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c51856_ex10-18.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EX-10.18

LOAN AGREEMENT 

           THIS
LOAN AGREEMENT (hereinafter referred to as “Agreement”)
is made and entered into effective as of the 31st day of December 2007, between Vaughan
Foods,  Inc., an Oklahoma corporation (“VFI”), Allison’s
Gourmet Kitchens, Limited Partnership, an Oklahoma limited partnership and
Wild About Food – Oklahoma, LLC, a Texas limited liability company
(hereinafter collectively referred to as the “Borrower”), and International
Bank of Commerce, a Texas state banking association (hereinafter referred
to as “Bank”). 

          WHEREAS, Borrower has applied to and/or received from Bank loan(s) and/or other financial accommodations, and 

          WHEREAS, Bank and Borrower intend that all indebtedness owing by Borrower to Bank, arising hereunder or under any note or other loan document executed pursuant hereto, be governed by the terms of this Agreement. 

          NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein and in the loan and collateral documents, and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrower and Bank hereby covenant and agree as follows: 

	
I.     	
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Bank that:
	 
	 	
A.     	
      Borrower VFI is duly organized,
          existing and in good standing under the laws of the state of Oklahoma.
          Borrower Allison’s Gourmet Kitchens, Limited Partnership, is duly organized, existing and in good standing as a
        limited partnership under the laws of the State of Oklahoma. Borrower Wild About Food – Oklahoma,
        LLC is duly organized, existing and in good standing as a limited liability
    company under the laws of the State of Texas.

	 
	 	
B.     	
      The borrowing hereunder
          and the execution, delivery and performance by Borrower of this Agreement,
          any promissory note(s) payable to Bank, or any other agreements contemplated
          in connection herewith have been duly authorized by all necessary corporate
          action of the Borrower that is a corporation and by all other necessary
          action by the Borrowers who are not corporations and are not in contravention
          of any law, rule or regulation or of the terms of the Borrower’s
          organization documents or of any agreement or instrument to which Borrower
    is a party or by which Borrower may be bound.

	 
	 	
C.     	
      Borrower has furnished to
          the Bank a true and correct copy of (i) consolidated balance sheet
          of Borrower as of September 30, 2007, and consolidated statement of
          operations for the three month and nine-month periods ended September
          30, 2007, (ii) Borrower VFI’s Quarterly Report on Form 10-Q (the “10-Q”) as filed with the Securities and Exchange Commission (“SEC”) for the three month period ended September 30, 2007, (the “Financial
    Statements”). The Financial

	 

	 	 	Statements fairly represent
      in all material respects the financial condition of Borrower as of the
      date and for the period shown, have been prepared in conformity with generally
      accepted accounting principles applied on a basis consistent with that
      of previous such statements, except where otherwise noted, and include
      all of Borrower’s contingent liabilities where required by GAAP; all
      other information, reports, documents, papers and data furnished to Bank
      are or shall be at the time furnished accurate and correct in all material
      respects and complete insofar as completeness may be necessary to give
      Bank a true and accurate knowledge of the subject matter; there as been
      no material change in the financial condition of Borrower since the effective
      date of the last furnished financial information which has not been disclosed
      to Bank in writing. Bank acknowledges that interim consolidated financial
      statements may not necessarily contain all footnote disclosures required
      by GAAP.

	 	 	 
	 	
D.     	
No litigation or governmental proceeding is pending or, to the knowledge of the Borrower, threatened against or affects Borrower which may result in any material adverse change in Borrower’s business, properties or
operation which has not been disclosed to Bank in writing or as disclosed in the footnotes to the financial statements.
	 
	 	
E.     	
Except as disclosed in footnotes to the Financial Statements, none of Borrower’s assets is subject to any lien, security interest, or other encumbrance.
	 
	 	
F.     	
Proceeds of loans and extensions of credit arising hereunder will be used only for working capital and general operating needs.
	 
	
II.     	
      LINE OF CREDIT. Bank agrees to make advances to Borrower from time to time from the date of this Agreement through the maturity date of the underlying promissory note of up to Five
        Million Dollars ($5,000,000), provided that the aggregate amount of such advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing limitations, Borrower may borrow, partially or wholly prepay, and reborrow under this
    Agreement as follows:

	 
	 	
A.     	
      Conditions Precedent to Each Advance.
          Bank’s obligation to make any advance to or for the account of
          Borrower under this Agreement is subject to the following conditions
          precedent, with all documents, instruments, opinions, reports and other
          items required under this Agreement to be in form and substance satisfactory
    to Lender:

	 
	 	 	
1.     	
Borrower shall have executed this Agreement and all related loan and collateral documents.
	 
	 	 	
2.     	
Borrower shall have paid to Bank all fees, costs, and expenses specified in this Agreement and the related loan documents as are then due and payable.
	 

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B.     	
      Fees. Non use fee billed quarterly on the daily average unused portion of the line. Rate would be based on the Funded Debt/EBITDA calculation 1/8% for below 3:1, 1/4% for 3:1 to 5:1
    and 3/8% for greater than 5:1.

	 
	 	
C.     	
      Making Loan Advances.
          Advances under this Agreement, as well as directions for payment from
          Borrower’s accounts, may be requested orally or in writing by
          authorized representatives of Borrower. Bank may, but is not required
          to, require that all oral requests be confirmed in writing. Each advance
          shall be conclusively deemed to have been made at the request of and
          for the benefit of Borrower when credited to any deposit account of
          Borrower maintained with Bank or when advanced in accordance with the
          instructions of an authorized person. Requests for advances after 2:30
          p.m. CST will be treated as having been requested on the next business
          day. Payments received by Bank after 2:30 p.m. CST will be treated
    as having been received on the next business day.

	 
	 	
D.     	
      Mandatory Loan Repayments. If at any time the aggregate principal amount of the outstanding advances shall exceed the applicable Borrowing Base, Borrower shall immediately, with or
        without written or oral notice from Bank, pay to Bank an amount equal to the difference between the outstanding principal balance of the advances and the Borrowing Base. All principal, and accrued interest is due and payable at the earlier of the
    exercise by Bank of its right of acceleration subsequent to an event of default, or the maturity of the note.

	 
	 	
E.     	
      Borrowing Base. The Borrowing Base means, as of any determination date, 80% of Eligible Accounts and 50% of Eligible Inventory. The inventory component of the Borrowing Base shall not
    exceed the lesser of $1,000,000.00 or the Eligible Accounts portion of the Borrowing Base.

	 
	 	
F.     	
      Eligible Accounts. Eligible Accounts means, as of any determination date, the aggregate unpaid balance of Accounts that arose from bona fide, outright sales of items of Inventory that
    have been delivered and accepted and that are based upon valid, enforceable and legally binding orders or contracts that have been fully performed by the Borrower, excluding, however, the following:

	 
	 	 	
1.     	
      That portion of any Account that is in dispute or as to which the Borrower has received written notice that the account debtor claims right of rejection, return, recoupment, setoff, counterclaim, deduction or defense to
    payment.

	 
	 	 	
2.     	
      Any Account that is subject to any assignment, adverse claim, lien or security interest, except in favor of Bank.

	 
	 	 	
3.     	
      Any Account that is evidenced
          by, or as to which the Borrower has received, a note, chattel paper,
          draft, check, trade acceptance or other instrument in payment thereof
          and for which Bank’s security interest therein is
    not clearly identified thereon.

	 

-3- 

	 	 	
4.     	
Any Account as to which the account debtor is an affiliate, officer or director of Borrower.
	 
	 	 	
5.     	
Any invoice that remains unpaid for more than 60 days from the original invoice date.
	 
	 	 	
6.     	
      Any Account that is owing from a person or entity who is not located in the United States, unless such account has been approved by Bank in its sole discretion or that is payable in currency other than U.S.
    Dollars.

	 
	 	 	
7.     	
      Any Account in which the Bank does not have a first and prior perfected security interest.

	 
	 	 	
8.     	
      Accounts will be considered
          ineligible and will be excluded from the Borrowing Base when more than
          25% of the total amount due is more than 60 days from the invoice date.
          For the purposes of determining an ineligible account, accounts customarily
          presented on the borrower’s accounts receivable ledger as separate
          accounts, such as ABC Company - Oklahoma City, and ABC Company - Dallas,
          shall be considered as separate accounts for the purpose of determining
    eligibility.

	 
	 	 	
9.     	
      Any other Account as to which Bank has made a determination, in the reasonable exercise of its discretion, that the prospects for collection are questionable.

	 
	 	 	
10.     	
      The amount in excess of
          20% of total Accounts Receivable that is owed by any individual account
          debtor. For the purposes of determining what constitutes an individual
          debtor, accounts customarily presented on the borrower’s accounts
    receivable ledger as separate accounts, such as ABC Company – Oklahoma City, and ABC Company – Dallas,
shall be considered as separate accounts for the purpose of determining individual debtors.

	 
	 	
G.     	
      Eligible Inventory.
          Eligible Inventory means, as of any determination date the aggregate
          value of the Borrower’s inventory of merchandise held for sale that is then in
        Borrower’s possession and located at its respective place of business or its warehouse location and valued at Borrower’s
        cost less provisions for obsolete or damaged goods and less the amount
        of any debt owed to secured creditors other than Bank who claim a lien
    on the Collateral.

	 
	 	
H.     	
      Borrowing Base Certificate and Supporting Documentation.
Borrowing Base Certificate means a written certificate to be delivered by Borrower to Bank within
30 days after the end of each
    month (each, a “Determination Date”) month and reflecting the Inventory and Accounts
as of the last day of the preceding month, in form and substance as is reflected in the attached
Exhibit “A” hereto. The

	 

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	 	 	Borrowing Base Certificate must be accompanied by supporting reports reflecting the aging of Accounts by account debtor. The names, addresses and other appropriate contact information of the account debtors shall be
    supplied to the Bank upon request. The Borrowing Base schedules shall also include a schedule of Inventory that is included in the Borrowing Base. No Certificate shall be required if no advances are outstanding.

	 	 	 
	 	
I.     	
Definitions. As used herein the following terms shall have the following meanings:
	 
	 	 	
1.     	
      EBITDA shall mean for any
          period, for the Borrower on a consolidated basis, the sum of (a) Net
          Income, plus (b) depreciation, amortization, and other non-cash expenses
          and charges (including any required or permitted purchase accounting
          adjustments and including non-cash write-ups and non-cash charges relating
          to inventory, fixed assets and other assets), plus (c) Costs of Terminated
          Acquisitions, plus (e) Interest Expense, plus (f) Income Tax Expense,
          all on a pro-forma basis as such term is used in the Company’s
          public filings on Form 10-K, Form 10-Q, or such other filing with the
    SEC as appropriate in the circumstances.

	 
	 	 	
2.     	
      Funded Debt shall mean indebtedness of Borrower for money borrowed from banks or other credit providers, including purchase money indebtedness to vendors of property sold or leased to Borrower, but excluding trade accounts
    payable incurred in the ordinary course of business.

	 
	 	 	
3.     	
      Generally Accepted Accounting
          Principles (“GAAP”) shall mean generally accepted accounting
          principles in the United States of America set forth in the opinions
          and pronouncements of the Accounting Principles Board, the American
          Institute of Certified Public Accountants, statements and pronouncements
          of the Financial Accounting Standards Board or such other principles
          as may be approved by a significant segment of the accounting profession
          in the United States, that are applicable to the circumstances as of
          the date of determination. The GAAP hierarchy stated in SAS 69, or
          its applicable successor standard, shall govern the proper determination
    of GAAP when conflicts exist among authoritative literature.

	 
	
III.     	
AFFIRMATIVE COVENANTS. Borrower agrees to:
	 
	 	
A.     	
      Maintain adequate records
          of all transactions so that at any time and from time to time the true
          and complete financial condition of Borrower may be readily determined
          in all material respects; make available at Bank’s
        request at any reasonable time such records for Bank’s inspection;
        furnish promptly to Bank and in such forms as Bank may request any additional
    financial or other information

	 

-5- 

	 	 	
concerning the assets, liabilities, operations and transactions of Borrower, and permit Bank to make and obtain copies of any such records or information.
	 
	 	
B.     	
      Deliver to Bank within 45
          days after the close of each quarterly period of each fiscal year (except
          for the last such period in each fiscal year) interim consolidated
          financial statements consisting of Borrower’s
        consolidated balance sheet, and consolidated statement of operations,
          reflecting the financial condition of Borrower at the close of the
          period and the results of operations for the period and since the beginning
          of the fiscal year; prepare such consolidated financial statements
          in conformity with GAAP on a basis consistent with that of the preceding
          fiscal year, such statements to be certified by an officer of Borrower
          as having been prepared in accordance with GAAP and to include such
    other financial and other information as Bank may reasonably request.

	 
	 	
C.     	
      Deliver to Bank within 120 days after the close of each fiscal year of Borrower Annual audited consolidated financial statements prepared in conformity with GAAP applied on a basis consistent with that of the preceding
    fiscal year, and with an independent certified public accountants opinion satisfactory to Bank.

	 
	 	
D.     	
      Deliver to Bank as soon as available, but in no event later than 30 days after the applicable filing date for the tax reporting period ended, Federal and other governmental income tax returns for the Borrower, and such
    other governmental tax returns, such as property tax returns, as Bank may reasonably request.

	 
	 	
E.     	
      Deliver to Bank within 30 days after the close of each fiscal year a certificate signed by Borrower containing a statement as to whether or not., to the knowledge of Borrower, a Default as hereinafter defined has occurred
        and is continuing, or whether there exists any event or condition that might become a Default after the lapse of time, and if the certificate shows that a Default has occurred and is continuing or such an event or condition exists the certificate
    shall also specify what actions are being taken by Borrower to cure the Default.

	 
	 	
F.     	
      Notify Bank in writing within
          ten days after Borrower receives notification of any litigation, or
          of any claim or controversy that might become the subject of litigation,
          against Borrower or affecting any of Borrower’s
        property, if such litigation or potential litigation, in the event of an unfavorable outcome, would have a material adverse effect on Borrower’s
        financial condition or assets, or might reasonably be expected to cause
    an event of Default.

	 
	 	
G.     	
      Upon reasonable notice, permit officers of Bank to visit and inspect any of the properties of Borrower during normal business hours.

	 
	 	
H.     	
      Pay promptly when due any
          and all taxes, assessments and governmental charges upon Borrower or
          against any of Borrower’s property, unless the same is being contested
          in good faith by appropriate proceedings and for which adequate reserves
    have been established, if required by GAAP.

	 

-6- 

	 	
I.     	
      Pay promptly when due all lawful claims whether for labor, materials or otherwise, that could, if unpaid, become a lien or charge on any property or assets of Borrower, unless and to the extent only that the same are being
    contested in good faith by appropriate proceedings and for which adequate reserves have been established, if required by GAAP.

	 
	 	
J.     	
      Maintain existence of Borrower and promptly and properly comply with all laws, statutes, ordinances and governmental regulations applicable to it or to any of its property, business operations and transactions to the extent
    that non-compliance could reasonably be expected to have a material adverse effect on the financial condition of Borrower.

	 
	 	
K.     	
      Maintain with financially sound insurance companies or associations acceptable to Bank insurance of the kinds and covering the risks and in the amounts usually carried by companies engaged in businesses similar to that of
    Borrower, which insurance in all respects shall be satisfactory to Bank and deliver to Bank, upon request, evidence of the maintenance of such insurance reflecting Bank as an additional loss payee.

	 
	 	
L.     	
      Maintain all of its tangible property in good condition and repair, and make all necessary replacements thereof and operate the same properly and efficiently.

	 
	 	
M.     	
      Preserve and maintain all
          licenses, privileges, franchises, certificates and the like necessary
    for the operation of Borrower’s business.

	 
	
IV.     	
      NEGATIVE COVENANTS. Unless the prior written consent of Bank has been obtained, that shall not be unnecessarily withheld or delayed, Borrower agrees not to:

	 
	 	
A.     	
      Permit the Debt Service Coverage ratio to be less than 1.25 to 1.0. Debt Service Coverage ratio is defined as EBITDA divided by the total of current maturities of all long term debt, plus interest expense and dividends. The
    Debt Service Coverage Ratio shall be calculated quarterly on a rolling twelve month basis, using the preceding twelve months.

	 
	 	
B.     	
Sell any of its accounts receivable.
	 
	 	
C.     	
      Endorse, guarantee or otherwise become surety for or contingently liable upon the obligations of any person, firm or corporation, provided, however, that the foregoing shall not apply to endorsements of negotiable
    instruments by Borrower in the ordinary course of business.

	 
	 	
D.     	
      Mortgage, assign, hypothecate,
          grant a security interest in, or encumber any of Borrower’s assets
          except to Bank, and except for purchase money security interests granted
          for assets subsequently acquired provided, however, that the foregoing
          shall not apply to liens for taxes not delinquent or being contested
    in

	 

-7- 

	 	 	good faith, and liens resulting
      from deposits to secure the payment of workers’ compensation or to
      secure the performance of bids or liens arising with respect to contracts
      in the ordinary course of business.

	 	 	 
	 	
E.     	
Make any other substantial negative change in the capitalization of Borrower or the general character of its business.
	 
	 	
F.     	
Sell any of its assets used or useful in its business, except in the ordinary course of business or to replace worn out or obsolete equipment.
	 
	 	
G.     	
      Sell any of its assets with
          the understanding or agreement that such assets shall be leased back
          to Borrower, except Borrower shall be entitled to undertake sale-leaseback
          transactions relating to its transportation  equipment.

	 
	
V.     	
      EVENTS OF DEFAULT. Borrower
          shall be in default under this Agreement upon the occurrence of any
          one or more of the following events or conditions, hereinafter called
  “Default(s)”:

	 
	 	
A.     	
      Any payment required by any note or obligation of Borrower to Bank is not made when due or in accordance with the terms of the applicable contract.

	 
	 	
B.     	
      Borrower defaults in the performance of any covenant, obligation, warranty or provision contained in this agreement or in any note, obligation, contract or undertaking of Borrower to or with Bank.

	 
	 	
C.     	
      Any warranty, representation, financial information, or statement made or furnished to Bank by or on behalf of Borrower proves to have been false in any material respect when made or furnished.

	 
	 	
D.     	
The making of any levy against or seizure, garnishment or attachment of any material property of Borrower.
	 
	 	
E.     	
      Failure by Borrower to pay any material indebtedness at maturity, or the occurrence of any event of default that results in the acceleration of the maturity of any obligation of Borrower to Bank or to others under any
    promissory note, agreement, or undertaking, to the extent such failure could reasonably be expected to cause a material adverse change in the financial condition of Borrower.

	 
	 	
F.     	
      Dissolution or termination of existence of Borrower, unless the entity is reconstituted or merged into another Borrower entity who remains liable hereunder.

	 
	 	
G.     	
      Appointment of a receiver over any part of the property of Borrower, the assignment of property of Borrower for the benefit of creditors, or the commencement of any proceedings under any bankruptcy or insolvency laws by or
    against Borrower; provided with respect to any such proceeding that is

	 

-8- 

	 	 	
commenced against Borrower, such event shall not be deemed to be a Default hereunder if such proceeding is dismissed within sixty (60) days.
	 
	 	
H.     	
A material adverse change occurs in Borrower’s financial condition.
	 

Upon the occurrence or the existence of a Default, Bank may, at its option and without notice or demand to Borrower and without demand or presentment which are hereby waived, immediately declare due and payable all
liabilities and obligations of Borrower to Bank, terminate its obligation to extend credit to Borrower, and exercise any and all rights and remedies possessed by Bank pursuant to this Agreement, the loan and collateral documents and in law and/or
equity, except that the Borrower shall be given ten (10) business days in which to cure Defaults caused by the events described in items A, D, E, and H above. The cure period for a Default caused by an event described in item B above shall be thirty
(30) days. 

	
VI.     	
GENERAL PROVISIONS. Borrower agrees to the following:
	 
	 	
A.     	
      No modification, consent or waiver of any provision of this Agreement, nor consent by Bank to any departure by Borrower therefrom, shall be effective unless the same shall be in writing and signed by a duly authorized
    officer of Bank, and then shall be effective only in the specific instance and for the purpose for which given.

	 
	 	
B.     	
      No act, delay or omission,
          including Bank’s waiver of remedy because of any Default hereunder, shall constitute a waiver of any of Bank’s rights and remedies under this Agreement or any other agreement between the
        parties. All rights and remedies of Bank are cumulative and maybe exercised singly or concurrently, and the exercise of any one or more remedies will not be a waiver of any other. No waiver, change, modification or discharge of any of Bank’s
        rights or of Borrower’s duties as so specified or allowed will be
        effective unless in writing and signed by a duly authorized officer of
        Bank, and any such waiver will not be a bar to the exercise of any right
    or remedy on any subsequent Default

	 
	 	
B.     	
      This Agreement shall inure to the benefit of the successors and assigns of Bank and shall be binding upon the heirs, executors, administrators, successors and assigns of Borrower.

	 
	 	
C.     	
      Bank at any time at its option may pledge, transfer or assign its rights under this Agreement in whole or in part, and any pledgee, transferee, or assignee shall have all the rights of Bank as to the rights or parts thereof
        so pledged, transferred or assigned, provided, however, Bank shall not assign any of its rights hereunder without the consent of Borrower if Borrower is not in Default; provided, further, that Borrower shall not assign any of its rights hereunder
    except with the written consent of Bank. In the event of a transfer or assignment by Bank of its rights hereunder, Bank shall continue to service the credit facility created in this Agreement and the related loan documents.

	 

-9- 

	 	
D.     	
      If any provision of this Agreement shall for any reason beheld to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if
    such invalid or unenforceable provision had never been contained herein.

	 
	 	
E.     	
      Any property, tangible or intangible, of Borrower in possession of Bank at any time, or any indebtedness due from Bank to Borrower, and any deposit or credit balances due from Bank to Borrower, or any of the foregoing of
    any party hereto, is pledged to secure the undertakings of Borrower hereunder and may at any time while Borrower is indebted to Bank be appropriated, held or applied toward the payment of any obligation of Borrower to Bank.

	 
	 	
F.     	
      This Agreement and all other loan and collateral documents have been delivered to and accepted by Bank in the State of Oklahoma, are to be performed in the State of Oklahoma and shall be deemed contracts made under the laws
    of the State of Oklahoma, and all rights and indebtedness hereunder, including matters of construction, validity and performance shall be governed by the laws of the State of Oklahoma.

	 
	 	
G.     	
      All notices, notifications, requests and demands required or authorized hereunder shall be given in writing or shall be served in person, delivered by overnight courier for next day delivery or by certified mail, return
    receipt requested, or transmitted by facsimile transmission or electronic mail, addressed as follows:

	 
	 	 	
if to the Borrower:
	 
	 	 	
Vaughan Foods, Inc. 

Attention: Gene P. Jones 

216 N.E. 12th Street 

Moore, Oklahoma 73160 

Fax number: (832) 201-7054 

E-mail: gpjones@vaughanfoods.com
	 
	 	 	
If to Bank:
	 
	 	 	
International Bank of Commerce 

3601 N. W. 63rd 

Oklahoma City, OK 73116 

Attention: Jason Estes 

Fax number: (405) 541-5926
	 
	 	 	
E-mail: JasonEstes@ibc.com
	 
	 	
H.     	
      All actions or proceedings with respect to this Agreement or any of the other loan and collateral documents may be instituted in any state or federal court sitting in Oklahoma county, Oklahoma, as Bank may
    elect and by execution of this

	 

-10- 

	 	 	
  Agreement, the Borrower irrevocably and unconditionally (i) submits to the non-exclusive jurisdiction of each such court, and (ii) waives (a) any objection that the Borrower may now or hereafter have to the laying of venue
    in any of such courts and (b) any claim that any action or proceeding brought in any such court has been brought in an inconvenient forum.

	 
	 	
I.     	
BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO A JURY TRIAL, IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM THAT RELATES TO OR ARISES OUT OF ANY OF THE AGREEMENTS REFERENCED HEREIN OR THE ACTS OR FAILURE TO
    ACT OF OR BY BANK IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT AND ALL OTHER LOAN AND COLLATERAL DOCUMENTS.

	 
	 	
J.     	
ARBITRATION. Bank and Borrower agree as follows:
	 
	 	 	
(a)     	
      Any and all commercial controversies between the parties shall be resolved by arbitration in accordance with the commercial arbitration rules of the American Arbitration Association in effect at the time of filing, unless
    the commercial arbitration rules conflict with this provision and in such event the terms of this provision shall control to the extent of the conflict.

	 
	 	 	
(b)     	
      The award of the arbitrators, or a majority of them, shall be final, and judgment upon the award rendered may be entered in any court, state or federal, having jurisdiction. The arbitration award shall be in writing and
    specify the factual and legal basis for the award. Upon the request of any party, the award shall include findings of fact and conclusions of law.

	 
	 	 	
(c)     	
      Arbitral disputes include any and all controversies or claims between the parties of whatever type or manner, including without limitation, any claim arising out of or relating to this agreement, all past, present and/or
        future credit facilities and/or agreements involving the parties, any transactions between or involving the parties, and/or any aspect of any past or present relationship of the parties, whether banking or otherwise, specifically including any
    alleged tort committed by any party.

	 
	 	 	
(d)     	
      The parties shall allow
          and participate in discovery in accordance with the federal rules of
          civil procedure for a period of one hundred twenty (120) days after
          the filing of the original responsive pleading. Discovery may continue
          thereafter as agreed by the parties or as allowed by the arbitrators.
          Unresolved discovery disputes shall be brought to the attention of
          the arbitrators by written motion for proper disposition, including
          ruling on any asserted objections, privileges, and protective order
          requests and awarding reasonable attorney’s fees to the prevailing
    party.

	 

-11- 

	 	 	
(e)     	
      In the event the aggregate
          of all affirmative claims asserted exceed $500,000.00, exclusive of
          interest and attorney’s fees, or upon the written request of any party, (1) prior to the dissemination of a list of
        potential arbitrators, the American Arbitration Association shall conduct an in person administrative conference with the parties and their attorneys for the following purposes and for such additional purposes as the parties or the American
        Arbitration Association may deem appropriate, (a) to obtain additional information about the nature and magnitude of the dispute and the anticipated length of hearings and scheduling; (b) to discuss the view of the parties about any technical and/or
        other special qualifications of the arbitrators; and (c) to consider, whether mediation or other methods of dispute resolution might be appropriate, and (2) as promptly as practicable after the selection of the arbitrators, a preliminary hearing
        shall be held among the parties, their attorneys and the arbitrators. With the agreement of the arbitrators and the parties, the preliminary hearing may be conducted by telephone conference call rather than in person. At the preliminary hearing the
        matters that may be considered shall include, without limitation, a pre-hearing scheduling order addressing (a) each party’s
        duty to submit a detailed statement of claims, damages and/or defenses,
        a statement of the issues asserted by each party and any legal authorities
        the parties may wish to bring to the attention of the arbitrators; (b)
        responses and/or replies to the pleadings filed in compliance with subpart
        2(a); (c) stipulations regarding any uncontested facts; (d) exchange
        and pre-marking of all documents which each party believes may be offered
        at the final arbitration hearing; (e) the identification and availability
        of witnesses, including experts, and such additional matters regarding
        witnesses including their biographies and a short summary of their expected
        testimony, (f) whether a stenographic or other official record of the
        proceedings shall be maintained; and (g) the possibility of utilizing
    mediation or other alternative methods of dispute resolution.

	 
	 	 	
(f)     	
      For purposes of this provision, “the parties” mean Borrower and Bank, and each and all persons and entities signing this agreement or any other agreements between or among any of the parties as part of this
        transaction; “the parties” shall also include individual partners,
        affiliates, officers, directors, employees, agents and/or representatives
        of any party to such documents, and shall include any other owner and
    holder of rights created by this agreement.

	 
	 	 	
(g)     	
      The parties shall have the right to invoke self-help remedies (such as set-off, notification of account debtors, seizure and/or foreclosure of collateral, and non-judicial sale of personal property and real property
    collateral) before, during or after any arbitration and/or request ancillary or provisional judicial remedies (such as garnishment, attachment, specific

	 

-12- 

	 	 	 	
  performance, receiver, injunction
      or restraining order, and sequestration) before or after any arbitration.
      The parties need not await the outcome of the arbitration before using
      self-help remedies. Use of self-help or ancillary and/or provisional judicial
      remedies shall not operate as a waiver of either party’s right to
      compel arbitration. Any ancillary or provisional remedy that would be available
      from a court at law shall be available from the arbitrators.

	 
	 	 	
(h)     	
      The parties agree that any action regarding any controversy between the parties shall either be brought by arbitration, as described herein, or by judicial proceedings, but shall not be pursued simultaneously in different
        or alternative forms. A timely written notice of intent to arbitrate pursuant to this agreement stays and/or abates any and all action in a trial court, save and except a hearing on a motion to compel arbitration and/or the
        entry of an order compelling arbitration and staying and/or abating the
        litigation pending the filing of the final award of the arbitrators.
        All reasonable and necessary attorney’s
          fees and all travel costs shall be awarded to the prevailing party
        on any motion to compel arbitration and must be paid to such party within
    ten (10) days of the signing of the order compelling arbitration.

	 
	 	 	
(i)     	
      Any party seeking to arbitrate
          shall serve a written notice of intent to arbitrate to any and all
          opposing parties within 360 days after dispute has arisen. A dispute
          is defined to have arisen only upon receipt of service of judicial
          process, including service of a counterclaim, failure to serve a written
          notice of intent to arbitrate within the time specified above shall
          be deemed a waiver of the aggrieved party’s right to compel arbitration
          of such claim. The issue of waiver pursuant to this agreement is an
    arbitral dispute.

	 
	 	 	
(j)     	
      Active participation in pending litigation during the 360 day notice period, whether as plaintiff or defendant, is not a waiver of the right to compel arbitration. All discovery obtained in the pending litigation may be
    used in any subsequent arbitration proceeding.

	 
	 	 	
(k)     	
      The parties further agree that (i) no arbitration proceeding hereunder shall be certified as a class action or proceed as a class action, or on a basis involving claims brought in a purported representative capacity on
    behalf of the general public, other customers or potential customers or persons similarly situated and (ii) no arbitration proceeding hereunder shall be consolidated with, or joined in any way with, any other arbitration proceeding.

	 
	 	 	
(l)     	
      Any arbitrator selected
          shall be knowledgeable in the subject matter of the dispute. Each of
          the parties shall pay an equal share of the arbitration costs, fees,
          expenses, and of the arbitrators’ fees, costs and
    expenses.

	 

-13- 

	 	 	
(m) 	All statutes of limitations that would
    otherwise be applicable shall apply to any and all claims asserted in any arbitration proceeding hereunder and the commencement
of any arbitration proceeding tolls such statutes of limitations.
	 
	 	 	(n)	
 In any arbitration proceeding subject to this provision,
the arbitrators, or majority of them, are specifically empowered to decide (by
documents only, or with a hearing, at the arbitrators’ sole discretion)
pre-hearing motions that are substantially similar to pre-hearing motions to dismiss and motions for summary adjudication.
	 
	 	 	(o) 	
This arbitration provision shall survive any termination,
amendment, or expiration of the agreement in which this provision is contained,
unless all of the parties otherwise expressly agree in writing.
	 
	 	 	(p) 	
The parties acknowledge that this agreement evidences
a transaction involving interstate commerce. The federal arbitration act shall
govern the interpretation, enforcement, and proceedings pursuant to the arbitration
clause of this agreement.
	 
	 	 	(q) 	
The arbitrators, or a majority of them, shall award
attorney’s fees and costs to the prevailing party pursuant to the terms of this agreement.
	 
	 	 	(r)	
 Neither the parties nor the arbitrators may disclose
the existence, content, or results of any arbitration hereunder.
	 
	 	 	(s)	
 Venue of any arbitration proceeding hereunder shall
be in Oklahoma County, Oklahoma.
	 
	 	K.     	

This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and all matters arising out of or related thereto, superseding all prior negotiations, understandings or
communications (written or oral). In the event of any direct conflict between or among the provisions of this Agreement and the provisions of any other loan or collateral documents, the provisions of this Agreement shall control. There are no
unwritten oral agreements between the parties
	 
	 	L.  	

This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.
	 
	VII.     	
      TERMINATION. This Agreement shall terminate, except as otherwise provided herein, on the Maturity Date. Any obligation of Bank to extend credit or to renew outstanding obligations of
Borrower shall terminate on the aforementioned date. However, such termination date shall not have application to Borrower in the event that any obligation of Borrower to Bank is unpaid, in which event all of the provisions of this agreement
shall
	 

-14- 

	 	remain in full force and effect as they relate
        to Borrower until such obligation and all other liabilities of Borrower
    to Bank have been paid in full. 

IN WITNESS WHEREOF,  the parties hereto have caused this Agreement to be duly executed in multiple counterparts, each of which shall be considered an original, effective the date and
year first above written.  

	 	
BORROWER:	 	 	
VAUGHAN FOODS, INC., an Oklahoma
	 	 	 	 	
corporation	 
	 
	 
	 
	 	 	 	
By:	/s/
	  Gene P. Jones
	 	 	 	 	
GENE P. JONES, Secretary, Treasurer, and
	 	 	 	 	
Chief Financial Officer	 
	 
	 	 	 	 	
ALLISON’S GOURMET KITCHENS,
	 	 	 	 	
LIMITED PARTNERSHIP
	 
	 	 	 	
By:	
VAUGHAN FOODS, INC., its General
	 	 	 	 	
Partner	 
	 
	 
	 
	 	 	 	
By:	/s/
    Gene P. Jones
	 	 	 	 	
GENE P. JONES, Secretary, Treasurer, and
	 	 	 	 	
Chief Financial Officer	 
	 
	 	 	 	 	
WILD ABOUT FOODS – OKLAHOMA,
	 	 	 	 	
LLC, a Texas limited liability company
	 
	 
	 
	 	 	 	
By:     	/s/ Gene P. Jones	 
	 	 	 	 	GENE P. JONES, Manager	 
	 
	 	
BANK:	 	 	
INTERNATIONAL
BANK
OF
	 	 	 	 	
COMMERCE, a Texas state banking
	 	 	 	 	
association	 
	 
	 
	 
	 	 	 	
By:	/s/
	  Jason Estes
	 	 	 	 	
JASON ESTES, Vice President

-15-c51856_ex10-19.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EX-10.19

SECURITY AGREEMENT 

           THIS
SECURITY AGREEMENT (this “Agreement”) is made effective as of the 31st
day of December, 2007, by and between VAUGHAN
FOODS, INC., an
Oklahoma corporation,  ALLISON’S GOURMET
KITCHENS, LIMITED PARTNERSHIP, an Oklahoma
limited partnership, and WILD ABOUT FOOD–OKLAHOMA,
LLC, a Texas limited liability company (herein
collectively called “Debtor”), in favor of INTERNATIONAL
BANK OF COMMERCE (herein called “Secured
 Party”). 

W I T N E S S E T H: 

           WHEREAS, Secured Party has agreed to extend credit by agreeing to make a loan to Debtor in an amount not to exceed $5,000,000.00 for the purposes set forth in that certain Loan Agreement of even date executed and delivered
by Debtor to Secured Party; and 

           WHEREAS, it is a condition precedent to such extension of credit by Secured Party that, among other things, Debtor shall have executed and delivered to Secured Party a Security Agreement granting to Secured Party a
security interest in the Collateral as defined herein; 

           NOW, THEREFORE, in consideration of the premises and in order to induce Secured Party to extend credit to Debtor, Debtor hereby agrees with Secured Party as follows: 

ARTICLE I 

Definitions and References 

           Section 1.1.     General Definitions.  As used herein, the terms “Debtor” and “Secured Party” shall have the meanings indicated
above, and the following terms shall have the following meanings: 

           “Accounts” has the meaning given it in the Code. 

           “Agreement” means the Loan Agreement of even date between Debtor and Secured Party. 

           “Chattel Paper” has the meaning given it in the Code. 

           “Code” means the Uniform Commercial Code currently in effect in the State of Oklahoma. 

           “Collateral” means all property in which Secured Party at any time has a security interest pursuant to Section 2.1 herein. 

           “Commitment” means the agreement or commitment by Secured Party to make loans or otherwise extend credit under the Agreement, and any other
agreement, commitment, statement of terms or other document contemplating the making of loans or advances or other extension of 

credit by Secured Party which is now or at any time hereafter intended to be secured by the Collateral under the Agreement and/or this agreement. 

           “General Intangibles” has the meaning given it in the Code. 

           “Instruments” has the meaning given it in the Code. 

           “Inventory” has the meaning give it in the Code. 

           “Obligations or Indebtedness” means the full and punctual observance and performance of all present and future duties, covenants and
responsibilities due to Secured Party under the Agreement, the Note, the Loan Documents and otherwise, all present and future obligations and liabilities to Secured Party for the payment of money under the Agreement, the Note, the Loan Documents and
otherwise (extending to all principal amounts, interest, late charges, fees and all other charges and sums, as well as all costs and expenses payable under the Agreement, the Note, the Loan Documents and otherwise), whether direct or indirect,
contingent or noncontingent, matured or unmatured, accrued or not accrued, related or unrelated to the Agreement, whether or not now contemplated, whether or not any instrument or agreement relating thereto specifically refers to this Agreement and
whether or not of the same character or class as Debtor’s obligations under the Agreement or the Note, including, without limitation, overdrafts in any checking or other account of Debtor, whether or not secured under any other document, or
agreement or statutory or common law provision, as well as all renewals, refinancings, consolidations, re-castings and extensions of any of the foregoing, including any future advances by Secured Party.

           “Obligation Documents” or “Loan Documents” means the Agreement, the Note and all other documents pursuant to which any or all of
the Obligations are evidenced, governed, secured, or otherwise dealt with, and all other agreements, certificates, legal opinions and other documents, instruments and writings heretofore or hereafter delivered in connection herewith or therewith.

           “Other Liable Party” means any Person, other than Debtor, who may now or may at any time hereafter be primarily or secondarily liable for
any of the Obligations or who may now or may at any time hereafter have granted to Secured Party a security interest or lien upon any property as security for the Obligations. 

           “Person” means an individual, corporation, partnership, limited liability company, limited liability partnership, estate, trust, trustee,
tribunal or any other entity.

           Section 1.2.     References. Reference is hereby made to the Agreement for a statement of the terms thereof.  All capitalized terms used in this
agreement which are defined in the Agreement and not otherwise defined herein shall have the same meanings herein as set forth therein. All terms used in this agreement which are defined in Article 9 of the Code and not otherwise defined herein or
in the Agreement shall have the same meanings as set forth therein, except where the context otherwise requires. 

-2- 

           Section 1.3.     Exhibits. All exhibits attached to this agreement are a part hereof for all purposes. 

           Section 1.4.     Amendment of Defined Instruments.  Unless the context otherwise requires or unless otherwise provided herein, references in this
agreement to a particular agreement, instrument or document (including, but not limited to, references in Section 2.1) also refer to and include all renewals, extensions, amendments, modifications, supplements or restatements of any such agreement,
instrument or document, provided that nothing contained in this Section shall be construed to authorize any Person to execute or enter into any such renewal, extension, amendment, modification, supplement or restatement. 

           Section 1.5.     References and Titles.  All references in this agreement to Exhibits, Articles, Sections, subsections, and other subdivisions refer to
the Exhibits, Articles, Sections, subsections and other subdivisions of this agreement unless expressly provided otherwise. Titles appearing at the beginning of any subdivision are for convenience only and do not constitute any part of any such
subdivision and shall be disregarded in construing the language contained in this agreement. The words “this agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer
to this agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases “this Section” and “this subsection” and similar phrases refer only to the Sections or subsections hereof in which the
phrase occurs.  The word “or” is not exclusive. Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless
the context otherwise requires. 

ARTICLE II 

Security Interest 

           Section 2.1.     Grant of Security Interest. As collateral security for all of the Obligations, Debtor hereby pledges and assigns to Secured Party and
grants to Secured Party a continuing security interest in all of the following (the “Collateral”): 

           (a)      “Accounts.” All of the following which are owned by Debtor or in which Debtor otherwise has any rights: (i) all accounts of any kind
whether now or hereafter existing, (ii) all chattel paper, documents and instruments of any kind, whether now or hereafter existing, relating to such accounts or arising out of or in connection with the sale or lease of goods or the rendering of
services, or otherwise existing, and (iii) all rights now or hereafter existing in, to, or under all security agreements, leases, and other contracts securing or otherwise relating to any accounts, chattel paper, documents, or instruments (any and
all such accounts, chattel paper, documents, instruments, security agreements, leases and other contracts being herein called the “Accounts”). 

           (b)      General Intangibles, etc. All of the following, whether now or hereafter existing, which are owned by Debtor or in which Debtor otherwise has any
rights; all contract rights and general intangibles of any kind (including but not limited to choses in action, tax refunds, and insurance proceeds), all chattel paper, documents, instruments, security agreements, leases, other 

-3- 

contracts and money, and all other rights of Debtor (except those constituting Accounts) to receive payments of money or the ownership of property (any and all such contract rights, general intangibles, chattel paper,
documents, instruments, security agreements, leases, other contracts and money and other rights being herein called the “General Intangibles”). 

           (c)      Inventory. All of Debtor’s inventory now owned or hereafter acquired. 

           (d)      Deposit Accounts. All of Debtor’s deposit accounts with Secured Party. 

           (e)      Proceeds.  All proceeds of any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance
(whether or not Secured Party is the loss payee thereof) or under any indemnity, warranty or guaranty by reason of loss to or otherwise with respect to any of the foregoing Collateral. 

In each case, the foregoing shall be covered by this agreement, whether Debtor’s ownership or other rights therein are presently held or hereafter acquired and howsoever Debtor’s interests therein may arise or
appear (whether by ownership, security interest, claim or otherwise). 

           Section 2.2.     Obligations Secured. The security interest created hereby in the Collateral constitutes continuing collateral security for all of the
following obligations, indebtedness, and liabilities, whether now existing or hereafter incurred: 

           (a)      Agreement Indebtedness. The payment by Debtor, as and when due and payable, of all amounts from time to time owing by it under or in respect of
the Agreement, the Note and the other Loan Documents or any other instrument now or hereafter delivered in connection with or as security for the Agreement, the Note or the other Loan Documents or any part thereof. 

           (b)      Other Indebtedness.  All loans and future advances made by Secured Party to Debtor and all other debts, obligations and liabilities of every kind
and character of Debtor now or hereafter existing in favor of Secured Party, whether such debts, obligations or liabilities be direct or indirect, primary or secondary, joint or several, fixed or contingent, and whether originally payable to Secured
Party or to a third party and subsequently acquired by Secured Party and whether such debts, obligations or liabilities are evidenced by Note, open account, overdraft, endorsement, security agreement, guaranty or otherwise (it being contemplated
that Debtor may hereafter become indebted to Secured Party in further sums but Secured Party shall have no obligation to extend further credit by reason of this agreement). 

           (c)      Renewals. All renewals, extensions, amendments, modifications, supplements, or restatements of or substitutions for any of the foregoing.

           (d)      Performance. The due performance and observance by Debtor of all of its other obligations from time to time existing under or in respect of the
Loan Documents or any other instrument now or hereafter delivered in connection with or as security for any of the Loan Documents. 

-4- 

ARTICLE III 

Representations, Warranties and Covenants 

           Section 3.1.     Representations and Warranties.  Debtor represents and warrants as follows: 

           (a)      Ownership and Liens.  Debtor owns the Collateral free and clear of all liens, security interests, encumbrances or adverse claims, except for the
security interest created by this agreement. No dispute, right of setoff, counterclaim, or defense exists with respect to all or any part of the Collateral.  No effective financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office except such as may have been filed in favor of Secured Party relating to this agreement. 

           (b)      No Conflicts or Consents.  Neither the ownership or the intended use of the Collateral by Debtor, nor the grant of the security interest by
Debtor to Secured Party herein, nor the exercise by Secured Party of its rights or remedies hereunder, will (i) conflict with any provision of (a) any domestic or to Debtor’s actual knowledge foreign law, statute, rule or regulation, (b) the
articles or certificate of incorporation, charter or bylaws of Debtor, or (c) any agreement, judgment, license, order or permit applicable to or binding upon Debtor, or (ii) result in or require the creation of any lien, charge or encumbrance upon
any assets or properties of Debtor except as expressly contemplated in the Obligation Documents.  Except as expressly contemplated in the Obligation Documents, no consent, approval, authorization or order of, and no notice to or filing with any
court, governmental authority, or third party is required in connection with the grant by Debtor of the security interest herein, or the exercise by Secured Party of its rights and remedies hereunder. 

           (c)      Security Interest.  Debtor has and will have at all times full right, power and authority to grant a security interest in the Collateral to
Secured Party in the manner provided herein, free and clear of any lien, security interest or other charge or encumbrance except as provided in paragraph (a) above. This agreement creates a valid and binding security interest in favor of Secured
Party in the Collateral securing the Obligations. Lender is hereby granted such control as the Code requires to perfect its security interest in Debtor’s Deposit Accounts. 

           (d)      Location of Debtor and Records.  The office where the records concerning the Collateral are kept is located at 216 N.E. 12th Street, Moore, Oklahoma 73160. 

           (e)      “Accounts” Each Account represents the valid and legally binding indebtedness of a bona fide account debtor arising from the sale or
lease by Debtor of goods or the rendition by Debtor of services and is not subject to contra-accounts, setoffs, defenses or counterclaims by or available to account debtors obligated on the Account except as disclosed to Secured Party in writing.
Goods which have been delivered to, and services which have been rendered by Debtor to the account debtor have been accepted by the account debtor, and the amount shown as to each Account on Debtor’s books is the true and undisputed amount
owing and unpaid thereon, subject only to discounts, allowances, rebates, credits and adjustments to which the account 

-5- 

debtor has a right and which have been disclosed to Secured Party in writing. 

           (f)      Chattel Paper, Documents and Instruments.  All chattel paper, documents, and instruments, if any, included in the Collateral are valid and
genuine.  Any chattel paper, document, or instrument included in the Collateral has only one original counterpart which constitutes collateral within the meaning of the Code or the law of any applicable jurisdiction. No Person other than Debtor or
Secured Party is in actual or constructive possession of any chattel paper, documents, or instruments. 

           Section 3.2.     Affirmative Covenants. Unless Secured Party shall otherwise consent in writing, Debtor will at all times comply with the covenants
contained in this Section 3.2 from the date hereof and so long as any part of the Indebtedness is outstanding. 

           (a)      Ownership and Liens. Debtor will maintain ownership of all Collateral free and clear of all liens, security interests, encumbrances or adverse
claims, except for the security interest created by this agreement.  Debtor will not permit any dispute, right of setoff, counterclaim, or defense to exist with respect to all or any part of the Collateral, except such disputes, claims of setoff,
counterclaims or defenses as may arise from time to time with Debtor’s customers in the ordinary course of business, and which do not, individually or in the aggregate have a material adverse effect on the value of the Collateral. Debtor will
cause to be terminated any financing statement or other security instrument with respect to the Collateral, except such as may exist or as may have been filed in favor of Secured Party. Debtor will defend Secured Party’s right, title and
special property and security interest in and to the Collateral against the claims of any Person. 

           (b)      Further Assurances.  Debtor will, at any time and from time to time, promptly execute and deliver all further instruments and documents and take
all further action that may be necessary or desirable or that Secured Party may request in order (i) to perfect and protect the security interest created or purported to be created hereby and the first priority of such security interest; (ii) to
enable Secured Party to exercise and enforce its rights and remedies hereunder in respect of the Collateral; or (iii) to otherwise effect the purposes of this agreement, including, without limitation: (A) information to enable Secured Party to file
such financing or continuation statements, or amendments thereto, as may be necessary or desirable or that Secured Party may request in order to perfect and preserve the security interest created or purported to be created hereby; and (B) furnishing
to Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may reasonably request, all in reasonable detail. 

           (c)      Inspection of Collateral.  Debtor will keep adequate records concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents, attorneys, appraisers and any other persons, to inspect any of the Collateral and the books and records of or relating to the Collateral at any reasonable time during normal
business hours, and to make photocopies and photographs thereof, and to write down and record any information as such representatives shall obtain. 

           (d)      Information. Debtor will furnish to Secured Party any information which Secured 

-6- 

Party may from time to time request concerning any covenant, provision or representation contained herein or any other matter in connection with the Collateral. 

           (e)      Payment of Taxes, etc. Debtor (i) will timely pay all property and other taxes, assessments and governmental charges or levies imposed upon the
Collateral or any part thereof; (ii) will timely pay all lawful claims which, if unpaid, might become a lien or charge upon the Collateral or any part thereof; and (iii) will maintain appropriate accruals and reserves for all such liabilities in a
timely fashion in accordance with generally accepted accounting principles (“GAAP”).  Debtor may, however, delay paying or discharging any such taxes, assessments, charges, claims or liabilities so long as the validity thereof is contested
in good faith by proper proceedings and it has set aside on its books adequate reserves therefor, if required by GAAP. 

           (f)      Collection of Accounts and General Intangibles. Debtor will, except as otherwise provided below, collect, at its own expense, all amounts due or
to become due under each of the Accounts and General Intangibles.  In connection with such collections, Debtor may (and, at Secured Party’s direction, will) take such action as Debtor or Secured Party may deem necessary or advisable to enforce
collection or performance of each of the Accounts and General Intangibles. 

           (g)      Performance Related to Accounts.  Debtor will duly perform and cause to be performed all of its obligations with respect to the goods or
services, the sale or lease or rendition of which gave rise or will give rise to each Accounts. 

           Section 3.3.     Negative Covenants.  Unless Secured Party shall otherwise consent in writing, Debtor will at all times comply with the covenants
contained in this Section 3.3 from the date hereof and so long as any part of the Obligations is outstanding. 

           (a)      Transfer or Encumbrance.  Debtor will not sell, assign (by operation of law or otherwise), transfer, exchange, lease or otherwise dispose of any
of the Collateral, nor will Debtor grant a lien or security interest in or execute, file or record any financing statement or other security instrument with respect to the Collateral, nor will Debtor deliver actual or constructive possession of the
Collateral to any other Person, other than: 

	          	         (i)     
          liens, security interests or financing statements in favor of Secured
          Party. 

               (ii)     
          Sales, other than during the continuance of an Event of Default, of
    Inventory in the ordinary course of business. 

           (b)      Impairment of Security Interest.
    Debtor will not take or fail to take any action which would in any manner
    impair the value or enforceability of Secured Party’s security interest
in any Collateral. 

           (c)      Goods. Debtor will not permit any of the Collateral which constitutes goods to at any time, if applicable, (i) be covered by any document, (ii)
become attached to, or used in connection with any particular real property so as to become a fixture upon such real property, or (iii) be installed in or affixed to other goods so as to become an accession to such other goods 

-7- 

unless such other goods are included in the Collateral. 

           (d)      Financing Statement Filings.  Debtor recognizes that financing statements pertaining to the Collateral have been or may be filed by Secured
Party. 

           (e)      Possession of Chattel Paper, Documents or Instruments. Debtor will not cause or permit any chattel paper, documents or instruments which are
included in the Collateral to at any time be in the actual or constructive possession of any Person other than Debtor or Secured Party. 

ARTICLE IV 

Remedies, Powers and Authorizations 

           Section 4.1.     Provisions Concerning the Collateral. 

           (a)      Additional Financing Statement Filings. Debtor hereby authorizes Secured Party to file one or more financing or continuation statements, and
amendments thereto, relating to the Collateral.  Debtor further agrees that financing statements may be filed in any jurisdiction Secured Party may deem appropriate. 

           (b)      Power of Attorney.  Debtor hereby irrevocably appoints Secured Party as Debtor’s attorney-in-fact and proxy, with full authority in the
place and stead of Debtor and in the name of Debtor or otherwise, from time to time in Secured Party’s discretion after the occurrence and continuance of an Event of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this agreement; (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the
Collateral; (iii) to receive, indorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (i) or (ii) above; and (iv) to file any claims or take any action or institute any proceedings which Secured
Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Secured Party with respect to any of the Collateral. 

           (c)      Performance by Secured Party.  If Debtor fails to perform any agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured Party incurred in connection therewith shall be payable by Debtor under Section 4.5. 

           (d)      Collection Rights.  Secured Party shall have the right upon the occurrence and during the continuance of an Event of Default, to notify any or
all obligors (account debtors) under any Accounts or General Intangibles of the assignment of such Accounts or General Intangibles to Secured Party and to direct such obligors to make payment of all amounts due or to become due to Debtor thereunder
directly to Secured Party and, upon such notification and at the expense of Debtor and to the extent permitted by law, to enforce collection of any such Accounts or General Intangibles and to adjust, settle or compromise the amount or payment

-8- 

thereof, in the same manner and to the same extent as Debtor may have done. After receipt by Debtor of the notice from Secured Party referred to in this subsection, all amounts and proceeds (including instruments and
writings) received by Debtor in respect of such Accounts or General Intangibles shall be received in trust for the benefit of Secured Party hereunder, shall be segregated from other funds of Debtor and shall be forthwith paid over to Secured Party
in the same form as so received (with any necessary indorsement) to be held as cash collateral and applied as specified in Section 4.3.  After such Notice Debtor will not adjust, settle or compromise the amount or payment of any Accounts or General
Intangibles or release wholly or partly any account debtor or obligor thereof or allow any credit or discount thereon.

           Section 4.2.     Event of Default Remedies.  If an Event of Default shall have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice, except as expressly provided below: 

           (a)      exercise in respect of the Collateral, in addition to other rights and remedies provided for herein, under the other Obligation Documents or otherwise available to it, all the rights and remedies of a secured party on
default under the Code (whether or not the Code applies to the affected Collateral); 

           (b)      require Debtor to, and Debtor hereby agrees that it will at its expense and upon request of Secured Party forthwith, assemble all or part of the Collateral as directed by Secured Party and make it available to Secured
Party at a place to be designated by Secured Party which is reasonably convenient to both parties; 

           (c)      reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest created hereby by any available judicial procedure; 

           (d)      dispose of, at its office, on the premises of Debtor or elsewhere, all or any part of the Collateral, as a unit or in parcels, by public or private proceedings, and by way of one or more contracts (it being agreed that
the sale of any part of the Collateral shall not exhaust Secured Party’s power of sale, but sales may be made from time to time, and at any time, until all of the Collateral has been sold or until the Obligations have been paid and performed in
full; 

           (e)      buy the Collateral, or any part thereof, at any public sale; 

           (f)      buy the Collateral, or any part thereof, at any private sale if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations;

           (g)      apply by appropriate judicial proceedings for appointment of a receiver for the Collateral, or any part thereof, and Debtor hereby consents to any such appointment; and 

           (h)      at its discretion, retain the Collateral in satisfaction of the Obligations whenever the circumstances are such that Secured Party is entitled to do so under the Code or otherwise. 

Debtor agrees that, to the extent notice of sale shall be required by law, at least twenty (20) days’ 

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notice to Debtor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Secured Party shall not be obligated to make any sale of collateral
regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefore, and such sale may, without further notice, be made at the time and place to
which it was so adjourned. 

           Section 4.3.     Application of Proceeds. If any Event of Default shall have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral, to any or all of the following in such order as
Secured Party may elect: 

           (a)      To the repayment of the reasonable costs and expenses, including reasonable attorneys fees and legal expenses, incurred by Secured Party in connection with (i) the administration of this agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from or other realization upon, any Collateral, (iii) the exercise or enforcement of any of the rights of Secured Party hereunder, or (iv) the failure of Debtor to perform or observe any
of the provisions hereof; 

           (b)      To the payment or other satisfaction of any liens and other encumbrances upon any of the Collateral; 

           (c)      To the reimbursement of Secured Party for the amount of any obligations of Debtor paid or discharged by Secured Party pursuant to the provisions of this agreement or the other Loan Documents, and of any expenses of
Secured Party payable by Debtor hereunder or under the other Loan Documents; 

           (d)      To the satisfaction of the Obligations of Debtor to Secured Party;

           (e)      By holding the same as Collateral;

           (f)      To the payment of any other
amounts required by applicable law; and 

           (g)      By delivery to Debtor or to whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct. 

           Section 4.4.     Deficiency.  In the event that the proceeds of any sale, collection or realization of or upon Collateral by Secured Party are
insufficient to pay all amounts to which Secured Party is legally entitled, Debtor shall be liable for the deficiency, together with interest thereon as provided in the governing Obligation Documents or (if no interest is so provided) at such other
rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees of any attorneys employed by Secured Party to collect such deficiency. 

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           Section 4.5.     Expenses.

           (a)      Debtor will upon demand pay to Secured Party the amount of any and all reasonable costs and expenses including the fees and disbursement of Secured Party’s counsel and of any experts and agents, which Secured
Party may incur in connection with (i) the transactions which give rise to this agreement, (ii) the preparation of this agreement and the perfection and preservation of this security interest created under this agreement, (iii) the custody,
preservation, use or operation of, or the sale of, collection from, or other realization upon, any Collateral; (iv) the exercise or enforcement of any of the rights of Secured Party hereunder; or (v) the failure by Debtor to perform or observe any
of the provisions hereof, except expenses resulting from Secured Party’s gross negligence or willful misconduct. 

           Section 4.6.     Non-Judicial Remedies. In granting to Secured Party the power to enforce its rights hereunder without prior judicial process or judicial
hearing, Debtor expressly waives, renounces, and knowingly relinquishes any legal right which might otherwise require Secured Party to enforce its rights by judicial process. In so providing for non-judicial remedies, Debtor recognizes and concedes
that such remedies are consistent with the usage of trade, are responsive to commercial necessity, and are the result of a bargain at arm’s length.  Nothing herein is intended to prevent Secured Party or Debtor from resorting to judicial
process at either party’s option. 

           Section 4.7.     Other Recourse.  Debtor waives any right to require Secured Party to proceed against any other person or entity, exhaust any Collateral
or other security for the Indebtedness, or to have any other person or entity joined with Debtor in any suit arising out of the Loan Documents or this agreement or pursue any other remedy in Secured Party’s power. Debtor further waives any and
all notice of acceptance of this agreement and of the creation, modification, rearrangement, renewal or extension for any period of any other indebtedness hereby secured. Until all of the Indebtedness shall have been paid in full, Debtor shall have
no right to subrogation and Debtor waives the right to enforce any remedy which Secured Party has or may hereafter have against any Other Liable Party (including co-makers on the Note), and waives any benefit of and any right to participate in any
other security whatsoever now or hereafter held by Secured Party. Debtor authorizes Secured Party, without notice or demand and without any reservation of rights against Debtor without affecting Debtor’s liability hereunder from time to time to
(a) take or hold any other property of any type from any other person or entity as security for the Indebtedness and exchange, enforce, waive and release any or all of such other property, (b) apply the Collateral or such other property and direct
the order or manner of sale thereof as Secured Party may in its discretion determine, (c) renew, extend for any period, accelerate, modify, compromise, settle or release any of the Obligations of any other maker on the Note in respect to any or all
of the Indebtedness or other security for the Indebtedness (d) waive, enforce, modify, amend or supplement any of the provisions of any Loan Document, and (e) release or substitute any maker. 

           Section 4.8.     Preservation of Rights.  No failure on the part of Secured Party to exercise, and no delay in exercising, any right hereunder or under
any other Loan Document shall operate as a waiver thereof; nor shall any signed or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.  Neither the 

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execution nor the delivery of this agreement shall in any manner impair or affect any other security for the Indebtedness. The rights and remedies of Secured Party provided herein and in the other Loan Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of Secured Party under any Loan Document against any party thereto are not conditional or contingent on any attempt by Secured Party to
exercise any of its rights under any other Loan Document against such party or against any other person or entity. 

           Section 4.9.     Unenforceability. Any provision of this agreement which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or invalidity without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. 

           Section 4.10.     Survival of Agreements.  All representations and warranties of Debtor herein, and all covenants and agreements herein shall survive the
execution and delivery of this agreement, the execution and delivery of any other Loan Documents.

           Section 4.11.     Other Liable Party. Neither this agreement nor the exercise by Secured Party or the failure of Secured Party to exercise any right,
power or remedy conferred herein or by law shall be construed as relieving Debtor from liability on the Indebtedness or any deficiency thereon. This agreement shall continue irrespective of the fact that the liability of any party may have ceased or
irrespective of the validity or enforceability of any other Loan Document to which Debtor or any party may be a party, and notwithstanding the reorganization, death, incapacity or bankruptcy of any Debtor and notwithstanding the reorganization or
bankruptcy or other event or proceeding affecting any party. 

           Section 4.12.     Binding Effect and Assignment.  This agreement creates a continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together with all rights and remedies of Secured Party hereunder, to the benefit of Secured party and its successors, transferors and assigns. Without limiting the generality of
the foregoing, Secured Party may pledge, assign or otherwise transfer the Note held by it, and Secured party may assign or otherwise transfer its rights under any other Loan Document to any other Person, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to Secured Party, herein or otherwise; provided Secured Party shall not assign its rights under this Security Agreement without the consent of Debtor if Debtor is not in Default and Secured
Party continues to service the Note for Debtor. None of the rights or obligations of Debtor hereunder may be assigned or otherwise transferred without the prior written consent of Secured Party. 

           Section 4.13.     Termination.  Upon the satisfaction in full of the Indebtedness, this agreement and the security interest created hereby shall
terminate and all rights to the Collateral shall revert to Debtor. Secured Party will, if in actual possession of any of the Collateral upon Debtor’s request and at Debtor’s expense, (a) return to Debtor such of the Collateral as shall not
have been sold or otherwise disposed of or applied pursuant to the terms hereof; and (b) execute and deliver to Debtor such documents as Debtor shall reasonably request to evidence such termination. 

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           IN WITNESS WHEREOF, Debtor has caused this agreement to be executed and delivered by its officer thereunder duly authorized, as of the date first above written. 

	 	 		
VAUGHAN FOODS, INC., an Oklahoma	
	 	 		
corporation	
	 	
	 	
	 	
	 	
By:		/s/
	  Gene P. Jones	
	 	 		
Name:		Gene
      P. Jones
	 	 		
Title:		Secretary,
      Treasurer & C.F.O.
	 	
	 	
	 	 		
ALLISON’S GOURMET KITCHENS,	
	 	 		
LIMITED PARTNERSHIP, an Oklahoma	
	 	 		
limited partnership	
	 	
	 	
By:		
VAUGHN FOODS, INC., its General	
	 	 		
Partner	
	 	
	 	
	 	
	 	
By:		/s/
    Gene P. Jones	
	 	 		Name: 	Gene
    P. Jones
	 	 		Title: 	Secretary,
	    Treasurer & C.F.O.
	 	
	 	
	 	 		
WILD ABOUT FOOD-OKLAHOMA,	
	 	 	LLC,
    a Texas limited liability company 
	 
	 	
	 	
	 	
	 	
	 	
By:		/s/
    Gene P. Jones	
	 	 		Name: 	Gene
    P. Jones 
	 	 		Title: 	Secretary, Treasurer
	  & C.F.O.

-13-

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