The move was announced Monday when the team began offseason workouts with first-year coach Jim Caldwell.
Vaughn played 16 games for Indianapolis last season, including four starts. The 5-foot-11, 199-pound Vaughn had a career-high three interceptions, tripling his career total. He started 11 games for the Colts in 2012.
Vaughn earned a spot in the NFL with the Denver Broncos as an undrafted rookie from Mississippi. He started in three of 22 games in Denver during the 2010 and 2011 seasons.
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