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                     GALAXY NUTRITIONAL FOODS COMPANY, INC.

                        INCENTIVE STOCK OPTION AGREEMENT
                        --------------------------------

     Galaxy Foods Company, a Delaware corporation (the"Company"),  hereby grants
as of the 8TH OF JULY,  2002,  to SALVATORE J.  FURNARI,  (the  "Optionee"),  an
option to  purchase a maximum of 20,000  shares of its  Common  Stock,  $.01 par
value,  at the price of $4.55 per share (the  "Option"),  on the following terms
and conditions:

     1.   GRANT UNDER 1996 STOCK PLAN. The Option is granted  pursuant to and is
governed by the Company's  1996 Stock Plan (the "Plan") and,  unless the context
otherwise  requires,  terms used  herein  shall have the same  meaning as in the
Plan.  Determinations  made in connection  with this option pursuant to the Plan
shall be governed by the Plan as it exists on this date.

     2.   GRANT AS INCENTIVE  STOCK OPTION;  OTHER OPTIONS.  The Option shall be
treated for federal  income tax  purposes as an  incentive  stock  option  under
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code").  The
option is in addition to any other options  heretofore  or hereafter  granted to
the Optionee by the Company,  but a duplicate  original of this instrument shall
not affect the grant of another option.

     3.   EXTENT  OF  OPTION  IF  EMPLOYMENT  CONTINUES.  If  the  Optionee  has
continued to be employed by the Company on the following dates, the Optionee may
exercise the Option for the number of shares set opposite the applicable date:

          6,667 options     -        vesting on July 8, 2003
          6,667 options     -        vesting on July 8, 2004
          6,666 options     -        vesting on July 8, 2005

     In the event of a change in ownership  of the Company,  that portion of the
Option  which has not yet vested as of the date of such  event will  immediately
vest and become exercisable  simultaneously  with the consummation of the change
in ownership.

     The foregoing rights are cumulative and, while the Optionee continues to be
employed by the Company, all vested options may be exercised up to and including
the date which is ten years from the date hereof.  All of the  foregoing  rights
are subject to Articles 4 and 5, as  appropriate,  if the Optionee  ceases to be
employed by the

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Company or dies or becomes disabled while in the employ of the Company.

     4.   TERMINATION  OF EMPLOYMENT.  If the Optionee  ceases to be employed by
the Company,  other than by reason of death or  disability as defined in Article
5, no further installments of the Option shall become exercisable and the vested
portion of the Option shall terminate at the earlier of sixty (60) days from the
date  employment  ceases or the scheduled  expiration  date.  In such case,  the
optionee's  only rights  hereunder  shall be those which are properly  exercised
before the termination of the Option.

     5.   DEATH;  DISABILITY.  If the  Optionee  dies while in the employ of the
Company,  the  Option  may be  exercised,  to the extent of the number of shares
vested as of the date of his death, by his estate,  personal  representative  or
beneficiary  to whom the Option has been assigned  pursuant to Article 9, at any
time within 180 days after the date of death,  but not later than the  scheduled
expiration  date. If the Optionee ceases to be employed by the Company by reason
of his disability  (as defined in the Plan),  the Option may be exercised to the
extent exercisable on the date of the termination of his employment, at any time
within  180 days  after  such  termination,  but not  later  than the  scheduled
expiration  date.  At the  expiration  of such 180 day  period or the  scheduled
expiration date,  whichever is the earlier, the Option shall terminate and be of
no further force and effect.

     6.   PARTIAL EXERCISE. Exercise of the Option up to the extent above stated
may be made in part at any time and from time to time  within the above  limits,
except that the Option may not be exercised for a fraction of a share.

     7.   PAYMENT OF PRICE.  The option  price is  payable,  upon  exercise,  in
United States dollars and may be paid in cash or by check, or any combination of
the foregoing, equal in amount to the option price.

     8.   METHOD OF EXERCISING  OPTION.  Subject to the terms and  conditions of
this Agreement, the Option may be exercised by written notice to the Company, at
the principal  executive office of the Company, or to such transfer agent as the
Company  shall  designate.  Such notice shall state the election to exercise the
Option and the number of shares in  respect of which it is being  exercised  and
shall be signed by the person or persons so exercising  the Option.  Such notice
shall be accompanied  by payment of the full purchase price of such shares,  and
the Company shall deliver a certificate or certificates representing such shares
as soon as practicable  after the notice shall be received.  The  certificate or
certificates  for the shares as to which the Option shall have been so exercised
shall be  registered in the name of the person or person  exercising  the Option
(or,  if the Option  shall be  exercised  by the  Optionee  and  another  person
jointly,  with right and  survivorship) and shall be delivered as provided above
to or upon the written order of the person or persons exercising the Option. All
shares  that shall be  purchased  upon the  exercise  of the Option as  provided
herein shall be fully paid and non-assessable.

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     9.   OPTION NOT TRANSFERABLE.  The Option is not transferable or assignable
except by will or by the laws of descent and distribution. During the Optionee's
lifetime only the Optionee can exercise the Option.

     10.  NO  OBLIGATION  TO EXERCISE  OPTION.  The grant and  acceptance of the
Option imposes no obligation on the Optionee to exercise it.

     11.  NO  OBLIGATION  TO  CONTINUE  EMPLOYMENT.  The Company and any Related
Corporations as defined in the Plan are not by the Plan or the Option  obligated
to continue the Optionee in employment.

     12.  NO RIGHTS AS STOCKHOLDER  UNTIL EXERCISE.  The Optionee shall have not
rights as a stockholder with respect to shares subject to this Agreement until a
stock  certificate  therefor  has been issued to the  Optionee and is fully paid
for. Except as is expressly provided in the Plan with respect to certain changes
in the capitalization of the Company,  no adjustment shall be made for dividends
or  similar  rights  for which the  record  date is prior to the date such stock
certificate is issued.

     13.  CAPITAL  CHANGES AND  BUSINESS  SUCCESSIONS.  It is the purpose of the
Option to encourage  the Optionee to work for the best  interests of the Company
and its stockholders.  Since, for example,  that might require the issuance of a
stock dividend or a merger with another  corporation,  the purpose of the Option
would not be served if such stock dividend,  merger or similar  occurrence would
cause the  Optionee's  rights  hereunder to be diluted or terminated and thus be
contrary to the  Optionee's  interest.  The Plan contains  extensive  provisions
designed  to  preserve  options  at full  value  in a number  of  contingencies.
Therefore, provisions in the Pan for adjustment with respect to stock subject to
options and the related provisions with respect to successors to the business of
the Company are hereby made applicable  hereunder and are incorporated herein by
reference. In particular,  without affecting the generality of the foregoing, it
is  understood  that for the  purposes  of  Articles  3 through  5 hereof,  both
inclusive,   employment  by  the  Company  includes   employment  by  a  Related
Corporation as defined in the Plan.

     14.  PROVISION OF DOCUMENTATION OF OPTIONEE.  By signing this Agreement the
Optionee  acknowledges  receipt  of a copy of this  Agreement  and a copy of the
Company's 1996 Stock Plan.

     15.  EARLY  DISPOSITION.  The  Employee  agrees to notify  the  Company  in
writing immediately after the Employee makes a Disqualifying  Disposition of any
Common Stock received  pursuant to the exercise of this option.  A Disqualifying
Disposition is any disposition  (including any sale) of such Common Stock before
the later of (a) two years after the date the  Employee  was granted this option
or (b) one year after the date the Employee  acquired Common Stock be exercising
this option.  If the Employee has died before such stock is sold,  these holding
period  requirements  do not apply and no  Disqualifying  Disposition  can occur
thereafter. The Employee also agrees to provide the Company with any information
which it shall request concerning any such

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disposition. The Employee acknowledges that he or she will forfeit the favorable
income tax treatment  otherwise  available  with respect to the exercise of this
incentive  stock option if he or she makes a  Disqualifying  Disposition  of the
stock received on exercise of this option.

     16.  WITHHOLDING TAXES. If the Company in its discretion determines that it
is obligated to withhold tax with  respect to a  Disqualifying  Disposition  (as
defined in Article 15) of Common  Stock  received by the Employee on exercise of
this option,  the Employee  hereby agrees that the Company may withhold from the
Employee's wages the appropriate amount of Federal,  state and local withholding
taxes  attributable to such  Disqualifying  Disposition.  If any portion of this
option is treated as a Non-Qualified Option, the Employee hereby agrees that the
Company  may  withhold  from the  Employee's  wages  the  appropriate  amount of
Federal,  state and  local  withholding  taxes  attributable  to the  Employee's
exercise of such Non-Qualified Option. At the Company's  discretion,  the amount
required  to be  withheld  may be  withheld  in cash from such  wages,  of (with
respect to compensation  income  attributable to the exercise of this option) in
kind from the Common Stock other wise deliverable to the Optionee on exercise of
this Option.  The Employee further agrees that, if the Company does not withhold
an  amount  from the  Employee's  wages  sufficient  to  satisfy  the  Company's
withholding  obligation,  the Employee will reimburse the Company on demand,  in
cash, for the amount underwithheld.

     17.  GOVERNING LAW. This Agreement  shall be governed by and interpreted in
accordance with the internal laws of the State of Delaware.

     18.  EXPIRATION. This Option shall expire at 5:00 p.m. Orlando time on July
8, 2012.  Whether or not  surrendered to the Company by the holder,  this Option
shall be deemed cancelled upon expiration hereof.

     IN WITNESS WHEREOF the Company and the Optionee have caused this instrument
to be executed,  and the Optionee  whose  signature  appears below  acknowledges
receipt  of a copy  of the  Plan  and  acceptance  of an  original  copy of this
Agreement.

OPTIONEE                                GALAXY NUTRITIONAL FOODS, INC.

____/s/ Salvatore J. Furnari__          ____/s/ Angelo S. Morini______
Salvatore J. Furnari                    Angelo S. Morini, President