Exhibit 10.14


                       SEPARATION AND SETTLEMENT AGREEMENT

This Separation and Settlement  Agreement (the  "Agreement") is made and entered
into by and between  Christopher J. New (the "Employee") and Galaxy  Nutritional
Foods, Inc., a Florida corporation (the "Company").

                              W I T N E S S E T H :
                              - - - - - - - - - - -

         WHEREAS,  Employee was  employed by the Company as its Chief  Marketing
Officer and Vice  President of Strategy and currently is employed by the Company
as its Chief Executive Officer;

         WHEREAS,  Employee  is also a  member  of the  Corporation's  Board  of
Directors (the "Board");

         WHEREAS,  Employee  and  the  Company  enter  into  this  Agreement  in
connection with the Employee's resignation.

         NOW THEREFORE,  in  consideration  of the premises and mutual  promises
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:

1. Separation Date. Employee hereby resigns from his employment with the Company
and his position on the Board effective the date hereof (the "Separation Date").

2. Confidentiality of Company Information.  Employee understands and agrees that
in the  course  of his  employment  with  the  Company,  Employee  has  acquired
confidential  information  and trade secrets  concerning  the  operations of the
Company,   the  Company's   owners,   parents,   subsidiaries   and   affiliates
(collectively,  the  "Companies")  and the Companies'  personnel,  future plans,
finances,  products,  customers,  suppliers and methods of doing business, which
information  Employee  understands and agrees would be extremely damaging to the
Companies if disclosed to a competitor or made  available to any other person or
corporation.  Employee  understands  that such  information has been divulged to
Employee  in  confidence  and  Employee  agrees  that  Employee  will  keep such
information  about the  Company  secret and  confidential,  except (a) as may be
required to effectuate the purposes  herein,  (b) as may be necessary to enforce
the terms of this  Agreement,  or (c) as may be  required to be  disclosed  by a
court or  governmental  authority,  provided  that the Employee will provide the
Company prompt notice of a court's or governmental  authority's request for such
disclosure.

         Except (a) as may be required to effectuate the purposes herein, (b) as
may be  necessary  to  enforce  the  terms of this  Agreement,  or (c) as may be
required to be disclosed by a court or governmental  authority,  Employee agrees
that any and all information which Employee has made,  developed,  originated or
acquired either  individually or jointly with any other person or persons at any
time during the period of employment by the  Companies  prior to the  Separation
Date, which relates in any way to the business or type of business engaged in by
the Companies is the property of the  Companies and is to be kept  confidential,
unless such  information is or becomes  generally  available to the public other
than as a  result  of an  improper  disclosure  by  Employee.  Such  information
includes,  but is not  limited  to all of the  Company's  concepts,  techniques,
processes,   systems,   devices,   charts,   manuals,   price  lists,   payroll,
administrative  methods and information and improvements  thereto; the names and


<PAGE>

identities of all of the Company's  clients,  owners,  lenders,  purchasers  and
suppliers; the names, addresses,  telephone number,  qualifications,  education,
accomplishments,  experience  and resumes of all persons who are employed by the
Company,  for either or both  permanent  and temporary  jobs,  the Company's job
order  specifications;  and all other  information or materials which may give a
competitive  advantage  to a  competitor  of the Company  (collectively,  to the
extent such  information  is not or does not become  generally  available to the
public  other  than  as  a  result  of  an  improper   disclosure  by  Employee,
"Confidential  Information").  Employee  agrees not to  reveal,  divulge or make
known to any person,  firm or  corporation  such  Confidential  Information  and
understands that if he discloses to others,  uses for his own benefit or for the
benefit of any person or entity other than  Companies,  copies or makes notes of
any such Confidential Information, such conduct will constitute a breach of this
Agreement.  Notwithstanding the foregoing,  the Employee shall not be prohibited
from doing business with Company  lenders,  suppliers or vendors so long as such
business  is not of a  competitive  nature  with the Company and so long as such
business does not involve or relate to or make use of the Company's  proprietary
and confidential information described above.

3. No  Disparagement.  The parties  agree they will not make any oral or written
statement or take any other  action which  disparages  or  criticizes  the other
party.  Specifically,  Employee  agrees that  Employee will not make any oral or
written  statement or take any other action which  disparages or criticizes  the
products,   operations,   administration,   employees,   management,   officers,
shareholders  or directors of the Companies.  The parties agree that in response
to any third party  inquiries that the parties may state such  separation was on
friendly  terms.  Any action by either party which  disparages or criticizes the
other  party at any time in the future  will  entitle the other party to seek an
injunction  for any further breach of this  provision,  in addition to all other
legal and equitable remedies available to the other party.

4.  Return  of  Records.  Employee  agrees  that all  correspondence,  drawings,
reports,  ideas, manuals,  letters,  data, notes,  analyses,  sales information,
personnel information,  notebooks,  reports, charts, programs,  proposals, legal
agreements,  files, memoranda,  records, computer generated information,  disks,
software  and any other  documents  whether  originals  or copies,  or  property
concerning the Company's customers, business, finances or products or processes,
whether  or not  prepared  by  and in the  course  of  employment,  alone  or in
conjunction  with others,  together with any credit cards,  cell phones,  laptop
computers and other physical and personal  property which Employee received from
the Company or which Employee generated in connection with his employment by the
Company,  which are in Employee's  possession,  custody or control, are the sole
property of the Company.  Employee  further  warrants that he has turned over to
the  Company,  any such  documents  or  property in his  possession,  custody or
control or will do so on or before July 20, 2004. Furthermore, on or before July
20,  2004  Employee  will  execute and deliver a  certificate  representing  and
warranting  that all such  Company  property  has been  returned to the Company.
Employee  understands  that no amounts due Employee under  paragraph 10 shall be
payable to Employee  until such  certificate  is executed  and  delivered to the
Company.

5.  Release.  As a  material  inducement  to the  Company  to  enter  into  this
Agreement, Employee hereby irrevocably and unconditionally releases, acquits and
forever  discharges the Company and each of the Company's owners,  predecessors,
successors,  assigns, agents, directors,  officers, employees,  representatives,
attorneys,  divisions,  parents,  subsidiaries,   affiliates  (and  the  agents,
directors,   officers,  employees,   representatives,   and  attorneys  of  such


                                     Page 2
<PAGE>

companies,  divisions,  subsidiaries,  and  affiliates),  and all persons acting
through,  under, or in concert with any of them  ("Releasees"),  or any of them,
from  any  and  all  charges,  complaints,  claims,  liabilities,   obligations,
promises, agreements,  controversies, damages, actions, causes of action, suits,
rights,  demands,  costs, losses, debts, and expenses (including attorneys' fees
and  costs  actually  incurred)  of any  nature  whatsoever,  known or  unknown,
suspected or unsuspected, including, but not limited to the following:

         i.       rights  arising out of alleged  violations  of any  contracts,
                  expressed  or  implied,  any  covenant  of good faith and fair
                  dealing, expressed or implied;

         ii.      any tort;

         iii.     any legal  restrictions  on the  Company's  right to terminate
                  employees; or

         iv.      any federal, state, or other governmental statute, regulation,
                  or ordinance,  including, without limitation, Title VII of the
                  Civil  Rights  Act  of  1964,  as  amended;  the  Federal  Age
                  Discrimination  in  Employment  Act; the Federal Older Workers
                  Benefit   Protection   Act;   the   Federal   Americans   with
                  Disabilities Act; the Family Medical Leave Act; the Fair Labor
                  Standards  Act;  the  Federal  Equal Pay Act;  the Fair Credit
                  Reporting  Act, The Employee  Retirement  and Income  Security
                  Act,  Chapter 760,  Florida  Statutes;  Chapter  448,  Florida
                  Statutes;  and any other federal,  state or local law, statute
                  or ordinance applicable to the employment relationship between
                  the parties

(all of the foregoing collectively "Claim" or "Claims"), which Employee now has,
or has ever had, or ever will have,  against  each or any of the  Releasees,  by
reason of any and all acts, omissions, events, circumstances,  or facts existing
or  occurring  up to the date hereof.  Employee  further  agrees to never file a
lawsuit asserting any Claims that are released in this Agreement.

         As a material inducement to Employee to enter into this Agreement,  the
Company hereby  irrevocably and  unconditionally  releases,  acquits and forever
discharges Employee from any and all charges,  complaints,  claims, liabilities,
obligations,  promises, agreements,  controversies,  damages, actions, causes of
action,  suits, rights,  demands,  costs, losses, debts, and expenses (including
attorneys' fees and costs actually  incurred) of any kind or nature  whatsoever,
whether known or unknown,  suspected or unsuspected,  which any of the Companies
(i) now has, owns or holds,  (ii) has at any time  heretofore  owned or held, or
(iii) may hereafter hold in the future  against the Employee or his  affiliates,
by reason of, arising from, in connection  with, or in any way pertaining to all
acts, omissions, events, circumstances, or facts existing or occurring up to the
date hereof  except for any  criminal or willful  misconduct  by  Employee.  The
Companies  and their  respective  successors  or assigns shall hold harmless and
indemnify  the  Employee  against  any  and  all  charges,  complaints,  claims,
liabilities, obligations, promises, agreements, controversies, damages, actions,
causes of action,  suits, rights,  demands,  costs, losses,  debts, and expenses
(including   attorneys'  fees  and  costs  actually   incurred)  of  any  nature
whatsoever,  known or unknown, suspected or unsuspected,  in each case by reason
of, in connection  with, or relating to the fact that Employee was an officer or
director of one or more of the Companies for matters arising during such service
by  Employee to the  fullest  extent  required  or  permitted  by the  Company's
Certificate  of  Incorporation,  Bylaws or the Company's  Officers and Directors
Liability  Insurance.  Nothing herein shall be deemed to expand the liability or
obligations of the Company to Employee beyond those set forth in the Certificate
of Incorporation, Bylaws or the Officers and Directors Liability Insurance.


                                     Page 3
<PAGE>

         Notwithstanding  the  foregoing,   this  Agreement  does  not  preclude
Employee or the Company from asserting  claims against the other party which may
be required in order to enforce any rights under this Agreement.

6. Injunction. In view of the nature of Employee's employments,  Employee agrees
that the Company would be  irreparably  harmed by any  violation,  or threatened
violation of this Agreement and that,  therefore,  the Company shall be entitled
to an injunction prohibiting Employee from any violation or threatened violation
of  this  Agreement.  This  right  shall  be in  addition  to and  not by way of
limitation of any other legal or equitable  remedies to which the Company may be
entitled,  including,  but not  limited  to,  the right of the  Company  to seek
recovery or set off of any and all  consideration  paid to  Employee  under this
Agreement in the event  Employee  breaches this  Agreement or this  Agreement is
held invalid.

7. Employee Understanding. Employee represents and agrees as follows:

         i.       Employee  is  advised to consult  with an  attorney.  Employee
                  fully  understands  Employee's right to discuss and review all
                  aspects of this  Agreement  with  Employee's  attorney  or any
                  other advisor and has had adequate time and  opportunity to do
                  so;

         ii.      To  the  extent,  if  any,  that  Employee  desired  to do so,
                  Employee has availed himself of this right;

         iii.     Employee has carefully read and fully  understands  all of the
                  provisions of this Agreement;

         iv.      Employee is voluntarily entering into this Agreement; and

         v.       Employee is not relying on any  representations  or statements
                  by the Company or its representatives  which are not contained
                  in this Agreement.

8. Lack of Wrongful Actions. This Agreement shall not in any way be construed as
an  admission  by the  Company  that it has acted  wrongfully  with  respect  to
Employee or any person, or that Employee has any rights  whatsoever  against the
Company,  and the Company  specifically  disclaims  any liability to or wrongful
acts against Employee or any other person, on the part of itself, its employees,
or its or their agents.

9.  Cooperation.  Employee  agrees at no expense to Employee to  reasonably  and
fully  cooperate  with  the  Company  in  connection  with and as  necessary  to
effectuate  the orderly  transition  of  Employee's  duties,  to provide  advice
regarding  matters  related  to  Employee's  duties,  to  aid  in  defending  or
prosecuting  any  claims or  litigation  by or  against  Company  or  related to
Employee's  duties for the Company for the 9 months  following  the date of this
Agreement. Company shall advance Employee his out of pocket reasonable necessary
and ordinary expenses, if any, in complying with this paragraph.

10. Payment to Employee.

         A. The Company  shall pay Employee the full amount of his severance pay
which shall be two years of his base salary in the total  amount of Four Hundred
Twenty  Thousand  Dollars  ($420,000),   subject  to  customary  withholding  or
deductions  by the  Company  as wages in lieu of notice  which  amount  shall be


                                     Page 4
<PAGE>

payable over a two year period on the Company's regular payroll dates commencing
on July 21, 2004.

         B. In addition,  the Company agrees (1) to pay Employee $1,000,  (2) to
either  cover  Employee  and his family  under the  Company  health care plan or
reimburse  Employee his premium  payments for COBRA  coverage for the six months
commencing  July, 2004 and ending  December,  2004 and (3)  notwithstanding  any
provision  to the  contrary,  to  continue in full force and effect as if he was
employed by the Company, Employee's stock option rights in the manner and to the
extent  provided in that  certain  Non-Qualified  Stock Option  Agreement  dated
December 5, 2002 and that certain  Non-Qualified  Stock Option  Agreement  dated
July 16,  2001.  This  sum and  these  rights  and  concessions  are in full and
complete settlement of all claims by Employee against the Company and constitute
consideration  for  Employee's  release  and  other  agreements  herein  and are
payments and rights to which Employee would not otherwise be entitled.

         All amounts due Employee under  paragraph A and paragraph B (1) and (2)
above  shall be  immediately  due and  payable to Employee in the event (1) of a
sale, lease or other  disposition of all or  substantially  all of the assets of
the Company or (2) the Company files a petition in bankruptcy or otherwise seeks
liquidation or dissolution.

11.  Invalid  Provision.  The  invalidity  or  unenforceability  of a particular
provision  or  portion  thereof  in this  Agreement  shall not  effect the other
provisions  or  portion  hereof,  and  if  any  one  of  them  is  found  to  be
unenforceable,  the other provisions shall remain fully valid and enforceable as
if such invalid or unenforceable provisions were omitted.

12. Waiver or Modification and  Construction.  No waiver or modification of this
Agreement or of any covenant, condition, or limitation herein contained shall be
valid unless in writing and duly executed by the party charged therewith.

13.  Complete  Agreement.  This written  Agreement  contains the sole and entire
agreement  between  the parties as to the matters  contained  herein,  and fully
supersedes any and all prior  agreements or  understandings  between the parties
hereto pertaining to the subject matter hereof.

14. Binding Effect of Agreement.  This Agreement shall be binding upon and inure
to the benefit of the parties  hereto and their  respective  heirs,  successors,
assigns and legal representatives.

15.  Waiver.  No failure  of any party to  exercise  any power  given such party
hereunder or to insist upon strict  compliance by any party with its obligations
hereunder,  and no custom or practice of the parties in variance  with the terms
hereof  shall  constitute  a  waiver  of the  parties'  right  to  demand  exact
compliance with the terms hereof.

16.  Governing Law. This Agreement and the  performance  hereunder and all suits
and  special  proceedings  hereunder  shall be  governed  by, and  construed  in
accordance  with,  the laws of the State of  Florida.  All  actions  under  this
Agreement shall be taken in a court of competent  jurisdiction within the county
in the State of Florida in which the  Company's  principal  place of business is
located and Employee hereby waives and agrees that he shall not assert that such
forum is inconvenient.


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<PAGE>

17.  Attorneys'  Fees.  In the event that any party is  required  to commence or
defend  any  action or  proceeding  against  the other in order to  enforce  the
provisions hereof or to challenge the provision hereof,  the prevailing party in
such action  shall be entitled to recover,  in addition to any amounts or relief
otherwise  awarded,  all  reasonable  costs  incurred in  connection  therewith,
including  attorneys' fees,  costs, and expenses for any action or proceeding or
appeal thereof.

18.  Counterparts  and Facsimile  Signatures.  This Agreement may be executed in
counterparts  which together shall constitute a single document.  This Agreement
may be executed and  delivered  with  facsimile  signatures  which shall for all
purposes be deemed originals.

         IN WITNESS  WHEREOF,  the  parties  have  executed  this  Agreement  in
counterparts effective on the 8th day of July, 2004.

                                           "Company"

                                           GALAXY NUTRITIONAL FOODS, INC.

Witness:
         -----------------------------     By: /s/ David H. Lipka
Print Name:                                    --------------------------------
            --------------------------     Print Name: David H. Lipka
                                                       ------------------------
Witness:                                   As its:     Chairman of the Board
         -----------------------------                 ------------------------
Print Name:                                Date:       July 8, 2004
            --------------------------                 ------------------------

                                           "Employee"

                                           CHRISTOPHER J. NEW

Witness:
         -----------------------------     By: /s/ Christopher J. New
Print Name:                                    --------------------------------
            --------------------------     Date:       July 8, 2004
                                                       ------------------------
Witness:
         -----------------------------
Print Name:
            --------------------------