hereof, the Trustee shall cause notice of such redemption to be given by mailing
not more  than 45 days nor less  than 30 days  prior to the  redemption  date by
first class mail a copy of the redemption  notice to the Registered Owner of any
Bonds  designated  for  redemption  in whole or in part, at their address as the
same shall last appear upon the  registration  books;  provided,  however,  that
failure to give such notice or any defect therein, shall not affect the validity
of any proceedings for the redemption of such Bonds for which no such failure or
defect occurs.

                  Notice of any redemption  hereunder with respect to Bonds held
under  a book  entry  system  shall  be  given  by  the  Registrar  only  to the
Depository, or its nominee, as the Holder of such Bonds. Selection of book entry
interests in the Bonds called for  redemption,  and notice of call to the owners
of those interests called, is the  responsibility of the Depository,  the Direct
Participant and the Individual  Participant and any failure of the Depository to
advise any Direct  Participant  and any failure of a Direct  Participant  or any
Indirect  Participant to notify the Beneficial  Owner of any such notice and its
contents  or  effect  will  not  affect  the  validity  of  such  notice  of any
proceedings for the redemption of such Bonds.

                  Each notice of redemption shall specify the name of the Bonds,
the date the Bonds were originally  issued,  the date fixed for redemption,  the
date of mailing of the  notice,  the  redemption  price,  the place or places of
payment  (including  contact person and phone number) the CUSIP numbers of Bonds
being  redeemed,  the rate of  interest  borne by each Bond  being  redeemed  or
tendered,  the  maturity  date of each Bond being  redeemed  or  tendered,  that
payment  will be  made  upon  presentation  and  surrender  of the  Bonds  to be
redeemed, that interest accrued to the date fixed for redemption will be paid as
specified in said notice, any conditions to the redemption  (including,  but not
limited to,  deposit of the applicable  redemption  price) and that on and after
said  date  interest  thereon  will  cease  to  accrue.  If  less  than  all the
Outstanding Bonds are to be redeemed, the notice of redemption shall specify the
Bonds to be  redeemed,  and the numbers of the Bonds or  portions  thereof to be
redeemed.

         Section 5.7 BONDS DUE AND PAYABLE ON REDEMPTION  DATE;  INTEREST CEASES
TO ACCRUE.  On or before any  redemption  pursuant to this Article V,  collected
funds  sufficient  to  redeem  all  the  Bonds  called  for  redemption  at  the
appropriate  redemption price,  including accrued interest to the date fixed for
redemption,  shall be deposited with the Trustee.  On the  redemption  date, the
principal amount of each Bond to be redeemed, together with the accrued interest
thereon to such date,  and  redemption  premium,  if any,  shall  become due and
payable;  from and after such date,  notice of redemption having been given, and
deposit  having been made in accordance  with the  provisions of this Article V,
then,  notwithstanding  that any Bonds called for redemption shall not have been
surrendered,  no further  interest  shall accrue on any of such Bonds.  From and
after such date of  redemption  (such notice  having been given and such deposit
having  been  made), the

                                     - 51 -
<PAGE>

Bonds to be redeemed  shall not be deemed to be Outstanding  hereunder,  and the
Issuer shall be under no further liability in respect thereof.

         Section 5.8  CANCELLATION.  All Bonds which have been redeemed shall be
canceled by the Trustee and destroyed as provided in Section 2.9 hereof.

         Section 5.9 PARTIAL REDEMPTION OF BONDS. Upon surrender of any Bond for
redemption  in part only,  the  Issuer  shall  execute,  and the  Trustee  shall
authenticate  and deliver to the owner thereof,  the cost of which shall be paid
by the  Company,  a new Bond or Bonds of the  same  maturity  and of  authorized
denominations,  in an aggregate principal amount equal to the unredeemed portion
of the Bond  surrendered;  provided  that the  Trustee  shall  select  Bonds for
redemption so as to assure that after such  redemption  no  Registered  Owner or
Owner of Beneficial Interests shall retain Bonds in authorized  denominations of
not less  than  $100,000;  and  provided  further  that,  if less than all of an
Outstanding  Bond of one  maturity  in a book  entry  system is to be called for
redemption,  the Trustee  shall give notice to the  Depository or the nominee of
the  Depository  that is the  Holder  of such  Bond,  and the  selection  of the
Beneficial Interests in that Bond to be redeemed shall be at the sole discretion
of the Depository and its participants.  In the case of a partial  redemption of
Bonds by lot, each unit of face value of principal thereof equal to $5,000 (each
such $5,000  unit is  hereinafter  referred to as a "Unit")  shall be treated as
though it were a separate  Bond in the amount of such Unit.  If it is determined
that one or more,  but not all,  of the  Units  represented  by a Bond are to be
called for  redemption,  then upon  notice of  redemption  of a Unit or Units of
Bonds,  the holder of that Bond shall  surrender the Bond to the Trustee (a) for
payment  of the  redemption  price of the Unit or  Units  of  Bonds  called  for
redemption (including without limitation. the interest accrued to the date fixed
for  redemption  and any premium),  and (b) for issuance,  without charge to the
holder thereof,  of a new Bond or Bonds of $100,000 or amounts in excess thereof
in such  integrals as are permitted  hereunder,  aggregating a principal  amount
equal to the unmatured and  unredeemed  portion of, and bearing  interest at the
same rate and maturing on the same date as, the Bond surrendered.

                                     - 52 -
<PAGE>

                                   ARTICLE VI

                                   INVESTMENTS

         Section 6.1  INVESTMENT  OF FUNDS.  Subject to the Section 3.18 hereof,
any  monies  held  as part of the  Funds  shall,  on  instructions  signed  by a
Corporation Representative,  be invested by the Trustee in Permitted Investments
(i) with  respect to the  Project  Fund and the  Reserve  Fund  maturing  in the
amounts  and at the times  necessary  to provide  funds to make the  payments to
which such monies are  applicable as estimated in a certificate of a Corporation
Representative from time to time filed with the Trustee and (ii) with respect to
the Bond Principal  Fund, the Bond Interest Fund and the Rebate Fund maturing in
the amounts and at the times  necessary to provide funds to make the payments to
which such monies are  applicable as  determined  by the Trustee.  To the extent
practicable,  all  such  Permitted  Investments  purchased  shall  mature  or be
redeemable on a date or dates prior to the time when the monies so invested will
be required for  expenditure.  Permitted  Investments  in the Reserve Fund shall
have a maturity of not more than one year.  The Trustee shall sell and reduce to
cash a  sufficient  portion of such  investments  whenever the cash balance in a
Fund is insufficient for the purposes of such Fund. The Trustee may make any and
all investments permitted by the provisions of this Section through its trust or
bond department.

                  Investments  in any of the Funds hereof shall be valued by the
Trustee not less often than annually,  on or before  December 1 of each year, at
the market value thereof,  exclusive of interest.  Deficiencies in the amount on
deposit in the Reserve  Fund  resulting  from a decline in market value shall be
restored  by the  Company  beginning  not  later  than  three  months  after the
valuation  date by making the deposits  required by Section  5.1(e)(iii)  of the
Loan Agreement.

                  As to any investment agreement,  the Trustee shall give notice
to any provider of an investment  agreement in accordance  with the terms of the
investment  agreement  so as to receive  funds  thereunder  when  needed with no
penalty or premium paid.

         Section 6.2  ARBITRAGE. In reliance upon the covenant of the Company in
Section 4.6 of the Loan Agreement,  the Issuer hereby  covenants for the benefit
of each owner of the Bonds that no use will be made of the proceeds of the Bonds
or of any monies in the Funds and that no other action shall be taken which will
cause  the Bonds or any  obligations  subsequently  issued  by the  Issuer to be
"arbitrage  bonds"  within  the  meaning  of  Section  148 of the  Code  and the
regulations prescribed thereunder.

                  Unless  otherwise  required  by Section  148 of the Code,  the
Secretary or any other Issuer  Representative having responsibility with respect
to the issuance of the Bonds  shall,  on or prior to the date of issuance of the
Bonds,  if applicable,  either alone or in  conjunction  with any other officer,
employee,  consultant  or  agent  of the  Issuer,  deliver  to the  Trustee  the
certification  required by the regulations  promulgated under Section 148 of the
Code to  evidence  that such

                                     - 53 -
<PAGE>

Bonds will not be  "arbitrage  bonds"  within the  meaning of Section 148 of the
Code  and the  regulations  thereunder.  Such  certificates  may  rely  upon the
certificates  of the Company  delivered to the Issuer pursuant to Section 4.6 of
the Loan Agreement.

         Section 6.3   ALLOCATION  AND  TRANSFERS  OF  INVESTMENT   INCOME.  Any
investments  shall be held by or under the  control of the  Trustee and shall be
deemed at all times a part of the Fund from which the  investment  was made. Any
loss resulting from such investments shall be charged to such Fund. Any interest
or other  gain  from  any Fund  from any  investment  or  reinvestment  shall be
allocated and transferred subject to the Tax Certificates, as follows:

                  (a) any  interest  or other gain  realized  as a result of any
investments or  reinvestments of moneys in the Project Fund shall be retained in
or transferred to the Project Fund;

                  (b) any  interest  or other gain  realized  as a result of any
investments or  reinvestments  of moneys in the Bond Principal Fund and the Bond
Interest Fund shall be retained in the respective Fund;

                  (c) any  interest  or other gain  realized  as a result of any
investments or  reinvestments of moneys in the Reserve Fund shall be transferred
to the Project Fund during the  construction of the  Improvements and thereafter
shall be  credited to the  Reserve  Fund if the amount  therein is less than the
Reserve  Requirement.  If the amount in the Reserve  Fund is equal to or greater
than the Reserve Requirement, such interest or other gain realized shall be paid
into the Project Fund, and after the Completion Date, to the Bond Interest Fund;

                  (d) (Reserved);

                  (e) any  interest  or other gain  realized  as a result of any
investment or reinvestment of moneys in the Rebate Fund shall be retained in the
Rebate Fund; and

                  (f) notwithstanding the foregoing,  any interest or other gain
realized  as a result of any  investments  or  reinvestments  of moneys in Funds
pursuant to the  Indenture  shall first be  deposited  in the Rebate Fund to the
extent amounts  required to be deposited  therein pursuant to the Indenture have
not been so deposited.

                                     - 54 -
<PAGE>

                                   ARTICLE VII

                             DISCHARGE OF INDENTURE

         Section 7.1  DISCHARGE OF THIS  INDENTURE.  If, when the Bonds  secured
hereby shall be paid in accordance with their terms (or payment of the Bonds has
been provided for in the manner set forth in the following paragraph),  together
with all other sums payable hereunder,  then this Indenture and the Trust Estate
and all rights granted  hereunder  shall thereupon  cease,  terminate and become
void and be discharged and  satisfied.  Also, if all  Outstanding  Bonds secured
hereby shall have been purchased by the Company and delivered to the Trustee for
cancellation,  and all other sums payable hereunder have been paid, or provision
shall have been made for the payment of the same,  then this  Indenture  and the
Trust Estate and all rights granted  hereunder shall thereupon cease,  terminate
and become  void and be  discharged  and  satisfied.  In such  events,  upon the
request of the Issuer,  the Trustee  shall assign and transfer to the Issuer all
property then held by the Trustee  hereunder and shall execute such documents as
may be reasonably required by the Issuer (including  undertakings by the Company
to continue to comply with its  covenants  contained  in Sections  4.6,  5.1(f),
5.1(g),  8.5 and 10.4 of the Loan  Agreement  until all Bonds are actually paid)
and shall turn over any  surplus in any Fund the  Company  Representative  shall
direct in writing, other than the Rebate Fund.

                  Payment of any  Outstanding  Bonds  prior to the  maturity  or
redemption  date  thereof  shall be deemed to have been  provided for within the
meaning and with the effect  expressed in this Section if (i) in case said Bonds
are  to  be  redeemed  on  any  date  prior  to  their  maturity,   the  Company
Representative  shall  have  given to the  Trustee  in form  satisfactory  to it
irrevocable  instructions to give on a date in accordance with the provisions of
Section 5.5 hereof notice of redemption of such Bonds on said  redemption  date,
such notice to be given in accordance with the provisions of Section 5.5 hereof,
(ii) there shall have been  deposited  with the Trustee  Government  Obligations
described  in Section  1(a) of the  definition  of such term as set forth herein
which shall not contain  provisions  permitting  the  redemption  thereof at the
option of the issuer before the date the principal thereof will be required, the
principal of and the  interest on which when due,  and without any  reinvestment
thereof, will provide monies which, together with any other available monies, if
any, deposited with or held by the Trustee at the same time, shall be sufficient
to pay when due the  principal of and  premium,  if any, and interest due and to
become due on said Bonds on and prior to the  redemption  date or maturity  date
thereof,  as the case may be (and if on the date of such deposit,  the Bonds are
not actually  paid in full,  then there shall be provided to the Trustee and the
Issuer (a) report of an  independent  firm of  nationally  recognized  certified
public  accountants  verifying the sufficiency of the escrow  established to pay
the Bonds in full and (b) an opinion of  nationally  recognized  bond counsel to
the effect that the Bonds are no longer  Outstanding under this Indenture),  and
(iii) in the event  said  Bonds are not by their  terms  subject  to  redemption
within the next 45 days, the Company Representative shall have given the Trustee
in  form  satisfactory  to it  irrevocable  instructions  to  give,  as  soon as
practicable  in the same manner as the notice of redemption is given pursuant to

                                     - 55 -
<PAGE>

Section  5.5  hereof,  a notice to the  owners of such  Bonds  that the  deposit
required by (ii) above has been made with the  Trustee and that  payment of said
Bonds has been  provided  for in  accordance  with this Section and stating such
maturity  or  redemption  date upon  which  monies are to be  available  for the
payment of the principal of and premium,  if any, and interest on said Bonds. At
such time as payment of any Bonds has been provided for as aforesaid, such Bonds
shall no longer be secured by or  entitled to the  benefits  of this  Indenture.
except for the purpose of any payment from such monies or  securities  deposited
with the  Trustee.  The  Company  will use its best  efforts to obtain  from the
Rating  Agencies the assignment of a rating to the Bonds that have been defeased
pursuant to this Section 7.1.

                  The  release  of the  obligations  of the  Issuer  under  this
Section  shall be  without  prejudice  to the  right of the  Trustee  to be paid
reasonable  compensation  for all services  rendered by it hereunder and all its
reasonable  expenses,  charges and other disbursements  incurred on or about the
administration of the trust hereby created and the performance of its powers and
duties hereunder.

         Section 7.2  LIABILITY OF ISSUER NOT DISCHARGED.  Upon  compliance with
the provisions of Section 7.1 hereof with respect to all Bonds then Outstanding,
this  Indenture  may be discharged  in  accordance  with the  provisions of this
Article  VII,  but the  liability  of the Issuer in respect of such Bonds  shall
continue  provided  that the owners  thereof  shall  thereafter  be  entitled to
payment  only out of the  monies or  securities  deposited  with the  Trustee as
provided in Section 7.1 hereof.

                                     - 56 -
<PAGE>

                                  ARTICLE VIII

                              DEFAULTS AND REMEDIES

         Section 8.1  EVENTS OF DEFAULT. Each of the following is hereby defined
as and shall be deemed an "Event of Default":

                  (a) default in the payment of the principal of or premium,  if
any,  on any Bond when the same  shall  become due and  payable,  whether at the
stated maturity thereof, on a sinking fund payment date, or upon proceedings for
redemption;

                  (b) default in the payment of any  installment  of interest on
any Bond when the same shall become due and payable;

                  (c) default shall be made in the  observance or performance of
any covenant,  contract or other provision in the Bonds or this Indenture (other
than as referred to in (a) or (b) of this Section and circumstances resulting in
an Interest Rate Step-up, as defined herein) and such default shall continue for
a period of 30 days after written  notice to the Issuer and the Trustee from the
owners of at least 25 percent in  aggregate  principal  amount of the Bonds then
Outstanding  or to the Issuer  from the  Trustee  specifying  such  default  and
requiring  the same to be remedied;  provided,  with respect to any such failure
covered by this  subsection  (c),  no Event of  Default  shall be deemed to have
occurred so long as a course of action  adequate to remedy  such  failure  shall
have been commenced within such 30-day period and shall thereafter be diligently
prosecuted to completion  and the failure  shall be remedied  thereby;  provided
further,  however,  that failure to correct  such  default  within 90 days after
receipt of such notice shall constitute an Event of Default; and

                  (d) the occurrence of an "event of default" under Section 10.1
of the Loan Agreement.

         Section 8.2  REMEDIES ON EVENTS OF DEFAULT.  Upon the occurrence  of an
Event of Default, the Trustee shall have the following rights and remedies:

                  (a) Upon the  occurrence  of an Event of Default  (as  defined
hereinabove  or as hereinafter  defined) other than an Event of Taxability,  the
rate of  interest  on the Bonds  shall be  adjusted  so that at all times on and
after the occurrence and  continuation of the Event of Default,  the Bonds shall
bear interest at a rate equal to fourteen  percent (14%) per annum (the "Default
Rate") until such Event of Default has been cured.

                  (b)  ACCELERATION.  The  Trustee  may,  and upon  the  written
request of the owners of not less than 25 percent aggregate  principal amount of
the sum of the Bonds then  Outstanding  shall, by notice in writing given to the
Issuer  and  the  Company,  declare  the  principal  amount  of all  Bonds  then
Outstanding  and the interest  accrued thereon to be immediately due

                                     - 57 -
<PAGE>

and payable and said principal and interest shall thereupon  become  immediately
due and payable. Upon any declaration of acceleration hereunder,  the Issuer and
the Trustee shall immediately declare all Loan Payments under the Loan Agreement
to be  immediately  due and  payable as  provided  in  Section  10.2 of the Loan
Agreement.

                  (c) LEGAL  PROCEEDINGS.  The Trustee may, by mandamus or other
suit,  action or  proceeding  at law or in  equity,  enforce  the  rights of the
Bondholders and require the Issuer,  the Company or any or both of them to carry
out the Loan Agreement with or for the benefit of the Bondholders and to perform
its or their duties under the Act, the Loan  Agreement and this  Indenture.  The
Trustee may also,  by action or suit in equity,  enjoin any acts or things which
may be unlawful or in violation of the rights of the Bondholders.

                  (d) RECEIVERSHIP. The Trustee shall be entitled as a matter of
right without notice or demand (such notice being expressly  waived hereby),  ex
parte, to the appointment of a receiver or receivers of the Trust Estate, and of
the  rents,  revenues,  income,  products  and  profits  thereof,  pending  such
proceedings,  but,  notwithstanding the appointment of any receiver,  trustee or
other custodian,  the Trustee shall be entitled to the possession and control of
any cash,  securities  or other  instruments  at the time held by, or payable or
deliverable under the provisions of this Indenture to, the Trustee.

                  (e) SUIT FOR  JUDGMENT  ON THE  BONDS.  The  Trustee  shall be
entitled to sue for and recover  judgment,  either before or after or during the
pendency of any  proceedings  for the enforcement of the lien of this Indenture,
for the  enforcement  of any of its  rights,  or the  rights of the  Bondholders
hereunder,  but any such judgment  against the Issuer shall be enforceable  only
against the Trust  Estate.  No recovery of any judgment by the Trustee  shall in
any manner or to any extent  affect the lien of this  Indenture  or any  rights,
powers or remedies  of the Trustee  hereunder,  or any lien,  rights,  powers or
remedies of the owners of the Bonds, but such lien, rights,  powers and remedies
of the Trustee, the Bondholders shall continue unimpaired as before.

                  (f) REMEDIES UNDER AGREEMENT.  The Trustee, as assignee of the
Issuer,  may exercise the remedies  provided  under the Loan  Agreement  upon an
Event of Default.

                  In the event written notice is given by the Bondholders to the
Trustee under  Section  8.1(c) hereof and upon due receipt of such notice by the
Trustee,  the Trustee shall immediately give notice with respect to such default
to the Company.

                  No right or remedy is  intended to be  exclusive  of any other
right or remedy,  but each and every such  right or remedy  shall be  cumulative
with  respect to the Trustee and the  Bondholders,  and in addition to any other
right or remedy given hereunder or now or hereafter existing at law or in equity
or by statute.

                  If any Event of Default  shall have occurred and if instructed
and  directed in writing by the owners of not less than the sum of a majority in
aggregate principal amount of

                                     - 58 -
<PAGE>

Bonds then  Outstanding and  indemnified as provided in Section 9.1 hereof,  the
Trustee shall  exercise  such one or more of the rights and powers  conferred by
this Section as the Trustee, being advised by counsel, shall deem most expedient
in the interests of the Bondholders or as may be set forth in such directions.

         Section 8.3  MAJORITY OF BONDHOLDERS AND HOLDERS OF PARITY INDEBTEDNESS
MAY  CONTROL   PROCEEDINGS.   Anything  in  this   Indenture   to  the  contrary
notwithstanding and subject to prior notice to the Issuer, the owners of the sum
of a majority in aggregate principal amount of the Bonds and Parity Indebtedness
then  Outstanding  shall have the right, at any time, to the extent permitted by
law, by an instrument or  instruments  in writing  executed and delivered to the
Trustee,  to direct the time,  method and place of conducting all proceedings to
be taken in connection  with the enforcement of the terms and conditions of this
Indenture,  or for the  appointment  of a  receiver,  or any  other  proceedings
hereunder;  provided  that  such  direction  shall  not  be  otherwise  than  in
accordance with the provisions  hereof. The Trustee shall not be required to act
on any  direction  given to it pursuant to this Section  unless  indemnified  as
provided in Section 9.1 hereof.

         Section 8.4 RIGHTS AND REMEDIES OF BONDHOLDERS. No owner of any Bond or
Parity  Indebtedness  shall  have any right to  institute  any  suit,  action or
proceeding in equity or at law for the  enforcement of this Indenture or for the
execution of any trust hereof or for the  appointment of a receiver or any other
remedy  hereunder,  unless a default has  occurred of which the Trustee has been
notified as provided  in Section 9.1 hereof,  or of which by said  Section it is
deemed to have  notice,  nor unless such  default  shall have become an Event of
Default  and the  owners of the sum of not less  than a  majority  in  aggregate
principal  amount of Bonds then  Outstanding  shall have made written request to
the Trustee  and shall have  offered ten (10) days either to proceed to exercise
the powers hereinbefore  granted or to institute such action, suit or proceeding
in its own name,  nor unless they have also offered to the Trustee  indemnity as
provided in Section 9.1 hereof nor unless the Trustee shall  thereafter  fail or
refuse to exercise the powers hereinbefore granted, or to institute such action,
suit or proceeding in its own name; and such notification,  request and offer of
indemnity  are hereby  declared in every case at the option of the Trustee to be
conditions  precedent  to the  execution  of  the  powers  and  trusts  of  this
Indenture,  and to any  action or cause of action  for the  enforcement  of this
Indenture,  or for  the  appointment  of a  receiver  or for  any  other  remedy
hereunder;  it being  understood  and intended that no one or more owners of the
Bonds  shall  have the right in any  manner  whatsoever  to  affect,  disturb or
prejudice  the lien of this  Indenture by his, her or their action or to enforce
any  right  hereunder  except  in  the  manner  herein  provided  and  that  all
proceedings at law or in equity shall be  instituted,  had and maintained in the
manner herein provided and for the equal benefit of the owners of all Bonds then
Outstanding.  Nothing in this  Indenture  contained  shall,  however,  affect or
impair  the  right  of any  owner  of  Bonds  to  enforce  the  payment,  by the
institution  of any suit,  action  or  proceeding  in  equity or at law,  of the
principal of, premium, if any, or interest on any Bond at and after the maturity
thereof,  or the obligation of the Issuer to pay the principal of,  premium,  if
any, and interest on each of the Bonds to the respective  owners of the Bonds at
the time and place,  from the  source and in the manner  herein and in the Bonds
expressed.

                                     - 59 -
<PAGE>

         Section 8.5  APPLICATION OF MONIES.  All monies received by the Trustee
pursuant to any  reasonable  right given or action taken under the provisions of
this Article shall, after payment of the fees of the Trustee, costs and expenses
of the proceedings  resulting in the collection of such monies and the expenses,
liabilities and advances  incurred or made by the Trustee,  first, to the extent
of any  deficiency  of required  amounts in the Rebate Fund be  deposited in the
Rebate Fund, and  thereafter  shall be held in trust and all monies so deposited
in the Bond  Principal  Fund and the Bond  Interest  Fund and all monies held or
deposited  in the Bond  Principal  Fund and the Bond  Interest  Fund  during the
continuance of an Event of Default shall be applied as follows:

                  (a)  Unless  the   principal  of  all  the  Bonds  and  Parity
Indebtedness shall have become or shall have been declared due and payable,  all
such monies shall be applied:

                           FIRST--for   so  long  as  the   Initial   Bondholder
beneficially  owns 100% of the Bonds, to the payment of the beneficial holder of
the Bonds maturing December 1, 2012, in satisfaction of installments of interest
and then to the extent  available,  principal  and  premium,  if any, due to the
beneficial  holder of the Bonds  maturing  December  1, 2012;  otherwise  to the
persons entitled thereto of all installments of interest and Parity Indebtedness
in the order of the maturity of the  installments  of such  interest and, if the
amount  available  shall  not  be  sufficient  to  pay in  full  any  particular
installment,  then to the payment ratably,  according to the amounts due on such
installment,  to the persons entitled  thereto,  without any  discrimination  or
privilege; and

                           SECOND--for   so  long  as  the  Initial   Bondholder
beneficially  owns 100% of the Bonds, to the payment of the beneficial holder of
the Bonds maturing December 1, 2024, in satisfaction of installments of interest
and then  principal  and premium,  if any, due to the  beneficial  holder of the
Bonds  maturing  December  1, 2024;  otherwise  (in the event  that the  Initial
Bondholder is not the  beneficial  owner of 100% of the Bonds) to the payment to
the persons entitled thereto of the unpaid principal of and premium,  if any, on
any of the Bonds and Parity Indebtedness which shall have become due (other than
Bonds called for redemption for the payment of which moneys are held pursuant to
the provisions of the Indenture), in the order of their due dates, with interest
on the  unpaid  principal  of and  premium,  if any,  on  such  Bonds  from  the
respective  dates upon which they became  due,  at the Default  Rate and, if the
amount  available  shall not be  sufficient to pay in full such Bonds due on any
particular  date,  together  with such  interest,  then to the payment  ratably,
according to the amount of principal due on such date,  to the persons  entitled
thereto, without any discrimination or privilege.

                  (b) If the principal of all the Bonds and Parity  Indebtedness
shall have  become due or shall have been  declared  due and  payable,  all such
moneys shall be applied (i) for so long as the Initial  Bondholder  beneficially
owns 100% of the Bonds,  to the  payment of interest  (at the Default  Rate) and
then  principal and premium,  if any, then due to the  beneficial  holder of the
Bonds  maturing  December  1, 2024 and then (ii) to the extent  that sums remain
thereafter available,  to the payment of interest (at the default Rate) and then
principal and premium,  if any,

                                     - 60 -
<PAGE>

then due to the  beneficial  holder  of the Bonds  maturing  December  1,  2024;
otherwise (in the event that the Initial  Bondholder is not the beneficial owner
of 100% of the Bonds) to the payment of the  principal and interest then due and
unpaid upon all of the Bonds,  together with interest on overdue installments of
principal  at a rate  which  shall  be  equal  to  the  Default  Rate),  without
preference or priority of principal over interest or of interest over principal,
or of any installment of interest over any other installment of interest,  or of
any such Bond over any other such Bond,  ratably,  according  to the amounts due
respectively for principal and interest, to the persons entitled thereto without
any discrimination or privilege.

                  (c) If the principal of all the Bonds and Parity  Indebtedness
shall  have  been  declared  due  and  payable,  and if such  declaration  shall
thereafter have been rescinded and annulled under the provisions of this Article
then,  subject to the  provisions  of paragraph (b) of this Section in the event
that the principal of all the Bonds and Parity  Indebtedness  shall later become
due or be declared  due and payable,  the monies shall be applied in  accordance
with the provisions of paragraph (a) of this Section.

                  Whenever  monies are to be applied  pursuant to the provisions
of this  Section,  such monies shall be applied at such times,  and from time to
time,  as the Trustee shall  determine,  having due regard to the amount of such
monies  available  for  application  and the  likelihood  of  additional  monies
becoming  available  for such  application  in the future.  Whenever the Trustee
shall  apply  such  funds,  it shall fix the date  (which  shall be an  Interest
Payment Date unless it shall deem another  date more  suitable)  upon which such
application  is to be made,  and upon  such  date  interest  on the  amounts  of
principal to be paid on such dates shall cease to accrue. The Trustee shall give
such notice as it may deem  appropriate of the deposit of any such monies and of
the fixing of any such date,  and shall not be required  to make  payment to the
owner  of  any  Bond  and  Parity   Indebtedness  until  such  Bond  and  Parity
Indebtedness  shall be presented to the Trustee for  appropriate  endorsement or
for cancellation if fully paid.

                  Whenever all of the Bonds and Parity Indebtedness and interest
thereon have been paid under the provisions of this Section and all expenses and
fees of the Trustee and all other amounts to be paid to the Issuer  hereunder or
under the Loan  Agreement  have been paid,  any balance  remaining  in the Funds
shall be paid as provided in Section 3.13 hereof.

         Section 8.6  TRUSTEE MAY ENFORCE RIGHTS  WITHOUT  BONDS.  All rights of
action and claims under this Indenture or any of the Bonds Outstanding hereunder
may be enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or proceedings relative thereto; and any suit or
proceeding  instituted  by the Trustee  shall be brought in its name as Trustee,
without the necessity of joining as  plaintiffs or defendants  any owners of the
Bonds,  and any  recovery  of judgment  shall be for the ratable  benefit of the
owners of the Bonds subject to the provisions of this Indenture.

                                     - 61 -
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         Section 8.7 TRUSTEE TO FILE PROOFS OF CLAIM IN RECEIVERSHIP, ETC In the
case of any receivership, insolvency, bankruptcy,  reorganization,  arrangement,
adjustment, composition or other judicial proceedings affecting the Trust Estate
or the Company, the Issuer or the Trustee shall, to the extent permitted by law,
be  entitled  to file  such  proofs  of claims  and  other  documents  as may be
necessary  or  advisable  in  order to have  claims  of the  Trustee  and of the
Bondholders allowed in such proceedings for the entire amount due and payable by
the Issuer under this Indenture,  or by the Company,  as the case may be, at the
date of the institution of such proceedings and for any additional amounts which
may become due and payable by it after such date, without prejudice, however, to
the right of any Bondholder to file a claim in his own behalf.

         Section 8.8  DELAY OR OMISSION  NO WAIVER.  No delay or omission of the
Trustee,  any  Bondholder or any holder to exercise any right or power  accruing
upon any  default  shall  exhaust  or impair any such right or power or shall be
construed to be a waiver of any such default, or acquiescence therein; and every
power and remedy given by this  Indenture may be exercised from time to time and
as often as may be deemed expedient.

         Section 8.9  NO WAIVER OF ONE DEFAULT TO AFFECT  ANOTHER.  No waiver of
any default hereunder, whether by the Trustee, the Bondholders,  shall extend to
or affect any subsequent or any other then existing  default or shall impair any
rights or remedies consequent thereon.

         Section 8.10  DISCONTINUANCE  OF  PROCEEDINGS  ON DEFAULT;  POSITION OF
PARTIES RESTORED. In case the Trustee shall have proceeded to enforce any rights
under  this  Indenture  and such  proceedings  shall have been  discontinued  or
abandoned  for any  reason,  or shall  have  been  determined  adversely  to the
Trustee,  then and in  every  such  case the  Issuer  and the  Trustee  shall be
restored to their  former  positions  and rights  hereunder  with respect to the
Trust Estate, and all rights,  remedies and powers of the Trustee shall continue
as if no such proceedings had been taken.

         Section  8.11  WAIVERS OF EVENTS OF DEFAULT.  Subject to prior  written
notice to and prior  written  consent  of the  Issuer,  the  Trustee  may in its
discretion waive any Event of Default hereunder and its consequences and rescind
any declaration of maturity of principal of and interest on the Bonds, and shall
do so upon  the  written  request  of the  owners  of the sum of a  majority  in
aggregate principal amount of all the Bonds then Outstanding in respect of which
default exists; provided,  however, that there shall not be waived (i) any Event
of Default  in the  payment of the  principal  of or premium on any  Outstanding
Bonds at the date of  maturity  or  redemption  thereof,  or any  default in the
payment when due of the interest on any such Bonds,  unless prior to such waiver
or  rescission,  all arrears of interest or all arrears of payments of principal
and premium, if any (with interest upon such principal and premium, if any, at a
rate which shall be 1 percent per annum above the highest rate of interest borne
by any Bond  during the 365 days prior to the date on which such  principal  and
premium, if any, were due or the maximum rate permitted by law if less than such
rate  aforesaid) and all expenses of the Trustee,  and all amounts to be paid to
the Issuer  hereunder  and under the Loan  Agreement,  in  connection  with such
default  shall have been paid or provided for or (ii) any default in the payment
of

                                     - 62 -
<PAGE>

amounts set forth in Section 5.1(d) of the Loan  Agreement.  In case of any such
waiver or rescission, or in case any proceedings taken by the Trustee on account
of any such default  shall have been  discontinued  or  abandoned or  determined
adversely to the Trustee,  then and in every such case the Issuer,  the Trustee,
the  Bondholders  shall  be  restored  to  their  former  positions  and  rights
hereunder,  respectively,  but no such waiver or  rescission  shall extend to or
affect  any  subsequent  or other  default,  or impair  any  rights or  remedies
consequent thereon.

         Section  8.12  TRUSTEE  TO  NOTIFY  PARTIES  OF  DEFAULT  AND  DISCLOSE
INFORMATION RELATING TO DEFAULT. The Trustee shall immediately notify in writing
the  Issuer  and the  Company of any  default  hereunder  of which it has actual
knowledge or the occurrence of any Event of Default. The Trustee shall notify as
within five (5) Business Days in writing all Bondholders  and Notice  Beneficial
Owners of the  occurrence  of any Event of Default and shall make  available  to
such Bondholders  information reasonably requested of the Trustee concerning the
Event of Default, the Bonds, the Company, and such other information relevant to
the Event of Default, subject to the provisions of Section 9.01 hereof.

                                   ARTICLE IX

                             CONCERNING THE TRUSTEE

         Section 9.1  DUTIES OF THE  TRUSTEE.  The  Trustee  hereby  accepts the
trusts imposed upon it by this Indenture and agrees to perform said trusts,  but
only upon and subject to the  following  express  terms and  conditions,  and no
implied  covenants or obligations  shall be read into this Indenture against the
Trustee:

                  (a) The  Trustee,  prior  to the  occurrence  of an  Event  of
Default and after the curing of all Events of Default  which may have  occurred,
undertakes to perform such duties and only such duties as are  specifically  set
forth in this Indenture. In case an Event of Default has occurred (which has not
been cured or waived),  the Trustee shall exercise such of the rights and powers
vested  in it by this  Indenture,  and use the same  degree of care and skill in
their exercise,  as a prudent man would exercise or use under the  circumstances
in the conduct of the affairs of others.

                  (b) The Trustee may execute any of the trusts hereof or powers
hereunder  and  perform  any of its  duties  by or  through  attorneys,  agents,
receivers or employees  but shall be  answerable  for the conduct of the same in
accordance  with the  standard  specified  above,  only if the  Trustee  has not
exercised  reasonable care in the selection thereof and shall be entitled to act
upon an opinion  of  independent  counsel  concerning  all  matters of the trust
hereof  and its  duties  hereunder,  and may in all  cases  pay such  reasonable
compensation  to all such  attorneys,  agents,  receivers  and  employees as may
reasonably be employed in connection with the trusts hereof. The Trustee may act
upon an opinion of independent counsel and shall not be responsible for any loss
or damage resulting from any action or nonaction taken by or omitted to be taken
in good faith in reliance upon such opinion of independent counsel.

                                     - 63 -
<PAGE>

                  (c) The  Trustee  shall  not be  responsible  for any  recital
herein or in the Bonds (except in respect to the  certificate of  authentication
of the  Trustee  endorsed  on  the  Bonds),  or for  insuring  the  Property  or
collecting  any  insurance  monies or for the  validity of the  execution by the
Issuer of this Indenture or of any supplements  hereto or instruments of further
assurance, or for the sufficiency of the security for the Bonds issued hereunder
or intended to be secured hereby,  or for the value of or title to the assets of
the Company and the Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on the part
of the Issuer,  except as hereinafter set forth;  but the Trustee may require of
the Issuer or the Company full  information  and advice as to the performance of
the  covenants,  conditions  and agreements as to the condition of the assets of
the Company contained herein or in the Loan Agreement.  The Trustee shall not be
accountable  for the use or  application  by the Issuer or the Company of any of
the Bonds or the proceeds  thereof or the use or  application  of any money paid
over by the Trustee in accordance  with the  provisions of this  Indenture.  The
Trustee  shall have no  obligation  to  perform  any of the duties of the Issuer
under the Loan Agreement; and the Trustee shall not be responsible or liable for
any loss  suffered  in  connection  with any  investment  of funds made by it in
accordance with Section 6.1 hereof.

                  (d) The Trustee  shall not be  accountable  for the use of any
Bonds authenticated or delivered  hereunder.  The Trustee may not hold Bonds for
its own account.

                  (e) The Trustee  shall be protected in acting upon any notice,
request, consent, certificate, order, affidavit, letter, telegram or other paper
or  document  believed to be genuine and correct and to have been signed or sent
by the proper  person or persons.  Any action  taken by the Trustee  pursuant to
this Indenture upon the request or authority or consent of any person who at the
time of making such request or giving such  authority or consent is the owner of
any Bonds shall be  conclusive  and binding  upon all future  owners of the same
Bond and upon Bonds issued in place thereof.

                  (f) As to the existence or  nonexistence  of any fact or as to
the sufficiency or validity of any instrument,  paper or proceeding, the Trustee
shall be entitled to rely upon a  certificate  signed on behalf of the Issuer by
an Issuer  Representative  or such other  person as may be  designated  for such
purpose by the Issuer as sufficient evidence of the facts therein contained, and
prior to the  occurrence  of a default of which the Trustee has been notified as
provided in subsection (h) of this Section, or of which by said subsection it is
deemed to have notice,  shall also be at liberty to accept a similar certificate
to the effect that any particular dealing, transaction or action is necessary or
expedient,  but  may at its  discretion  secure  such  further  evidence  deemed
necessary or advisable, but shall in no case be bound to secure the same.

                  (g)  The  permissive  rights  of  the  Trustee  to  do  things
enumerated  in this  Indenture  shall not be construed as a duty and the Trustee
shall not be  answerable  for other  than its  negligence  or  willful  default,
subject to Section 9.1(a) hereof.

                                     - 64 -
<PAGE>

                  (h) The  Trustee  shall not be  required  to take notice or be
deemed to have notice of any default  hereunder  except failure by the Issuer to
cause to be made  any of the  payments  to the  Trustee  required  to be made by
Article III hereof unless the Trustee shall be specifically  notified in writing
of such  default  by the  Issuer  or by the  owners  of at least 25  percent  in
aggregate  principal amount of Bonds then Outstanding,  and all notices or other
instruments  required by this  Indenture to be delivered to the Trustee must, in
order to be effective,  be delivered at the principal  corporate trust office of
the  Trustee;  in the  absence of such  notice so  delivered,  the  Trustee  may
conclusively assume that there is no default except as aforesaid.

                  (i) All monies  received by the Trustee  shall,  until used or
applied or invested as herein  provided,  be held in trust in the manner and for
the purposes for which they were received but need not be segregated  from other
funds except to the extent  required by this Indenture or law. The Trustee shall
not be under any liability for interest on any monies received  hereunder except
such as may be agreed upon.

                  (j) At any and all reasonable times, the Trustee, and its duly
authorized   agents,   attorneys,    experts,    engineers,    accountants   and
representatives, shall have the right, but shall not be required, to inspect any
and all of the Trust  Estate,  including  all books,  papers and  records of the
Issuer pertaining to the Project and the Bonds.

                  (k) The  Trustee  shall  not be  required  to give any note or
surety in respect of the execution of the said trusts and powers or otherwise in
respect of the premises.

                  (l) Notwithstanding  anything in this Indenture contained, the
Trustee shall have the right, but shall not be required,  to demand,  in respect
of the  authentication  of any Bonds, the withdrawal of any cash, the release of
any property, or any action whatsoever within the purview of this Indenture, any
showings, certificates,  opinions, appraisals or other information, or corporate
action or evidence thereof, in addition to that by the terms hereof required, as
a condition of such action by the Trustee  deemed  desirable  for the purpose of
establishing  the right of the Issuer to the  authentication  of any Bonds,  the
withdrawal  of any cash,  the release of any property or the taking of any other
action by the Trustee.

                  (m) Before  taking any action  under  Section  8.2, 8.3 or 8.4
hereof, the Trustee may require that reasonable  indemnity be furnished to it by
the owners of the Bonds and for the  reimbursement  of all expenses which it may
incur and to protect it against all liability, except liability which may result
from its negligence or willful default, by reason of any action so taken.

                  (n) The Trustee may  deposit  the  property  held in the Funds
with a court  of  general  jurisdiction  in the  city in which  the  Trustee  is
located, or the Issuer may file an action to interplead the Trust Estate and the
Company,  the Issuer  and any other  appropriate  parties to such  action in the
event of the  Trustee's  resignation  hereunder  and the  failure of a successor
trustee to succeed to the duties of the Trustee  hereunder within 90 days of the
giving of notice of the

                                     - 65 -
<PAGE>

Trustee's  resignation.  Upon the deposit of such  property  and the filing of a
complaint in interpleader,  the Trustee shall be relieved of all liabilities and
duties under the Loan Agreement and this  Indenture.  The Issuer and the Company
shall thereupon submit themselves to the jurisdiction of the District Court.

                  (o) In the event there  occurs a conflict of interest  arising
as the result of the Trustee's  acting as Trustee or in fiduciary  capacity with
respect to other  Indebtedness  of the  Company,  the  Trustee  shall  appoint a
Co-Trustee with respect to the Bonds.

         Section 9.2  FEE AND EXPENSES OF TRUSTEE. The Trustee shall be entitled
to payment and  reimbursement  for its reasonable fees for its services rendered
hereunder  as and when the  same  become  due and all  expenses  reasonably  and
necessarily  made or incurred by the Trustee in connection with such services as
and when the same become due as  provided in Section 5.1 of the Loan  Agreement.
The Trustee  shall not be entitled to payment of any expenses it incurs  related
to such  resignation  upon its  resignation  as Trustee  hereunder  unless  such
resignation  is made in relation to the exercise by the Trustee of its rights of
interpleader hereunder.

                  Notwithstanding  any  provision in this  Indenture or the Loan
Agreement to the contrary, any reference or covenant set forth in this Indenture
or the Loan  Agreement  for the payment or  remuneration  of (i) the  reasonable
fees,  compensation,  charges or remuneration of the Trustee, or the like, shall
be deemed to reference and include  Trustee's fees and  extraordinary  Trustee's
fees  including  reasonable  default fees of Trustee upon the  occurrence  of an
Event of Default incurred as a result of the administration of the duties of the
Trustee hereunder, and (ii) reasonable expenses, costs,  out-of-pocket costs, or
other  reimbursable  charges,  or the like,  shall be deemed  to  reference  and
include reasonable attorney's fees, fees and expenses of independent contractors
or agents  incurred  in the  course of the  administration  of the duties of the
Trustee hereunder, and other customary and reimbursable expenditures.

         Section 9.3  RESIGNATION  OR  REPLACEMENT  OF TRUSTEE.  The Trustee may
resign by giving to the Issuer,  the  Beneficial  Owners and the  Bondholders 90
days' notice of such  resignation,  provided,  however that no such  resignation
shall become effective until a successor has been appointed and has accepted the
duties of Trustee.  The present or any future Trustee may be removed at any time
by the  Bondholders by an instrument in writing,  executed by the Issuer and the
Company, so long as the Company is not in default or by the owners of a majority
in aggregate principal amount of the Bonds then Outstanding;  provided, however,
that no such removal shall become effective until a successor has been appointed
and has accepted the duties of Trustee hereunder.

                  In case the Trustee  shall at any time resign or be removed or
otherwise become  incapable of acting,  subject to the prior written approval of
the  Issuer,  a  successor  may be  appointed  by the  owners of a  majority  in
aggregate  principal  amount  of  the  Bonds  Outstanding  by an  instrument  or
concurrent  instruments signed by such Bondholders,  or their  attorneys-in-fact
duly  appointed;  provided  that the Issuer may appoint a successor  until a new
successor shall

                                     - 66 -
<PAGE>

be appointed by the  Bondholders  as herein  authorized.  The Issuer upon making
such  appointment  shall forthwith give notice thereof to the Bondholders and to
the  Company,  which  notice  may be  given  concurrently  with  the  notice  of
resignation  given by any resigning  Trustee.  Any successor so appointed by the
Issuer shall  immediately  and without  further act be superseded by a successor
appointed in the manner above  provided by the owners of a majority in aggregate
principal amount of the Bonds Outstanding.

                  Every  successor shall always be a bank or trust company (or a
subsidiary thereof) in good standing,  qualified to act hereunder,  and having a
combined capital, surplus and undivided profits of not less than $25,000,000. An
successor  appointed  hereunder  shall execute,  acknowledge  and deliver to the
Issuer an instrument  accepting such appointment  hereunder,  and thereupon such
successor shall, without any further act, deed or conveyance, become vested with
all the estates, properties, rights, powers and trusts of its predecessor in the
trust hereunder with like effect as if originally  named as Trustee herein;  but
the  Trustee  retiring  shall,  nevertheless,  on  the  written  demand  of  its
successor,  execute and deliver an instrument conveying and transferring to such
successor,  upon the  trusts  herein  expressed,  all the  estates,  properties,
rights,  powers and trusts of the predecessor,  who shall duly assign,  transfer
and deliver to the  successor  all  properties  and monies held by it under this
Indenture.  Should  any  instrument  in writing  from the  Issuer be  reasonably
required by any  successor  for such  vesting and  confirming,  the Issuer shall
execute,  acknowledge and deliver the said deeds, conveyances and instruments on
the request of such successor.

                  The  notices   herein   provided  for,  to  be  given  to  the
Bondholders,  shall be given by mailing a copy of such  notices  by first  class
mail to the  Bondholders  at their  addresses as the same shall last appear upon
the  registration  books.  The  notice  herein  provided  for to be given to the
Issuer, the Company and the retiring Trustee,  shall be given in accordance with
Section 11.07 hereof.

                  The  instruments  evidencing the resignation or removal of the
Trustee and the  appointment of a successor  hereunder,  together with all other
instruments provided for in this Section,  shall be filed and/or recorded by the
successor  Trustee in each recording office where this Indenture shall have been
filed and/or recorded.

         Section 9.4 CONVERSION, CONSOLIDATION OR MERGER OF TRUSTEE. Any bank or
trust  company  into which the  Trustee or its  successor  may be  converted  or
merged,  or with  which  it may be  consolidated,  or to  which  it may  sell or
transfer  its trust  business as a whole shall be the  successor  of the Trustee
under this Indenture with the same rights,  powers,  duties and  obligations and
subject  to  the  same   restrictions,   limitations   and  liabilities  as  its
predecessor,  all without the  execution  or filing of any papers or any further
act on the part of any of the parties  hereto,  anything  herein to the contrary
notwithstanding. In case any of the Bonds to be issued hereunder shall have been
authenticated,   but  not  delivered,   any  successor  Trustee  may  adopt  the
certificate of any predecessor  Trustee,  and deliver the same as authenticated;
and, in case any of such

                                     - 67 -
<PAGE>

Bonds shall not have been authenticated,  any successor Trustee may authenticate
such Bonds in the name of such successor Trustee.

         Section 9.5  TRUSTEE TO RETAIN INFORMATION. So long as any of the Bonds
shall be  Outstanding,  the Trustee  shall  retain all  certificates,  financial
statements and other written information  furnished to it by or on behalf of the
Company, the Issuer or any other Person under this Indenture, the Loan Agreement
and any other  agreement or  instrument  pertaining  to the Bonds and shall make
such  documentation  available for review after reasonable notice during regular
business  hours at the  principal  corporate  trust office of the Trustee to any
Bondholder and to any Beneficial  Owner. The Trustee shall permit such reviewers
to take  copies  of all or any  part of such  documentation,  subject  to  their
payment of such  reasonable  copying  and  handling  charges as the  Trustee may
impose.

                  In  addition,  the  Trustee  shall be  required  to  report to
Bondholders  and  Beneficial  Owners who have  provided  their  addresses to the
Trustee any withdrawals from the Reserve Fund.

         Section 9.6   GUARANTY  AGREEMENT.  The Issuer  hereby  authorizes  and
directs the Trustee to draw on the Principal  Guaranty pursuant to its terms, in
the amounts and at the times  necessary to pay  principal of and interest on the
Bonds  pursuant to this Section 9.6. The Trustee  shall draw upon the  Principal
Guaranty in accordance with the terms thereof as herein provided.

                  (a) On or before  11:00  a.m.,  local  time at the  designated
office of the Trustee on the second  Business Day prior to any Interest  Payment
Date (or the maturity date or any date set for  redemption on Bonds which is not
an Interest  Payment Date),  the Trustee shall determine the amount necessary to
make all required  payments of  principal  and interest on the Bonds on the next
succeeding  Interest  Payment Date,  maturity date, other redemption date, after
giving  effect to any  permitted  transfers  from the  Reserve  Fund,  and shall
present a demand to the  Guarantor  in such amount,  after giving  credit to the
amounts on deposit  therefore in the Bond  Principal Fund or Bond Interest Fund,
subject  to the terms of the  Principal  Guaranty,  so as to permit  the  timely
transfer of funds from the Guarantor to the Trustee for payment of the principal
of and  interest  on the Bonds  when due,  whether  at  maturity  or upon  prior
redemption.

                  (b) The  Trustee  shall  promptly  notify the Company and each
Notice Beneficial Owner by oral or telephonic communication confirmed in writing
if the Guarantor  has not  transferred  funds in  accordance  with the Principal
Guaranty upon the presentment of any such demand.

                  (c) In  calculating  the  amount to be drawn on the  Principal
Guaranty for the payment of  principal of and interest on the Bonds,  whether on
an Interest  Payment Date, at maturity or upon redemption or  acceleration,  the
Trustee  shall take into account the receipt of funds from the Company under the
Loan Agreement.

                                     - 68 -
<PAGE>

                  (d) Upon satisfaction of the conditions for the release of the
Principal  Guaranty in  accordance  with the terms  thereof,  the Trustee  shall
execute such releases or similar documents as may be reasonably requested by the
Company or the Guarantor.

                                     - 69 -
<PAGE>

                                    ARTICLE X

                             SUPPLEMENTAL INDENTURES
                      AND AMENDMENTS OF THE LOAN AGREEMENT

         Section 10.1   SUPPLEMENTAL  INDENTURES.  The owners of not less than a
majority in aggregate  principal amount of the Bonds then Outstanding shall have
the right,  from time to time,  to consent to and approve the  execution  by the
Issuer and the Trustee of such  indenture or indentures  supplemental  hereto as
shall be  deemed  necessary  or  desirable  by the  Issuer  for the  purpose  of
modifying,  altering,  amending, adding to or rescinding, in any particular, any
of the terms or provisions contained in this Indenture;  provided, however, that
without  the  consent  of the  owners of all the Bonds at the time  Outstanding,
nothing herein contained shall permit, or be construed as permitting:

                  (a) an  extension  of the  maturity  of, or a reduction of the
principal  amount of, or a reduction of the rate of, or extension of the time of
payment of interest on, or a reduction of a premium  payable upon any redemption
of, any Bond;

                  (b) the deprivation of the owner of any Bond then  Outstanding
of the lien created by this Indenture  (other than as permitted hereby when such
Bond was initially issued);

                  (c) a  privilege  or  priority  of any Bond or Bonds  over any
other Bond or Bonds except as specifically permitted by this Indenture; or

                  (d) a reduction in the aggregate principal amount of the Bonds
required for consent to such supplemental indenture.

                  If at any time the Issuer  shall  request the Trustee to enter
into such  supplemental  indenture for any of the purposes of this Section,  the
Trustee shall, upon being reasonably  indemnified by the Company with respect to
expenses,  cause notice of the proposed execution of such supplemental indenture
to be given to the Issuer and the Company in accordance with Section 11.7 hereof
and to the Notice  Beneficial  Owners and the  Bondholders  by mailing a copy of
such notice by first class mail to their addresses as the same shall last appear
upon the registration  books.  Such notice shall briefly set forth the nature of
the proposed  supplemental  indenture and shall state that copies thereof are on
file at the designated  corporate  trust office of the Trustee for inspection by
all Bondholders and Beneficial  Owners.  If, within 60 days following the giving
of such  notice,  the  owners  of the  requisite  principal  amount of the Bonds
Outstanding  at the time of the  execution  of any such  supplemental  indenture
shall have consented to and approved the execution  thereof as herein  provided,
no owner of any Bond  shall  have any  right to  object  to any of the terms and
provisions  contained  therein,  or the operation  thereof,  or in any manner to
question the  propriety of the execution  thereof,  or to enjoin or

                                     - 70 -
<PAGE>

restrain  the Trustee or the Issuer from  executing  the same or from taking any
action pursuant to the provisions thereof.

         Section 10.2   EXECUTION  OF  SUPPLEMENTAL  INDENTURES.  The Trustee is
authorized  to join with the Issuer in the  execution  of any such  supplemental
indenture and to make further agreements and stipulations which may be contained
therein,  but the  Trustee  shall  not be  obligated  to  enter  into  any  such
supplemental indenture which affects its rights, duties or immunities under this
Indenture. Any supplemental indenture executed in accordance with the provisions
of this Article shall thereafter form a part of this Indenture and all the terms
and conditions contained in any such supplemental  indenture as to any provision
authorized to be contained  therein shall be deemed to be part of this Indenture
for  any  and  all  purposes.  In case  of the  execution  and  delivery  of any
supplemental indenture, express reference may be made thereto in the text of the
Bonds issued thereafter.

         Section 10.3   AMENDMENTS,  ETC.,  OF THE LOAN  AGREEMENT.  Neither the
Issuer  nor  the  Trustee  shall  consent  to any  other  amendment,  change  or
modification of the Loan Agreement  without the giving of notice and the written
approval  or  consent of the  owners of not less than a  majority  in  aggregate
principal amount of the Bonds at the time  Outstanding.  Such notice and consent
shall be given and procured as provided in Section 10.2 hereof.

         If at any time the Issuer or the Company  shall  request the consent of
the Trustee to any such proposed  amendment,  change or modification of the Loan
Agreement,  the Trustee shall, upon being reasonably  indemnified by the Company
with respect to expenses,  cause notice of such  proposed  amendment,  change or
modification  to be given in the same manner as provided in Section 10.2 hereof.
Such  notice  shall  briefly  set forth the nature of such  proposed  amendment,
change or modification  and shall state that copies of the instrument  embodying
the same are on file at the  principal  office of the Trustee for  inspection by
all Bondholders.

                                     - 71 -
<PAGE>

                                   ARTICLE XI

                                  MISCELLANEOUS

         Section 11.1   EVIDENCE OF SIGNATURE OF  BONDHOLDERS  AND  OWNERSHIP OF
BONDS. Any request, consent or other instrument which this Indenture may require
or permit to be signed and  executed  by the  Bondholders  may be in one or more
instruments  and executed by such  Bondholders  in person or by their  attorneys
appointed in writing.  Proof of the execution of any such  instrument,  or of an
instrument  appointing  such  attorney,  or the  ownership  of  Bonds  shall  be
sufficient  (except  as  otherwise  herein  expressly  provided)  if made in the
following manner, but the Trustee may,  nevertheless,  in its discretion require
further or other proof in cases where it deems the same desirable:

                  (a) the fact and date of the  execution by any  Bondholder  or
his attorney of such  instrument may be proved by the certificate of any officer
authorized to take  acknowledgments  in the jurisdiction in which he purports to
act that the person signing such request or other instrument acknowledged to him
the execution thereof,  or by an affidavit of a witness of such execution,  duly
sworn to before a notary public; and

                  (b) the  Ownership  of any Bonds and the amount and numbers of
such Bonds and the date of holding the same shall be proved by the  registration
books of the Issuer kept by the Trustee.

                           Any request or consent of the owner of any Bond shall
bind all future  owners of such Bond in respect of anything  done or suffered to
be done by the Issuer or the Trustee in accordance therewith.

         Section 11.2  PARTIES INTERESTED  HEREIN.  With the exception of rights
herein expressly  conferred on the Company,  nothing in this Indenture expressed
or implied is intended or shall be construed to confer upon,  or to give to, any
person  other than the  Issuer,  the  Trustee  and the owners of the Bonds,  any
right,  remedy or claim under or by reason of this  Indenture  or any  covenant,
condition or stipulation hereof, and all the covenants,  stipulations,  promises
and agreements in this Indenture  contained by and on behalf of the Issuer shall
be for the sole and exclusive benefit of the Issuer, the Trustee, and the owners
of the Bonds.

         Section 11.3   TITLES,  HEADINGS,  ETC The titles and  headings  of the
articles,  sections and subsections of this Indenture have been inserted for the
convenience  of reference only and shall in no way modify or restrict any of the
terms or provisions hereof.

         Section 11.4 SEVERABILITY. In the event any provision of this Indenture
shall be held invalid or unenforceable  by any court of competent  jurisdiction,
such holding shall not invalidate or render  unenforceable  any other  provision
hereof.

                                     - 72 -
<PAGE>

         Section 11.5  GOVERNING  LAW. This  Indenture  shall be governed by and
construed in accordance with the laws of the State of Oklahoma.

         Section 11.6  EXECUTION IN COUNTERPARTS. This Indenture may be executed
in several  counterparts,  each of which shall be an  original  and all of which
shall constitute but one and the same instrument.

         Section 11.7  NOTICES.  All notices, certificates,  directions or other
communications  hereunder shall be sufficiently  given and shall be deemed given
when mailed by certified mail, return receipt requested,  postage prepaid, or by
first-class mail, if this Indenture so provides, addressed as follows:

         Issuer:        Cleveland County Industrial Authority
                        c/o Board of Cleveland County Commissioners
                        605 E. Robinson
                        Norman, Oklahoma 73071
                        Attn: Secretary

         With copy to:  R. Lindsay Bailey, Esq.
                        Issuer's Counsel
                        303 E. Eufaula
                        Norman, Oklahoma 73102

         Trustee:       J.P. Morgan Trust Company, National Association
                        Corporate Trust Department
                        1200 N.W. 63rd
                        Oklahoma City, Oklahoma 73116
                        Attn: Brenda Batchelor

         Company:       Vaughan Foods, Inc.
                        216 NE 12th Street
                        Moore, Oklahoma 73160
                        Attn: Stan Gustas, Financial Consultant

         Underwriter:   Gates Capital Corporation
                        100 Park Avenue, 22nd Floor
                        New York, New York 10017

A  duplicate  copy of each  notice,  certificate  or other  communication  given
hereunder by or to the Issuer or the Trustee shall also be given to the Company,
the Underwriter and each Notice  Beneficial Owner.  Alternatively,  all notices,
certificates  or other  communications  hereunder may be given by telegram or by
telecopy (if confirmed  promptly  telephonically and in writing by the sender of
such notice and if receipt of such notice by telecopy is confirmed in writing by
the

                                     - 73 -
<PAGE>

intended  recipient).  The Issuer, the Company,  the Underwriter and the Trustee
may, by notice given hereunder,  designate any further or different addresses to
which subsequent notices, certificates or other communications shall be sent.

         Section 11.8  PAYMENTS DUE ON NONBUSINESS  DAYS. If the date for making
any payment or the last day for  performance  of any act or the  exercise of any
right, as provided in this Indenture,  shall not be a Business Day, such payment
may be made or act performed or right exercised on the next succeeding  Business
Day with the same force and effect as if done on the  nominal  date  provided in
this Indenture.

         Section 11.9  SUBORDINATION  TO SENIOR  LOAN.  In the event the Company
shall certify to the Trustee that any Senior Loan shall be  refinanced  pursuant
to the incurrence by the Company of  Indebtedness on terms more favorable to the
Company than terms of the Senior Loan being refinanced,  the Trustee shall, upon
reasonable  indemnification  by the  Company as herein  provided,  execute  such
consents,  subordination  provisions  or similar  documents  with respect to the
Senior Loan to the effect that the Senior Loan shall be secured by a Lien on the
Pledged Property senior in priority to the Lien of the Loan Agreement.

         Section 11.10 PROVISION OF GENERAL APPLICATION. Any consent or approval
of the Issuer or Trustee required pursuant to this Indenture shall be in writing
and shall not be unreasonably withheld. Any direction given to the Trustee shall
be in writing.

                                     - 74 -
<PAGE>

         IN WITNESS  WHEREOF,  the  Issuer  and the  Trustee  have  caused  this
Indenture  to be executed in their  respective  corporate  names and attested by
their duly authorized  Officers and the Trustee has caused its corporate seal to
be hereto affixed, all as of the date first above written.

                                        CLEVELAND COUNTY INDUSTRIAL
                                        AUTHORITY

                                        By:  /s/Charles Thompson
                                             -------------------
                                        Title:  Charles Thompson
                                                Chairman

Attest:

By:      /s/Donna Roberts
         ----------------
         Donna Roberts
         Secretary

[SEAL]

                                        J.P. MORGAN TRUST COMPANY, NATIONAL
                                        ASSOCIATION,
                                        as Trustee

                                        By: /s/ Brenda Batchelor
                                            --------------------
                                        Title:  Brenda E. Batchelor
                                                Vice-President

                                     - 75 -
<PAGE>

STATE OF OKLAHOMA          )
                           ) ss.
COUNTY OF OKLAHOMA         )

         The foregoing  instrument was  acknowledged  before me this 16th day of
December,  2004, by Charles  Thompson,  Chairman and Donna  Roberts,  Secretary,
Cleveland County Industrial Authority, a public trust, on behalf of the trust.

         Witness my hand and official seal.

         My commission expires:
                                        ---------------------

[SEAL]

                                        ----------------------------------------
                                        Notary Public

STATE OF OKLAHOMA          )
                           ) ss.
COUNTY OF OKLAHOMA         )

         The foregoing  instrument was  acknowledged  before me this 16th day of
December,  2004,  by Brenda E.  Batchelor,  Vice-President,  J.P.  Morgan  Trust
Company, National Association.

         Witness my hand and official seal.

         My commission expires:
                                        ---------------------

[SEAL]

                                        ----------------------------------------
                                        Notary Public

                                     - 76 -EX-4.7

                                PROMISSORY NOTE

================================================================================

Borrower: Vaughan Foods, Inc.           Lender: CNL Commercial Finance, Inc.,
          216 NE 12th Street                    a Delaware Corporation
          Moore, OK 73160                       26137 La Paz Road, Suite 102
                                                Mission Viejo, CA 92691

================================================================================

Principal Amount:                 Initial Rate:                    Date of Note:
 $3,500,000.00                       5.110%                        July 2, 2003

PROMISE  TO  PAY.  VAUGHAN  FOODS,  INC.  ("BORROWER")  PROMISES  TO  PAY TO CNL
COMMERCIAL FINANCE, INC., A DELAWARE CORPORATION ("LENDER"), OR ORDER, IN LAWFUL
MONEY OF THE UNITED  STATES OF AMERICA,  THE  PRINCIPAL  AMOUNT OF THREE MILLION
FIVE HUNDRED THOUSAND & 00/100 DOLLARS  ($3,500,000.00),  TOGETHER WITH INTEREST
ON THE UNPAID PRINCIPAL BALANCE FROM JULY 2, 2003, UNTIL PAID IN FULL.

PAYMENT.  SUBJECT TO ANY PAYMENT  CHANGES  RESULTING  FROM CHANGES IN THE INDEX,
BORROWER  WILL  PAY  THIS  LOAN IN 300  PAYMENTS  OF  $20,840.14  EACH  PAYMENT.
BORROWER'S  FIRST PAYMENT IS DUE SEPTEMBER 1, 2003, AND ALL SUBSEQUENT  PAYMENTS
ARE DUE ON THE SAME DAY OF EACH MONTH AFTER THAT.  BORROWER'S FINAL PAYMENT WILL
BE DUE ON AUGUST 1, 2028, AND WILL BE FOR ALL PRINCIPAL AND ALL ACCRUED INTEREST
NOT YET PAID.  PAYMENTS INCLUDE PRINCIPAL AND INTEREST.  UNLESS OTHERWISE AGREED
OR REQUIRED BY  APPLICABLE  LAW,  PAYMENTS  WILL BE APPLIED FIRST TO ANY ACCRUED
UNPAID INTEREST;  THEN TO PRINCIPAL;  THEN TO ANY UNPAID  COLLECTION  COSTS; AND
THEN TO ANY LATE CHARGES.  THE ANNUAL INTEREST RATE FOR THIS NOTE IS COMPUTED ON
A 365/360 BASIS; THAT IS, BY APPLYING THE RATIO OF THE ANNUAL INTEREST RATE OVER
A YEAR OF 360 DAYS, MULTIPLIED BY THE OUTSTANDING PRINCIPAL BALANCE,  MULTIPLIED
BY THE ACTUAL NUMBER OF DAYS THAT  PRINCIPAL  BALANCE IS  OUTSTANDING.  BORROWER
WILL PAY LENDER AT LENDER'S ADDRESS SHOWN ABOVE OR AT SUCH OTHER PLACE AS LENDER
MAY DESIGNATE IN WRITING.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the 3 Month LIBOR
(London  Interbank  Offered  Rates) as published in the Wall Street Journal (the
"Index").  The Index is not necessarily the lowest rate charged by Lender on its
loans. If the Index becomes unavailable during the term of this loan, Lender may
designate a substitute index after notice to Borrower. Lender will tell Borrower
the current Index rate upon  Borrower's  request.  The interest rate change will
not occur  more often than each  first day of each  Calendar  Quarter.  Borrower
understands  that Lender may make loans based on other rates as well.  THE INDEX
CURRENTLY  IS 1.110%.  THE INTEREST  RATE TO BE APPLIED TO THE UNPAID  PRINCIPAL
BALANCE  OF THIS  NOTE  WILL BE AT A RATE OF 4.000  PERCENTAGE  POINTS  OVER THE
INDEX,  RESULTING IN AN INITIAL RATE OF 5.110%.  NOTICE:  under no circumstances
will the  interest  rate on this Note be more than the maximum  rate  allowed by
applicable law.  Whenever  increases occur in the interest rate,  Lender, at its
option, may do one or more of the following: (A) increase Borrower's payments to
ensure  Borrower's  loan will pay off by its original  final  maturity date, (B)
increase Borrower's payments to cover accruing interest, (C) increase the number
of Borrower's payments,  and (D) continue Borrower's payments at the same amount
and increase Borrower's final payment.

PREPAYMENT  FEE.  Borrower  agrees that all loan fees and other prepaid  finance
charges  are earned  fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default),  except
as otherwise  required by law. UPON PREPAYMENT OF THIS NOTE,  LENDER IS ENTITLED
TO THE  FOLLOWING  PREPAYMENT  FEE:  BORROWER MAY REPAY  WITHOUT ANY  PREPAYMENT
PREMIUM UP TO TWENTY PERCENT (20%) OF THE THEN  OUTSTANDING  PRINCIPAL AMOUNT OF
THIS NOTE DURING EACH OF THE FIRST FIVE (5) YEARS (EACH A "NOTE YEAR") FOLLOWING
DELIVERY  OF  THIS  NOTE  (ON  A   NONCUMULATIVE   BASIS)   (EACH  A  "PERMITTED
PREPAYMENT"), EXCEPT THAT NO "PERMITTED PREPAYMENT" MAY BE MADE AT THE TIME OF A
FULL REPAYMENT OF THE NOTE WHICH EXCEEDS 20% OF THE THEN  OUTSTANDING  PRINCIPAL
NOTE BALANCE. BORROWER SHALL PAY TO LENDER, IN ADDITION TO ALL OTHER AMOUNTS DUE
UNDER THE NOTE, A  PREPAYMENT  PREMIUM  EQUAL TO THREE  PERCENT (3%) OF THE THEN
OUTSTANDING  PRINCIPAL NOTE BALANCE IF PAID IN FULL OR THREE PERCENT (3%) OF ANY
PRINCIPAL REPAID IN ANY NOTE YEAR IN EXCESS OF THE PERMITTED PREPAYMENT FOR SUCH
NOTE YEAR.  FIVE (5) OR MORE YEARS  AFTER  DELIVERY OF THIS NOTE,  BORROWER  MAY
REPAY THE NOTE IN WHOLE OR IN PART WITHOUT ANY  PREPAYMENT  PREMIUM  WHATSOEVER.
EXCEPT FOR THE  FOREGOING,  BORROWER MAY PAY ALL OR A PORTION OF THE AMOUNT OWED
EARLIER THAN IT IS DUE. Early  payments will not,  unless agreed to by Lender in
writing,  relieve Borrower of Borrower's obligation to continue to make payments
under the Payment  schedule.  Rather,  early  payments will reduce the principal
balance due and may result in Borrower's making fewer payments.  Borrower agrees
not to send  Lender  payments  marked  "paid in full",  "without  recourse",  or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of  Lender's  rights  under  this  Note,  and  Borrower  will  remain
obligated to pay any further amount owed to Lender.  All written  communications
concerning  disputed  amounts,  including any check or other payment  instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed  amount must be mailed or delivered  to: CNL  Commercial  Finance,
Inc., a Delaware  Corporation;  26137 La Paz Road,  Suite 102; Mission Viejo, CA
92691.

LATE  CHARGE.  If a payment  is 10 days or more late,  Borrower  will be charged
5.000% of the regularly scheduled payment.

INTEREST AFTER DEFAULT.  Upon default,  the variable  interest rate on this Note
shall  immediately  increase  to 9.000  percentage  points  over the  Index,  if
permitted under applicable law.

DEFAULT.  Each of the following shall  constitute an event of default ("Event of
Default") under this Note:

     PAYMENT  DEFAULT.  Borrower  fails to make any payment  when due under this
     Note.

     OTHER DEFAULTS. Borrower fails to comply with or to perform any other term,
     obligation,  covenant or condition  contained in this Note or in any of the
     related  documents  or to comply with or to perform  any term,  obligation,
     covenant or condition  contained in any other agreement  between Lender and
     Borrower.

     FALSE  STATEMENTS.  Any  warranty,  representation  or  statement  made  or
     furnished to Lender by Borrower or on Borrower's  behalf under this Note or
     the related  documents  is false or  misleading  in any  material  respect,
     either now or at the time made or furnished or becomes  false or misleading
     at any time thereafter.

     INSOLVENCY.  The  dissolution or  termination of Borrower's  existence as a
     going business,  the insolvency of Borrower,  the appointment of a receiver
     for any part of  Borrower's  property,  any  assignment  for the benefit of
     credits,  any  type  of  creditor  workout,  or  the  commencement  of  any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     CREDITOR  OR  FORFEITURE   PROCEEDINGS.   Commencement  of  foreclosure  or
     forfeiture   proceedings,   whether  by  judicial  proceeding,   self-help,
     repossession  or any other  method,  by any  creditor of Borrower or by any
     government agency against any collateral securing the loan. This includes a
     garnishment of any of Borrower's accounts, including deposit accounts, with
     Lender.  However,  this Event of Default shall not apply if there is a good
     faith dispute by Borrower as to the validity or reasonableness of the claim
     which is the basis of the creditor or forfeiture proceeding and if Borrower
     gives Lender  written  notice of the creditor or forfeiture  proceeding and
     deposits with Lender monies or a surety bond for the creditor or forfeiture
     proceeding,  in an amount determined by Lender, in its sole discretion,  as
     being an adequate reserve or bond for the dispute.

     EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
     to any  Guarantor  of any of the  indebtedness  or any  Guarantor  dies  or
     becomes  incompetent,  or revokes or disputes the validity of, or liability
     under,  any guaranty of the  indebtedness  evidenced  by this Note.  In the
     event of a death, Lender, at its option, may, but shall not be required to,
     permit the  Guarantor's  estate to assume  unconditionally  the obligations
     arising  under the  guaranty in a manner  satisfactory  to Lender,  and, in
     doing so, cure any Event of Default.

     CHANGE IN OWNERSHIP.  Any change in ownership of twenty-five  percent (25%)
     or more of the common stock of Borrower.

     ADVERSE CHANGE.  A material  adverse change occurs in Borrower's  financial
     condition,  or Lender  believes the prospect of payment or  performance  of
     this Note is impaired.

     CURE PROVISIONS. If any default, other than a default in payment is curable
     and if  Borrower  has not  been  given a  notice  of a  breach  of the same
     provision of this Note within the preceding  twelve (12) months,  it may be
     cured (and no event of  default  will have  occurred)  if  Borrower,  after
     receiving  written notice from Lender  demanding cure of such default:  (1)
     cures the default  within ten (10) days;  or (2) if the cure  requires more
     than ten (10) days,  immediately  initiates  steps  which  Lender  deems in
     Lender's  sole  discretion  to  be  sufficient  to  cure  the  default  and
     thereafter  continues  and  completes all  reasonable  and necessary  steps
     sufficient to produce compliance as soon as reasonably practical.

LENDER'S  RIGHTS.  Upon default,  Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest  immediately  due, and then
Borrower will pay that amount.

ATTORNEYS' FEES;  EXPENSES.  Lender may hire or pay someone else to help collect
this Note if Borrower does not pay.  Borrower will pay Lender that amount.  This
includes,  subject to any limits under applicable law, Lender's  attorneys' fees
and  Lender's  legal  expenses,  whether  or not there is a  lawsuit,  including
attorneys'  fees,  expenses for  bankruptcy  proceedings  (including  efforts to
modify or vacate any automatic stay or injunction),  and appeals.  Borrower also
will pay any court costs, in addition to all other sums provided by law.

GOVERNING  LAW.  THIS  NOTE WILL BE  GOVERNED  BY,  CONSTRUED  AND  ENFORCED  IN
ACCORDANCE  WITH FEDERAL LAW AND THE LAWS OF THE STATE OF CALIFORNIA.  THIS NOTE
HAS BEEN ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Cleveland County, State of Oklahoma.

DISHONORED  ITEM FEE.  Borrower  will pay a fee to Lender of $25.00 if  Borrower
makes a payment on Borrower's loan and the check or
<PAGE>

                                PROMISSORY NOTE
                                   (Continued)                            Page 2
================================================================================

preauthorized charge with which Borrower pays is later dishonored.

COLLATERAL.  Borrower  acknowledges  this  Note  is  secured  by  the  following
collateral  described in the security instrument listed herein; a Mortgage dated
July 2, 2003, to Lender on real property located in Cleveland  County,  State of
Oklahoma.

UNPAID INTEREST AND ENFORCEMENT COSTS.  Interest and Lender collection  expenses
(including  attorneys'  fees) not paid when due shall be added to principal  and
thereafter bear like interest.

FUNDING DATE INTEREST RATE  ADJUSTMENT.  In the event that Lender has not funded
the  loan  evidenced  by this  Note on or  before  the date  which is seven  (7)
calendar days after the date of this Note as set forth on the first page hereon,
Borrower acknowledges and agrees that Lender may elect (in its sole and absolute
discretion) to cancel and redraw the Note to increase the interest rate accruing
under the Note in accordance with the  increase(s),  if any, in interest rate(s)
then being  offered by Lender on loans  similar  to the loan  evidenced  by this
Note.

FINANCIAL REPORTING. Borrower agrees to furnish Lender with Federal Tax Returns,
as soon as available,  but in no event later than one-hundred-twenty  (120) days
after the applicable filing date for the tax reporting period ended, prepared by
a tax professional  satisfactory to Lender. All financial reports required to be
provided under this Note shall be prepared in accordance with GAAP, applied on a
consistent basis, and certified by Borrower as being true and correct.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs,  personal  representatives,  successors and assigns,  and
shall inure to the benefit of Lender and its successors and assigns.

GENERAL  PROVISIONS.  Lender may delay or forgo  enforcing  any of its rights or
remedies under this Note without losing them.  Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations,  presentment,  demand for payment, and notice
of  dishonor.  Upon any change in the terms of this Note,  and unless  otherwise
expressly  stated in  writing,  no party who signs this Note,  whether as maker,
guarantor,  accommodation  maker or endorser,  shall be released from liability.
All such parties agree that Lender may renew or extend  (repeatedly  and for any
length of time) this loan or release any party or  guarantor or  collateral;  or
impair,  fail to realize  upon the  perfect  Lender's  security  interest in the
collateral;  and take any other action  deemed  necessary by Lender  without the
consent  of or notice to anyone.  All such  parties  also agree that  Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the  modification is made. The  obligations  under this Note are joint
and several.

PRIOR TO SIGNING THIS NOTE,  BORROWER READ AND  UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE,  INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  BORROWER AGREES TO
THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

VAUGHAN FOODS, INC.

By: /s/ Mark E. Vaughan                 By: /s/ Andre G. Vaughan
--------------------------------        --------------------------------
Mark E. Vaughan,                        Andre G. Vaughan,
President of Vaughan Foods, Inc.        Secretary of Vaughan Foods, Inc.

<PAGE>

                CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

================================================================================

Corporation: Vaughan Foods, Inc.        Lender: CNL Commercial Finance, Inc.,
             216 NE 12th Street                 a Delaware Corporation
             Moore, OK 73160                    26137 La Paz Road, Suite 102
                                                Mission Viejo, CA 92691

================================================================================

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

THE CORPORATION'S EXISTENCE. The complete and correct name of the Corporation is
Vaughan Foods, Inc. ("Corporation"). The Corporation is a corporation for profit
which is, and at all times shall be, duly organized,  validly  existing,  and in
good  standing  under and by virtue  of the laws of the State of  Oklahoma.  The
Corporation is duly  authorized to  transaction  business in all other states in
which the Corporation is doing business,  having obtained all necessary filings,
governmental  licenses and approvals for each state in which the  Corporation is
doing  business.  Specifically,  the  Corporation is, and at all times shall be,
duly qualified as a foreign corporation in all states in which the failure to so
qualify  would have a  material  adverse  effect on its  business  or  financial
condition.  The  Corporation  has  the  full  power  and  authority  to own  its
properties  and to transact  the  business in which it is  presently  engaged or
presently proposes to engage. The Corporation maintains an office at 216 NE 12th
Street,  Moore, OK 73160.  Unless the  Corporation  has designated  otherwise in
writing,  the principal office is the office at which the Corporation  keeps its
books and records. The Corporation will notify Lender prior to any change in the
location  of the  Corporation's  state  of  organization  or any  change  in the
Corporation's  name. The Corporation  shall do all things  necessary to preserve
and to keep in full force and effect its existence,  rights and privileges,  and
shall  comply with all  regulations,  rules,  ordinances,  statutes,  orders and
decrees of any governmental or quasi-governmental  authority or court applicable
to the Corporation and the Corporation's business activities.

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation  is a close  corporation  having  no  Board of  Directors  then at a
meeting of the Corporation's shareholders, duly called and held on July 2, 2003,
at which a quorum was present and voting,  or by other duly authorized action in
lieu of a meeting, the resolutions set forth in this Resolution were adopted.

OFFICERS. The following named persons are officers of Vaughan Foods, Inc.:

     NAMES                  TITLES         AUTHORIZED      ACTUAL SIGNATURES
     -----                  ------         ----------      -----------------
     Mark E. Vaughan        President           Y         /s/ Mark E. Vaughan
     Andrea G. Vaughan      Secretary           Y         /s/ Andrea G. Vaughan

ACTIONS AUTHORIZED. Any one (1) of the authorized persons listed above may enter
into any agreements of any nature with Lender,  and those  agreements  will bind
the  Corporation.  Specifically,  but  without  limitation,  any one (1) of such
authorized persons are authorized,  empowered,  and directed to do the following
for and on behalf of the Corporation:

     BORROW MONEY. To borrow, as a cosigner or otherwise, from time to time from
     Lender,  on such terms as may be agreed upon  between the  Corporation  and
     Lender,  such sum or sums of money as in their judgment should be borrowed,
     without limitation.

     EXECUTE  NOTES:  To execute  and deliver to Lender the  promissory  note or
     notes, or other evidence of the  Corporation's  credit  accommodations,  on
     Lender's  forms,  at such  rates of  interest  and on such  terms as may be
     agreed  upon,  evidencing  the  sums of  money  so  borrowed  or any of the
     Corporation's  indebtedness  to Lender,  and also to execute and deliver to
     Lender  one or  more  renewals,  extensions,  modifications,  refinancings,
     consolidations,  or substitutions for one or more of the notes, any portion
     of the notes, or any other evidence of credit accommodations.

     GRANT SECURITY. To mortgage,  pledge, transfer,  endorse,  hypothecate,  or
     otherwise  encumber  and deliver to Lender any  property  now or  hereafter
     belonging to the  Corporation or in which the  Corporation now or hereafter
     may have an interest, including without limitation all of the Corporation's
     real property and all of the Corporation's  personal property  (tangible or
     intangible),   as  security   for  the  payment  of  any  loans  or  credit
     accommodations so obtained, any promissory notes so executed (including any
     amendments to or modifications, renewals, and extensions of such promissory
     notes),  or any other or further  indebtedness of the Corporation to Lender
     at any time owing, however the same may be evidenced.  Such property may be
     mortgaged,  pledged, transferred,  endorsed,  hypothecated or encumbered at
     the time such loans are obtained or such  indebtedness  is incurred,  or at
     any other time or times, and may be either in addition to or in lieu of any
     property   theretofore   mortgaged,   pledged,    transferred,    endorsed,
     hypothecated or encumbered.

     EXECUTE SECURITY  DOCUMENTS.  To execute and deliver to Lender the forms of
     mortgage,  deed of trust, pledge agreement,  hypothecation  agreement,  and
     other security agreements and financing statements which Lender may require
     and which shall  evidence  the terms and  conditions  under and pursuant to
     which such liens and  encumbrances,  or any of them, are given; and also to
     execute and deliver to Lender any other  written  instruments,  any chattel
     paper,  or any other  collateral,  of any kind or nature,  which Lender may
     deem necessary or proper in connection  with or pertaining to the giving of
     the liens and encumbrances.  Notwithstanding the foregoing,  any one of the
     above  authorized  persons  may  execute,   deliver,  or  record  financing
     statements.

     NEGOTIATE  ITEMS.  To draw,  endorse,  and discount with Lender all drafts,
     trade  acceptances,  promissory  notes,  or other evidences of indebtedness
     payable to or belonging to the  Corporation or in which the Corporation may
     have an interest,  and either to receive cash for the same or to cause such
     proceeds to be credited to the  Corporation's  account with  Lender,  or to
     cause such other  disposition of the proceeds derived therefrom as they may
     deem advisable.

     FURTHER  ACTS. In the case of lines of credit,  to designate  additional or
     alternate  individuals as being  authorized to request  advances under such
     lines,  and in all cases, to do and perform such other acts and things,  to
     pay any and all fees and  costs,  and to  execute  and  deliver  such other
     documents  and  agreements  as the  officers may in their  discretion  deem
     reasonably necessary or proper in order to carry into effect the provisions
     of this Resolution.

ASSUMED  BUSINESS NAMES.  The Corporation has filed or recorded all documents or
filings  required  by law  relating to all  assumed  business  names used by the
Corporation.  Excluding the name of the Corporation, the following is a complete
list of all assumed  business names under which the  Corporation  does business:
NONE.

NOTICES TO LENDER.  The  Corporation  will promptly  notify Lender in writing at
Lender's  address shown above  (or such other  addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation's name; (B) change
in the Corporation's  assumed business name(s);  (C) change in the management of
the  Corporation;  (D)  change in the  authorized  signer(s);  (E) change in the
Corporation's principal office address; (F) change in the Corporation's state of
organization;  (G)  conversion of the  Corporation to a new or different type of
business  entity;  or (H)  change in any other  aspect of the  Corporation  that
directly or indirectly  relates to any agreements  between the  Corporation  and
Lender. No change in the  Corporation's  name or state of organization will take
effect until after Lender has received notice.

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS.  The officers named above are
duly elected,  appointed, or employed by or for the Corporation, as the case may
be,  and  occupy  the  positions  set  opposite  their  respective  names.  This
Resolution  now  stands of record  on the books of the  Corporation,  is in full
force and effect, and has not been modified or revoked in any manner whatsoever.

SHAREHOLDER   APPROVAL.  At  a  special  meeting  of  the  shareholders  of  the
Corporation,  duly  called  and  held  (or by  consent  of the  shareholders  in
accordance  with the laws of the State of Oklahoma),  not less than the required
percentage of shareholders adopted or consented to all the resolutions set forth
in this Resolution.

NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal
is affixed to this Resolution.

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed  prior to the  passage  of this  Resolution  are hereby  ratified  and
approved.  This Resolution  shall be continuing,  shall remain in full force and
effect and Lender may rely on it until written  notice of its  revocation  shall
have been  delivered to and received by Lender at Lender's  address  shown above
(or such addresses as Lender may designate  from time to time).  Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.

IN  TESTIMONY  WHEREOF,  WE HAVE  HEREUNTO  SET OUR  HAND  AND  ATTEST  THAT THE
SIGNATURES SET OPPOSITE THE NAMES LISTED ABOVE ARE THEIR GENUINE SIGNATURES.

WE EACH HAVE READ ALL THE PROVISIONS OF THIS RESOLUTION,  AND WE EACH PERSONALLY
AND ON BEHALF OF THE CORPORATION CERTIFY THAT ALL STATEMENTS AND REPRESENTATIONS
MADE IN THIS  RESOLUTION  ARE TRUE AND CORRECT.  THIS  CORPORATE  RESOLUTION  TO
BORROW / GRANT COLLATERAL IS DATED JULY 2, 2003.
<PAGE>

               CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL
                                  (Continued)                             Page 2
================================================================================

                        CERTIFIED TO AND ATTESTED BY:

                        By: /s/ Mark E. Vaughan
                            ----------------------------------------------------
                            Mark E. Vaughan, President of Vaughan Foods, Inc.

                        By: /s/ Andrea G. Vaughan
                            ----------------------------------------------------
                            Andrea G. Vaughan, Secretary of Vaughan Foods, Inc.

NOTE: If the officers  signing this  Resolution  are designated by the foregoing
document as one of the officers  authorized to act on the Corporation's  behalf,
it is advisable to have this  Resolution  signed by at least one  non-authorized
officer of the Corporation.

<PAGE>

COMMERCIAL GUARANTY

================================================================================

Borrower:   Vaughan Foods, Inc.            Lender: CNL Commercial Finance, Inc.,
            216 NE 12th Street                     a Delaware Corporation
            Moore, OK 73160                        26137 La Paz Road, Suite 102
                                                   Mission Viejo, CA 92691

Guarantor:  Mark E. Vaughan
            917 NW 39th Street
            Oklahoma City, OK 73118

================================================================================

AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.

CONTINUING  UNLIMITED  GUARANTY.  FOR GOOD AND VALUABLE  CONSIDERATION,  MARK E.
VAUGHAN ("GUARANTOR") ABSOLUTELY AND UNCONDITIONALLY  GUARANTEES AND PROMISES TO
PAY TO CNL COMMERCIAL FINANCE,  INC., A DELAWARE  CORPORATION  ("LENDER") OR ITS
ORDER,  IN LEGAL TENDER OF THE UNITED STATES OF AMERICA,  THE  INDEBTEDNESS  (AS
THAT TERM IS DEFINED BELOW) OF VAUGHAN FOODS, INC. ("BORROWER") TO LENDER ON THE
TERMS AND  CONDITIONS  SET  FORTH IN THE  GUARANTY.  UNDER  THIS  GUARANTY,  THE
LIABILITY  OF  GUARANTOR  IS UNLIMITED  AND THE  OBLIGATIONS  OF  GUARANTOR  ARE
CONTINUING.

INDEBTEDNESS  GUARANTEED.  The Indebtedness  guaranteed by the Guaranty includes
any  and all of  Borrower's  Indebtedness  to  Lender  and is  used in the  most
comprehensive   sense  and  means  and  includes  any  and  all  of   Borrower's
liabilities,  obligations  and debts to  Lender,  now  existing  or  hereinafter
incurred  or  created,  including,  without  limitation,  all  loans,  advances,
interest, costs, debts, overdraft indebtedness,  credit card indebtedness, lease
obligations, other obligations, and liabilities of Borrower, or any of them, and
any present or future judgments  against  Borrower,  or any of them; and whether
any such  Indebtedness  is  voluntarily  incurred,  due or not due,  absolute or
contingent,  liquidated or  unliquidated,  determined or  undetermined;  whether
Borrower may be liable  individually  or jointly  with  others,  or primarily or
secondarily, or as guarantor or surety; whether recovery on the Indebtedness may
be or may  become  barred  or  unenforceable  against  Borrower  for any  reason
whatsoever;  and whether the Indebtedness  arises from transactions which may be
voidable on account of infancy, insanity, ultra vires, or otherwise.

DURATION OF GUARANTY.  This  Guaranty  will take effect when  received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower,  and will continue in full force until all Indebtedness incurred or
contracted  before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all of  Guarantor's  other  obligations
under this Guaranty  shall have been  performed in full. If Guarantor  elects to
revoke this Guaranty,  Guarantor may only do so in writing.  Guarantor's written
notice of revocation  must be mailed to Lender,  by certified  mail, at Lender's
address  listed  above or such other place as Lender may  designate  in writing.
Written  revocation  of  this  Guaranty  will  apply  only  to  advances  or new
Indebtedness  created  after  actual  receipt by Lender of  Guarantor's  written
revocation. For this purpose and without limitation, the term "new Indebtedness"
does not  include  Indebtedness  which at the time of  notice of  revocation  is
contingent,  unliquidated,  undetermined  or not due  and  which  later  becomes
absolute,  liquidated,  determined  or due.  This Guaranty will continue to bind
Guarantor for all Indebtedness incurred by Borrower or committed by Lender prior
to  receipt  of  Gaurantor's   written  notice  of  revocation,   including  any
extensions,  renewals,  substitutions or modifications of the Indebtedness.  All
renewals,  extensions,  substitutions,  and  modifications  of the  Indebtedness
granted after Guarantor's revocation,  are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness.  This Guaranty shall
bind  Guarantor's  estate  as to  Indebtedness  created  both  before  and after
Guarantor's  death or  incapacity,  regardless  of  Lender's  actual  notice  of
Guarantor's   death.   Subject  to  the  foregoing,   Guarantor's   executor  or
administrator or other legal  representative  may terminate this Guaranty in the
same  manner  in which  Guarantor  might  have  terminated  it and with the same
effect.  Release of any other  guarantor or termination of any other guaranty of
the  Indebtedness  shall not  affect  the  liability  of  Guarantor  under  this
Guaranty. A revocation Lender receives from any one or more Guarantors shall not
affect  the  liability  of  any  remaining   Guarantors   under  this  Guaranty.
Guarantor's  obligations  under this  Guaranty  shall be in  addition  to any of
Guarantor's  obligations,  or  any  of  them,  under  any  other  guaranties  of
Borrower's  Indebtedness  or any other person  heretofore or hereafter  given to
Lender unless such other guaranties are modified or revoked in writing; and this
Guarantor shall not, unless provided in this Guaranty,  affect,  invalidate,  or
supersede any such other guaranty. IT IS ANTICIPATED THAT FLUCTUATIONS MAY OCCUR
IN THE AGGREGATE AMOUNT OF INDEBTEDNESS COVERED BY THIS GUARANTY,  AND GUARANTOR
SPECIFICALLY   ACKNOWLEDGES   AND  AGREES  THAT  REDUCTIONS  IN  THE  AMOUNT  OF
INDEBTEDNESS,  EVEN  TO ZERO  DOLLARS  ($0.00),  PRIOR  TO  GUARANTOR'S  WRITTEN
REVOCATION OF THIS GUARANTY SHALL NOT CONSTITUTE A TERMINATION OF THIS GUARANTY.
THIS GUARANTY IS BINDING UPON GUARANTOR AND  GUARANTOR'S  HEIRS,  SUCCESSORS AND
ASSIGNS SO LONG AS ANY OF THE  GUARANTEED  INDEBTEDNESS  REMAINS UNPAID AND EVEN
THOUGH  THE  INDEBTEDNESS  GUARANTEED  MAY  FROM  TIME TO  TIME BE ZERO  DOLLARS
($0.00).

OBLIGATIONS  OF MARRIED  PERSONS.  Any  married  person who signs this  Guaranty
hereby  expressly  agrees that  recourse  under this Guaranty may be had against
both his or her separate property and community property.

GUARANTOR'S  AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation  hereof,  WITHOUT NOTICE OR DEMAND AND WITHOUT LESSENING
GUARANTOR'S  LIABILITY  UNDER  THIS  GUARANTY,  FROM TIME TO TIME:  (A) prior to
revocation  as set  forth  above,  to make  one or more  additional  secured  or
unsecured loans to Borrower,  to lease equipment or other goods to Borrower,  or
otherwise to extend  additional  credit to Borrower;  (B) to alter,  compromise,
renew,  extend,  accelerate,  or otherwise change one or more times the time for
payment  or other  terms of the  Indebtedness  or any part of the  Indebtedness,
including  increases and decreases of the rate of interest on the  Indebtedness;
extensions  may be repeated and may be for longer than the  original  loan term;
(C) to  take  and  hold  security  for  the  payment  of  this  Guaranty  or the
Indebtedness,  and exchange, enforce, waive, subordinate,  fail or decide not to
perfect, and release any such security,  with or without the substitution of new
collateral; (D) to release,  substitute,  agree not to sue, or deal with any one
or more of Borrower's sureties,  endorsers,  or other guarantors on any terms or
in any manner Lender may choose; (E) to determine how, when and what application
of payments  and credits  shall be made on the  Indebtedness;  (F) to apply such
security  and  direct  the order or manner of sale  thereof,  including  without
limitation,  any  nonjudicial  sale  permitted  by the terms of the  controlling
security  agreement or deed of trust, as Lender in its discretion may determine;
(G) to sell, transfer,  assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.

GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (A) no  representations  or agreements of any kind have been made to
Guarantor  which would  limit or qualify in any way the terms of this  Guaranty;
(B) this  Guaranty is executed at  Borrower's  request and not at the request of
Lender;  (C)  Guarantor  has full power,  right and authority to enter into this
Guaranty;  (D) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument  binding upon Guarantor and do
not  result  in a  violation  of any  law,  regulation,  court  decree  or order
applicable to Guarantor;  (E) Guarantor has not and will not,  without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially  all of Guarantor's  assets, or any
interest therein;  (F) upon Lender's  request,  Guarantor will provide to Lender
financial and credit  information  in form  acceptable  to Lender,  and all such
financial  information  which  currently  has  been,  and all  future  financial
information  which will be provided to Lender is and will be true and correct in
all material respects and fairly present  Guarantor's  financial condition as of
the dates the financial information is provided;  (G) no material adverse change
has  occurred  in  Guarantor's  financial  condition  since the date of the most
recent financial  statements  provided to Lender and no event has occurred which
may  materially  adversely  affect  Guarantor's  financial  condition;   (H)  no
litigation,  claim,  investigation,  administrative proceeding or similar action
(including  those for unpaid taxes) against  Guarantor is pending or threatened;
(I) Lender has made no representation to Guarantor as to the creditworthiness of
Borrower;  and (J) Guarantor has  established  adequate  means of obtaining from
Borrower  on a  continuing  basis  information  regarding  Borrower's  financial
condition.  Guarantor agrees to keep adequately  informed from such means of any
facts,  events, or circumstances which might in any way affect Guarantor's risks
under this  Guaranty,  and  Guarantor  further  agrees that absent a request for
information,  Lender  shall have no  obligation  to  disclose to  Guarantor  any
information  or documents  acquired by Lender in the course of its  relationship
with Borrower.

GUARANTOR'S  FINANCIAL  STATEMENTS.  Guarantor agrees to furnish Lender with the
following:

     TAX  RETURNS.   As  soon  as   available,   but  in  no  event  later  than
     one-hundred-twenty  (120) days after the applicable filing date for the tax
     reporting  period  ended,  Federal  and  other  governmental  tax  returns,
     prepared by a tax professional satisfactory to Lender.

All  financial  reports  required to be provided  under this  Guaranty  shall be
prepared in accordance with GAAP,  applied on a consistent  basis, and certified
by Guarantor as being true and correct.

GUARANTOR'S  WAIVERS.  Except as prohibited by applicable law,  Guarantor waives
any right to require Lender to (A) make any  presentment,  protest,  demand,  or
notice of any kind,  including notice of change of any terms of repayment of the
Indebtedness,  default by Borrower or any other guarantor or surety,  any action
or nonaction  taken by  Borrower,  Lender,  or any other  guarantor or surety of
Borrower, or the creation of new or additional Indebtedness; (B) proceed against
any person, including Borrower, before proceeding against Guarantor; (C) proceed
against any collateral for the Indebtedness,  including  Borrower's  collateral,
before proceeding against Guarantor; (D) apply any payments or proceeds received
against the Indebtedness in any order;  (E) give notice of the terms,  time, and
place of any sale of the collateral  pursuant to the Uniform  Commercial Code or
any other law  governing  such sale;  (F)  disclose  any  information  about the
Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or
about any action or nonaction  of Lender;  or (G) pursue any remedy or course of
action in Lender's power whatsoever.

Guarantor  also waives any and all rights or  defenses  arising by reason of (H)
any  disability or other defense of Borrower,  any other  guarantor or surety or
any other  person;  (I) the  cessation  from any cause  whatsoever,  other  than
payment in full, of the  Indebtedness;  (J) the  application  of proceeds of the
Indebtedness  by Borrower for purposes  other than the purposes  understood  and
intended by  Guarantor  and Lender;  (K) any act of  omission or  commission  by
Lender which  directly or indirectly  results in or contributes to the discharge
of Borrower or any other guarantor

<PAGE>

                                COMMERCIAL GUARANTY
                                   (Continued)                            Page 2
================================================================================

or surety,  or the  Indebtedness,  or the loss or release of any  collateral  by
operation  of law or  otherwise;  (L) any statute of  limitations  in any action
under this Guaranty or on the Indebtedness; or (M) any modification or change in
terms  of  the  Indebtedness,  whatsoever,  including  without  limitation,  the
renewal,  extension,  acceleration,  or other  change in the time payment of the
Indebtedness  is due and any change in the interest rate, and including any such
modification   or  change  in  terms  after   revocation  of  this  Guaranty  on
Indebtedness incurred prior to such revocation.

Guarantor  waives all rights and any  defenses  arising  out of an  election  of
remedies  by  Lender  even  though  that the  election  of  remedies,  such as a
non-judicial  foreclosure with respect to security for a guaranteed  obligation,
has  destroyed  Guarantor's  rights of  subrogation  and  reimbursement  against
Borrower by operation of Section 580d of the California  Code of Civil Procedure
or otherwise.

Guarantor  waives  all rights  and  defenses  that  Guarantor  may have  because
Borrower's  obligation  is secured by real  property.  This  means  among  other
things:  (1) Lender may collect from Guarantor  without first foreclosing on any
real  or  personal  property  collateral  pledged  by  Borrower.  (2) If  Lender
forecloses on any real property  collateral pledged by Borrower;  (a) the amount
of  Borrower's  obligation  may be  reduced  only by the  price  for  which  the
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price.  (b) Lender may collect from Guarantor  even if Lender,  by
forclosing on the real property  collateral,  has destroyed any right  Guarantor
may have to collect from  Borrower.  This is an  unconditional  and  irrevocable
waiver  of any  rights  and  defenses  Guarantor  may  have  because  Borrower's
obligation is secured by real property.  These rights and defenses include,  but
are not limited to, any rights and defenses based upon Section 580a, 580b, 580d,
or 726 of the Code of Civil Procedure.

Guarantor  understands and agrees that the foregoing  waivers are  unconditional
and  irrevocable  waivers of substantive  rights and defenses to which Guarantor
might otherwise be entitled under state and federal law. Guarantor  acknowledges
that  Guarantor  has  provided  these  waivers of rights and  defenses  with the
intention  that  they  be  fully  relied  upon  by  Lender.   Guarantor  further
understands and agrees that this Guaranty is a seperate and independent contract
between  Guarantor and Lender,  given for full and ample  consideration,  and is
enforceable on its own terms. Until all Indebtedness is paid in full,  Guarantor
waives any right to enforce any remedy  Guarantor  may have against the Borrower
or any other guarantor,  surety, or other person, and further,  Guarantor waives
any right to participate in any collateral for the Indebtedness now or hereafter
held by Lender.

In addition to the waivers set forth herein, if now or hereafter  Borrower is or
shall become insolvent and the Indebtedness shall not at all times until paid be
fully secured by collateral pledged by Borrower, Guarantor hereby forever waives
and  gives up in favor of Lender  and  Borrower,  and  Lender's  and  Borrower's
respective  successors,  any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise, so that
at no time shall  Guarantor  be or become a  "creditor"  of Borrower  within the
meaning of 11 U.S.C.  section 547(b), or any successor  provision of the Federal
bankruptcy laws.

GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under circumstances,  the waivers
are  reasonable  and not contrary to public policy or law. If any such waiver is
determined to be contrary to any applicable  law or public  policy,  such waiver
shall be effective only to the extent permitted by law or public policy.

SUBORDINATION  OF  BORROWER'S  DEBT TO  GUARANTOR.  Guarantor  agrees  that  the
Indebtedness of Borrower to Lender,  whether now existing or hereafter  created,
shall be superior to any claim that Guarantor may now have or hereafter  acquire
against Borrower,  whether or not Borrower becomes  insolvent.  Guarantor hereby
expressly  subordinates any claim Guarantor may have against Borrower,  upon any
account  whatsoever,  to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower,  through bankruptcy, by an assignment for the benefit of creditors, by
voluntary  liquidation,  or otherwise,  the assets of Borrower applicable to the
payment of the claims of both Lender and  Guarantor  shall be paid to Lender and
shall be first  applied by Lender to the  Indebtedness  of  Borrower  to Lender.
Guarantor  does hereby  assign to Lender all claims which it may have or acquire
against  Borrower or against any assignee or trustee in  bankruptcy of Borrower;
provided  however,  that such assignment shall be effective only for the purpose
of assuring  to Lender  full  payment in legal  tender of the  Indebtedness.  If
Lender so requests,  any notes or credit agreements now or hereafter  evidencing
any debts or obligations of Borrower to Guarantor  shall be marked with a legend
that the same are subject to this  Guaranty  and shall be  delivered  to Lender.
Guarantor  agrees,  and Lender is hereby  authorized,  in the name of Guarantor,
from time to time to execute  and file  financing  statements  and  continuation
statements and to execute such other documents and to take such other actions as
Lender  deems  necessary  or  appropriate  to perfect,  preserve and enforce its
rights under this Guaranty.

MISCELLANEOUS  PROVISIONS.  The following miscellaneous provisions are a part of
this Guaranty:

     AMENDMENTS. This Guaranty, together with any Related Documents, constitutes
     the entire understanding and agreement of the parties as to the matters set
     forth in this  Guaranty.  No  alteration  of or amendment to this  Guaranty
     shall be  effective  unless  given in  writing  and  signed by the party or
     parties sought to be charged or bound by the alteration or amendment.

     ATTORNEYS'  FEES;  EXPENSES.  Guarantor  agrees to pay upon  demand  all of
     Lender's  costs  and  expenses,  including  Lender's  attorneys'  fees  and
     Lender's legal expenses, incurred in connection with the enforcement of the
     Guaranty.  Lender  may  hire  or pay  someone  else to  help  enforce  this
     Guaranty,   and  Guarantor  shall  pay  the  costs  and  expenses  of  such
     enforcement.  Costs and expenses include Lender's attorneys' fees and legal
     expenses whether or not there is a lawsuit,  including  attorneys' fees and
     legal expenses for bankruptcy  proceedings  (including efforts to modify or
     vacate any automatic  stay or  injunction),  appeals,  and any  anticipated
     post-judgment collection services. Guarantor also shall pay all court costs
     and such additional fees as may be directed by the court.

     CAPTION  HEADINGS.  Caption  headings in this Guaranty are for  convenience
     purposes only and are not to be used to interpret or define the  provisions
     of this Guaranty.

     GOVERNING LAW. THIS GUARANTY WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
     ACCORDANCE  WITH FEDERAL LAW AND THE LAWS OF THE STATE OF CALIFORNIA.  THIS
     GUARANTY HAS BEEN ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA.

     CHOICE OF VENUE.  If there is a lawsuit,  Guarantor  agrees  upon  Lender's
     request to submit to the  jurisdiction  of the courts of Cleveland  County,
     State of Oklahoma.

     INTEGRATON.  Guarantor  further  agrees that  Guarantor  has read and fully
     understands  the terms of this Guaranty;  Guarantor has had the opportunity
     to be advised by Guarantor's  attorney with respect to this  Guaranty;  the
     Guaranty  fully reflects  Guarnator's  intentions and parol evidence is not
     required  to  interpret  the  terms  of  this  Guaranty.  Guarantor  hereby
     indemnifies and holds Lender harmless from all losses, claims, damages, and
     costs (including  Lender's  attorneys' fees) suffered or incurred by Lender
     as a result of any breach by Guarantor of the  warranties,  representations
     and agreements of this paragraph.

     INTERPRETATION.  In all  cases  where  there is more than one  Borrower  or
     Guarantor,  then all words used in the  Guaranty in the  singular  shall be
     deemed to have been used in the plural  where the context and  construction
     so  require;  and  where  there  is more  than one  Borrower  named in this
     Guaranty or when this Guaranty is executed by more than one Guarantor,  the
     words "Borrower" and "Guarantor" respectively shall mean all and any one or
     more of them. The words  "Guarantor,"  "Borrower," and "Lender" include the
     heirs,  successors,  assigns,  and  transferees of each of them. If a court
     finds  that any  provision  of the  Guaranty  is not valid or should not be
     enforced,  that fact by itself will not mean that the rest of this Guaranty
     will not be valid or enforced.  Therefore, a court will enforce the rest of
     the provisions of this Guaranty even if a provision of this Guaranty may be
     found to be invalid or  unenforceable.  If any one or more of  Borrower  or
     Guarantor are corporations,  partnerships,  limited liability companies, or
     similar entities, it is not necessary for Lender to inquire into the powers
     of Borrower or Guarantor or of the officers, directors, partners, managers,
     or other agents acting or  purporting to act on their behalf,  and any Loan
     Indebtedness  made or created in reliance  upon the  professed  exercise of
     such powers shall be guaranteed under this Guaranty.

     NOTICES. Any notice required to be given under this Guaranty shall be given
     in writing,  and,  except for  revocation  notices by  Guarantor,  shall be
     effective when actually delivered,  when actually received by telefacsimile
     (unless  otherwise  required  by law),  when  deposited  with a  nationally
     recognized  overnight courier,  or, if mailed, when deposited in the United
     States mail, as first class,  certified or registered mail postage prepaid,
     directed to the addresses  shown near the beginning of this  Guaranty.  All
     revocation  notices by Guarantor shall be in writing and shall be effective
     upon  delivery  to Lender  as  provided  in the  section  of this  Guaranty
     entitled  "DURATION  OF  GUARANTY."  Any party may change its  address  for
     notices under this Guaranty by giving  formal  written  notice to the other
     parties, specifying that the purpose of the notice is to change the party's
     address.  For notice purposes,  Guarantor agrees to keep Lender informed at
     all times of Guarantor's  current  address.  Unless  otherwise  provided or
     required by law, if there is more than one  Guarantor,  any notice given by
     Lender to any Guarantor is deemed to be notice given to all Guarnators.

     NO WAIVER BY LENDER.  Lender  shall not be deemed to have waived any rights
     under this  Guaranty  unless  such waiver is given in writing and signed by
     Lender.  No delay or omission on the part of Lender in exercising any right
     shall  operate  as a waiver of such right or any other  right.  A waiver by
     Lender of a provision of this Guaranty  shall not prejudice or constitute a
     waiver of Lender's right  otherwise to demand strict  compliance  with that
     provision  or any other  provision  of this  Guaranty.  No prior  waiver by
     Lender,  nor any course of dealing  between  Lender  and  Guarantor,  shall
     constitute  a waiver of any of  Lender's  rights  or of any of  Guarantor's
     obligations as to any future  transactions.  Whenever the consent of Lender
     is required under this Guaranty,  the granting of such consent by Lender in
     any  instance  shall  not  constitute   continuing  consent  to  subsequent
     instances  where such consent is required and in all cases such consent may
     be granted or withheld in the sole discretion of Lender.

<PAGE>

                                COMMERCIAL GUARANTY
                                   (Continued)                            Page 3
================================================================================

     SUCCESSORS AND ASSIGNS.  Subject to any limitations stated in this Guaranty
     on transfer of  Guarantor's  interest,  this Guaranty shall be binding upon
     and inure to the benefit of the parties, their successors and assigns.

PAYMENT AND PERFORMANCE GUARANTY.  This is a guaranty of full and timely payment
and/or performances of each and all obligations or Indebtedness now or hereafter
owing by Borrower to Lender.

ADDITIONAL  WAIVER.  In addition  to any and all waivers set forth  hereinabove,
Guarantor hereby waives and relinquishes all of the Guarantor's  rights provided
by 12 Oklahoma  State Section 686, 15 Oklahoma  State Sections 334, 338, 341 and
344,  and all other  statutory  and common law rights,  remedies,  defenses  and
set-off  credits for the fair market value of the property which may be accorded
to Grantor under Oklahoma law.

DEFINITIONS.  The following capitalized words and terms shall have the following
meanings when used in this Guaranty. Unless specifically stated to the contrary,
all  references  to dollar  amounts  shall mean  amounts in lawful  money of the
United States of America. Words and terms used in the singular shall include the
plural,  and the plural shall include the singular,  as the context may require.
Words and terms not otherwise  defined in this Guaranty  shall have the meanings
attributed to such terms in the Uniform Commercial Code:

     BORROWER.  The word "Borrower"  means Vaughan Foods,  Inc. and includes all
     co-signers and co-makers signing the Note.

     GAAP. The word "GAAP" means generally accepted accounting principles.

     GUARANTOR.  The word  "Guarantor"  means  each and  every  person or entity
     signing this Guaranty, including without limitation Mark E. Vaughan.

     GUARANTY.  The word "Guaranty" means the guaranty from Guarantor to Lender,
     including without limitation a guaranty of all or part of the Note.

     INDEBTEDNESS.  The word  "Indebtedness"  means  Borrower's  indebtedness to
     Lender as more particularly described in this Guaranty.

     LENDER.  The word "Lender" means CNL Commercial  Finance,  Inc., a Delaware
     Corporation, its successors and assigns.

     NOTE.  The  word  "Note"  means  and  includes  without  limitation  all of
     Borrower's  promissory notes and/or credit agreements evidencing Borrower's
     loan  obligations  in favor of  Lender,  together  with  all  renewals  of,
     extensions of,  modifications  of,  refinancings of,  consolidations of and
     substitutions for promissory notes or credit agreements.

     RELATED DOCUMENTS. The words "Related Documents" mean all promissory notes,
     credit agreements, loan agreements,  environmental agreements,  guaranties,
     security agreements,  mortgages, deeds of trust, security deeds, collateral
     mortgages, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Indebtedness.

EACH UNDERSIGNED  GUARANTOR  ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION,  EACH GUARANTOR  UNDERSTANDS THAT
THIS  GUARANTY IS  EFFECTIVE  UPON  GUARANTOR'S  EXECUTION  AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE  UNTIL  TERMINATED IN THE
MANNER  SET  FORTH IN THE  SECTION  TITLED  "DURATION  OF  GUARANTY".  NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JULY 2, 2003.

GUARANTOR:

MARK E. VAUGHAN
--------------------------------------
Mark E. Vaughan, Individually

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