**GALAXY      NUTRITIONAL FOODS, INC.**

**2007      STAY BONUS, SEVERANCE BONUS AND SALES BONUS PLAN**

**Plan**
**Company**

**Plan      Effective Date**

**Section      4**

| 1. | **STAY                BONUS** |
|----|-------------------------------|

|   | A. | ***Stay**** ****Bonus                Pool.***                A                stay bonus pool of up to $475,000 is established under this Plan                to                encourage and reward executives to remain with the Company through                the                sale process. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | ***Pool                Allocation.***                The stay bonus pool will be allocated as                follows: |
|--------|----|-----------------------------------------------------------------------------------------------------------------------|

|   | David                  Lipka                        | $125,000                        |
|--------|-----------------------------------------------------|---------------------------------|
|   |                                                |                            |
|   | Michael                  Broll                      | $100,000                        |
|   |                                                |                            |
|   | Other                  key executives (unallocated) | up                  to $250,000 |

|   | C. | ***Timing                of Payment*****.**                The stay bonuses will be paid following the Company’s receipt of a                Definitive Purchase Offer (as hereinafter defined) upon the earlier                of (i)                the Consummation Date or (ii) the termination of the Definitive Purchase                Offer for any reason other than a breach by the Company. Payments                will be                made to an executive if he is employed by the Company, or serving                on the                Board of Directors, at the time his respective payment or payments                are due                or if his employment was terminated for any reason other than death,                termination by the Company for Cause or by the executive without                Good                Reason. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | D. | ***Unallocated                  Amounts.***                  The $250,000 portion of the bonus pool that is not allocated to                  a                  particular executive as of the Plan Effective Date as provided                  above may                  be awarded, in whole or in part, at any time and from time to time                  after                  the Plan Effective Date, by agreement of David Lipka (as Chairman)                  and                  Michael Broll (as Chief Executive Officer) in their full discretion                  to one                  or more executives of the Company. Any such awards will be paid,                  if at                  all, in accordance with Section 1.C                  above. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 2. | **SEVERANCE                BONUS** |
|----|------------------------------------|

|   | A. | ***Severance                Payments***.                Severance payments will be made to executives if their employment                with the                Company or service as Chairman of the Board in the case of David                Lipka, or                Chief Executive Officer in the case of Michael Broll, as applicable,                is                terminated after the Consummation Date in the cases and within the                periods                described below. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | ***Triggers.***                David Lipka will receive a severance payment (i) upon termination                of his                employment or of his position as Chairman of the Board with the Company                for any reason (including voluntary resignation) other than by the                Company                with Cause, or (ii) if he is not re-elected to the Board of Directors,                at                any time during the period commencing on the Consummation Date and                ending                on the first anniversary thereafter. Michael Broll will receive a                severance payment upon termination of his employment for any reason                (including voluntary resignation) other than by the Company for Cause                at                any time during the period commencing on the Consummation Date and                ending                on the first anniversary of the Consummation                Date. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | ***Severance                Amounts*****.**                The respective severance payment amounts payable to the executives                in the                cases described above are as                follows: |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | David                    Lipka   | $125,000 |
|--------|----------------------------------|----------|
|   |                             |     |
|   | Michael                    Broll | $100,000 |

| 3. | **SALES                BONUS** |
|----|--------------------------------|

|   | A. | ***Sales**** ****Bonus                Pool.***                A                sales bonus pool is established under this Plan to reward David Lipka                and                Michael Broll if the Company Sale is consummated. The aggregate sales                bonus pool is as follows: |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If                the Sales Price is equal to or greater than $17 million but less                than $20                million, the sales bonus pool shall be $250,000 plus                an                amount equal to 1.6% of the excess of the Sales Price over $17                million. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If                the Sales Price is equal to or greater than $20 million but less                than $23                million, the sales bonus pool shall be $300,000 plus                an                amount equal to 3% of the excess of the Sales Price over $20                million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | If                the Sales Price is equal to or greater than $23 million, the sales                bonus                pool shall be an amount equal to 1.8% of the Sales Price. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | ***Pool                Allocation.***                The sales bonus pool will be allocated as                follows: |
|--------|----|------------------------------------------------------------------------------------------------------------------------|

|   | David                    Lipka   | 55.5%  |
|--------|----------------------------------|--------|
|   |                             |   |
|   | Michael                    Broll | 44.5%  |

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|   | C. | ***Timing                of Payment*****.**                All executives will receive their respective sales bonuses as soon                as                practicable after the Consummation Date. Payments will be made to                each                executive if he is then an officer or employee on the Consummation                Date,                or if he is not so serving if his termination is by the Company without                Cause, or by him for Good Reason. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4. | **CERTAIN                DEFINITIONS** |
|----|----------------------------------------|

***Definition      of Cause:***

|   | · | Failure                to perform duties, except as a result of physical or mental disability,                continuing after notice and ten days to                cure. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Willful                misconduct or gross negligence. |
|--------|--------|--------------------------------------------------------|

|   | · | Refusal                or willful failure to follow the lawful direction of the Board of                Directors or a more senior officer. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Disclosure                of confidential information of the Company except in connection with                the                Company Sale, engaging in activities in competition with the business                of                the Company, or attempting to interfere in the Company’s relationship with                its vendors, customers or                employees. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Material                breach of the Company’s Code of                Conduct. |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | Conviction                or plea of *nolo                contendere*                to                any crime involving fraud or                dishonesty. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Definition      of Company Sale***

***Definition      of Consummation Date***

***Definition      of Definitive Purchase Offer***

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***Definition      of Good Reason:***

|   | · | Material                reduction in the nature or status of position, duties, responsibilities                or                support. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Reduction                in annual rate of base cash compensation during any                period. |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | Failure                by the Company to pay compensation after notice has been given and                10 days                have elapsed without cure. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Relocation                of executive offices to an office more than 30 miles away from the                Company’s current headquarters. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

***D***
**efinition      of Sales Price**

| 5. | **TAX                WITHHOLDING** |
|----|------------------------------------|

| 6. | **DISPUTE                RESOLUTION** |
|----|---------------------------------------|

| 7. | **LEGAL                FEES** |
|----|-------------------------------|

| 8. | **GOVERNING                LAW** |
|----|----------------------------------|

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| 9. | **SUCCESSORS                AND ASSIGNS** |
|----|-------------------------------------------|

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