Document:

Exhibit 10.07

                          LIFESCIENCE VENTURES LIMITED

                              September, 28th, 2004

BIOACCELERATE HOLDINGS, Inc.
712 Fifth Avenue
New York, NY, 10019
Attn: President and CEO

Re: Credit Facility

Gentlemen:

LIFESCIENCE VENTURES LIMITED ("LIFESCIENCE VENTURES LIMITED") is pleased to make
available to BIOACCELERATE HOLDINGS, Inc. (the "Company") a senior, secured
credit facility (the "Credit Facility"), pursuant to which LIFESCIENCE VENTURES
LIMITED shall provide the Company one or more loans (each, a "Tranche") in the
aggregate principal amount of up to Twelve Million Five Hundred Thousand Dollars
($12,500,000) dollars (the "Maximum Funded Amount"), subject to the terms and
conditions as hereinafter provided in this letter agreement (this "Letter
Agreement").

The First Tranche (the "Initial Tranche") will be payable to the Company or its
Creditors on an as needed basis and will be provided and funded to the Company
upon receipt of the following documents from the Company: (i) a grid promissory
note (the "Note"), executed by an authorized officer of the Company evidencing
the principal amount of funds available under the Credit Facility and the draw
down of the Initial Tranche (in the form attached hereto as Exhibit A), (ii) a
security agreement (the "Security Agreement") and other collateral documents
pursuant to which certain assets and subsequently acquired assets of the Company
shall be pledged to secure the repayment of the indebtedness evidenced by the
Note (the "Security Documents"), executed by an authorized officer of the
Company (in the form attached hereto as Exhibit B), (iii) the warrant (as
defined herein), executed by an authorized officer of the Company, (iv) such
other documents, each in form and substance satisfactory to LIFESCIENCE VENTURES
LIMITED, as LIFESCIENCE VENTURES LIMITED shall reasonably request. This Credit
Facility and associated documents shall rank pari-passu with an identical
agreement that BIOACCELERATE HOLDINGS INC is entering into with JANO HOLDINGS
LIMITED.

Subject to the conditions specified herein, additional Tranches shall be made
available on as needed basis (each a "Funding Date"). Each Additional Tranche
will be funded within two (2) business days following receipt by LIFESCIENCE
VENTURES LIMITED on a Funding Date of a request for the funding of an Additional
Tranche (each, a "Request") from the Company.

The Company covenants to use the proceeds of each Tranche solely for the
purposes as agreed with LIFESCIENCE VENTURES LIMITED. In connection with the
foregoing covenant, LIFESCIENCE VENTURES LIMITED shall have the right (the
"Audit and Demand Right"), subject to customary confidentiality provisions, at
any time during the term of the Note and for such extended period of time as
indebtedness remains outstanding under any Note to (a) audit and inspect the
books and records of the Company for the purpose of determining the use of
proceeds from any Tranche at reasonable times and with reasonable prior notice
in accordance with the terms and conditions of the Note or (b) demand reasonable
evidence from the Company that the Company is in compliance with the foregoing
covenant, which evidence the Company shall provide to LIFESCIENCE VENTURES
LIMITED promptly upon written request.

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Notwithstanding anything to the contrary provided herein or elsewhere,
LIFESCIENCE VENTURES LIMITED shall have no obligation to fund a Tranche if at
the time a Request is received by LIFESCIENCE VENTURES LIMITED and prior to when
the funds requested in the Tranche are sent, one or more of the following events
shall have occurred:

(vii) There shall be any material change in the business, properties, assets,
results of operations, prospects or financial condition of the Company since
January 31, 2004;

(viii) The Company shall be in breach of or default under any material contract,
license or other agreement or instrument; or

(ix) There shall not have occurred (a) any domestic or international event, act
or occurrence which has materially disrupted, or is likely in the immediate
future to materially disrupt, the securities markets; (b) a general suspension
of, or a general limitation on prices for, trading in securities on the New York
Stock Exchange or the American Stock Exchange or in the over-the-counter market;
(c) any outbreak of major hostilities or other national or international
calamity; (d) any banking moratorium declared by a state or federal authority;
(e) any moratorium declared in foreign exchange trading by major international
banks or other persons; (f) any material interruption in the mail service or
other means of communication within the United States; (g) any change in the
market for securities in general or in political, financial, or economic
conditions; or (h) neither the Company nor any of its officers, directors and/or
controlling shareholders have become the subject of or a named party in any
investigation or action involving any regulatory or self-regulatory organization
including, but not limited to, the SEC, the NASD or any state and/or federal
agency (each as set forth in this clause (iii), a "Pro Rata Event").

As an inducement to LIFESCIENCE VENTURES LIMITED to provide the Credit Facility
to the Company, the Company shall issue to LIFESCIENCE VENTURES LIMITED (on the
date of the funding of the Initial Tranche) five (5) year warrants (the
"Warrants") to purchase 1,000,000 shares of the Company's common stock (the
"Common Stock"), at an exercise price of $14 per share and 1,000,000 shares at
an exercise price of $28 per share (subject to adjustment for anti-dilution and
other customary adjustments) .

This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York without regard to the conflicts of laws
principles thereof. The parties hereto hereby agree that any suit or proceeding
arising directly and/or indirectly pursuant to or under this instrument or the
consummation of the transactions contemplated hereby, shall be brought solely in
a federal or state court located in the City, County and State of New York. By
its execution hereof, the parties hereby covenant and irrevocably submit to the
in personam jurisdiction of the federal and state courts located in the City,
County and State of New York and agree that any process in any such action may
be served upon any of them personally, or by certified mail or registered mail
upon them or their agent, return receipt requested, with the same fall force and
effect as if personally served upon them in New York City. The parties hereto
waive any claim that any such jurisdiction is not a convenient forum for any
such suit or proceeding and any defense or lack of in personam jurisdiction with
respect thereto. In the event of any such action or proceeding, the party
prevailing therein shall be entitled to payment from the other party hereto of
its reasonable counsel fees and disbursements in an amount judicially
determined.

Any notice, consent, request, or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail, return
receipt requested addressed to the Company, at its principal office as first
provided above, Attention: CEO . And to LIFESCIENCE VENTURES LIMITED at its
addressed provided above (or to such other address as either the Company and/or
LIFESCIENCE VENTURES LIMITED shall provide in writing to the other party).
Notices shall be deemed to have been given on the date of receipt by the other
party.

Very truly yours,

                          LIFESCIENCE VENTURES LIMITED

                    By: _____________________________________
                        Name:
                        Title:
Accepted and agreed as of the
date first appearing above

BIOACCELERATE HOLDINGS, INC.

By: ___________________________________
Name:
Title:

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THE NOTE REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THIS NOTE MAY NOT BE TRANSFERRED
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR (B) PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS. THIS LEGEND SHALL BE
ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.

                          BIOACCELERATE HOLDINGS, INC.

                            Senior Secured Grid Note

Up to $12,500,000 September 28th, 2004

FOR VALUE RECEIVED, BIOACCELERATE HOLDINGS, Inc., a Delaware corporation (the
"Company"), with its principal executive office 712 Fifth Avenue, New York, NY,
10019, promises to pay to the order of Lifescience Ventures Limited, a BVI
Corporation with offices at Suite F8, International Commercial Centre,
Casemates, Main Road, Gibraltar (together with any permitted registered assigns,
the "Payee") the principal sum of $12,500,000 or, if less, the aggregate unpaid
principal amount of all Tranches made to the Company by Payee (the "Principal
Amount") pursuant to the letter agreement, dated as of even date herewith,
between the Company and the Payee (the "Letter Agreement"), on the Maturity
Date. Capitalized terms used, and not defined, herein shall have the meanings
ascribed thereto in the Letter Agreement.

The Initial Tranche of will be immediately available to the Company, subject to
the satisfaction of all required conditions under the Letter Agreement.
Additional Tranches will be made available to the Company as per the agreed
budget thereafter from drawdown of initial tranche(each a "Funding Date"). Each
Additional Tranche will be funded within two (2) business days following receipt
by the Payee on a Funding Date of a Request Letter and a certification (in form
and substance satisfactory to Bioaccelerate) signed by an authorized officer of
the Company that all conditions to funding set forth herein have been satisfied
and that the Company is not in breach of any representation, warranty or
covenant provided in this Note, the Letter Agreement, the Security Documents,
the Security Agreement, any Warrant issued by the Company to the Payee, the
Engagement Letter or any agreement between the Company and either the Payee or
Bioaccelerate Limited related to the subject matter contained in such agreements
or documents.

The Company hereby authorizes the Payee to endorse on the Schedule of Tranches
annexed to this Note all Tranches made to the Company and all payments of
principal amounts in respect of such Traches, which endorsements shall, in the
absence of manifest error, be conclusive as to the outstanding principal amount
of all Tranches; provided, however, that the failure to make such notation with
respect to any Tranche or payment shall not limit or otherwise affect the
obligations of the Company under the Letter Agreement or this Note.

The Maturity Date shall mean the earliest of (i) the date on which any Placement
occurs, (ii) the date on which an Event of Default (as defined herein) occurs,
(iii) the date on which a Change in Control occurs. "Change in Control" shall
mean (a) a merger , consolidation or any other combination of the Company (other
than a merger, consolidation or combination of a wholly-owned subsidiary of the
Company or any other person or entity with respect to which the Payee has given
its approval in writing) with any entity or person, (b) the sale of all or
substantially all of the assets of the Company, or (c) the purchase by a single
entity or group, as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended, of more than 25% of the voting stock of the Company in a
single transaction or a series of related transactions. A "Placement" shall mean
the closing of either debt or equity financing in which the Company receives at
least Fifty Million Dollars ($50,000,000) in gross proceeds in any transaction
or series of related transactions after the date hereof. The Principal Amount,
accrued interest and any other amounts due under this senior secured grid note
(this "Note") are payable in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts. Interest on this Note shall accrue on the Principal
Amount outstanding from time to time at a rate per annum computed in accordance
with Section 4 hereof. This Note is made with full recourse to the Company and
upon all the warranties, representations, covenants and agreements contained
herein.

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The Company (i) waives presentment, demand, protest or notice of any kind in
connection with this Note and (ii) agrees, in the event of an Event of Default
(as defined below), to pay to the holder of this Note, on demand, all reasonable
out-of-pocket costs and expenses (including legal fees) incurred in connection
with the enforcement and collection of this Note.

- Prepayments; Mandatory Prepayments. The Company may prepay at any time all or
any portion of the principal sum hereunder without penalty or premium; provided,
however, that (i) any prepayment (whether voluntary or involuntary) shall be
applied first to any accrued and unpaid interest hereunder up to the date of
such prepayment, then to any other sums which may be payable to Payee hereunder,
and then to the principal balance outstanding hereunder, and (ii) the acceptance
of any such prepayment following the occurrence and during the continuance of
any Event of Default hereunder shall not constitute a waiver, release or accord
and satisfaction thereof or of any rights with respect thereto by Payee.
Notwithstanding anything to the contrary provided herein or elsewhere, in the
event that prior to the Maturity Date, a Placement has occurred, then the
Company, upon the closing of such transaction or transactions, as the case may
be, will immediately repay in full the Principal Amount and all accrued and
unpaid interest thereon. The Company shall provide in any applicable financing
document that the Company uses in connection with any Placement that the
required amount of funds raised will be used to repay the Principal Amount and
all accrued and unpaid interest thereon and the Company shall provide to the
Payee no later than five (5) Business Days prior to the date of funding of any
such financing the date such financing is expected to close, the amount of
financing to be received and the place and time of such closing. The Company
shall provide to the Payee all other such applicable information the Payee shall
subsequently reasonably request. The Company shall provide to the Payee at the
closing of such financing in immediately available funds such funds as is
necessary to repay the entire Principal Amount and all accrued and unpaid
interest thereon.

- Day of Payment. Whenever any payment to be made hereunder shall become due and
payable on a day which is not a Business Day (as defined below), such payment
may be made on the next succeeding Business Day without being deemed past due
and, in the case of any payment of principal, such extension of time shall in
such case be included in computing interest on such payment. As used herein,
"Business Day" shall mean any day which is not a Saturday or Sunday and on which
banks in the State of New York are not authorized or required to close. Interest
on past due principal and accrued interest thereon shall be calculated as
follows: the amount of principal and interest past due multiplied by the Penalty
Interest Rate (as defined herein) and multiplied by a fraction, the numerator of
which is the number of days such principal and interest is past due and the
denominator of which is 360.

- Use of Proceeds. The Company shall use the proceeds of each Tranche solely for
the purposes as agreed with Bioaccelerate Inc.

13. Computation of Interest.

A. Base Interest Rate. Subject to subsections 4B and 4C below, the outstanding
Principal Amount shall bear interest per annum at the Applicable Federal Rate
(the "Base Interest Rate"), as defined in Section 1274(d) of the Internal
Revenue Code of 1986, as amended (the "Code"), payable on the Maturity Date.

B. Penalty Interest. In the event the Note is not repaid on the Maturity Date,
the rate of interest applicable to the unpaid Principal Amount and accrued
interest thereon shall be adjusted to ten percent (10%) per annum (the "Penalty
Interest Rate") from the date of default until repayment; provided, that in no
event shall the interest rate exceed the Maximum Rate provided in Section 4C
below.

C. Maximum Rate. In the event that it is determined that New York law is not
applicable to the indebtedness evidenced by this Note or that under New York law
("Applicable Usury Laws") the interest, charges and fees payable by the Company
in connection herewith or in connection with any other document or instrument
executed and delivered in connection herewith cause the effective interest rate
applicable to the indebtedness evidenced by this Note to exceed the maximum rate
allowed by law (the "Maximum Rate"), then such interest shall be recalculated
for the period in question and any excess over the Maximum Rate paid with
respect to such period shall be credited, without further agreement or notice,
to the Principal Amount outstanding hereunder to reduce said balance by such
amount with the same force and effect as though the Company had specifically
designated such extra sums to be so applied to principal and the Payee had
agreed to accept such extra payment(s) as a premium-free prepayment. All such
deemed prepayments shall be applied to the principal balance payable at
maturity.

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14. Collateral. This Note is secured by a Security Agreement dated the date
hereof (as amended, modified or supplemented from time to time, the "Security
Agreement") of the Company in favor of the Payee covering all assets and future
assets of the Company therein described (collectively, the "Collateral"), and is
entitled to the benefits thereof. The Security Agreement, the Uniform Commercial
Code financing statements in connection with the Security Agreement, and any and
all other documents executed and delivered by the Company to the Payee under
which the Payee is granted liens on assets of the Company are collectively
referred to as the "Security Documents."

15. Covenants of Company.

A. Affirmative Covenants. The Company covenants and agrees with respect to the
Company and each of its Subsidiaries (which, for purposes of this Note means any
entity (i) in which the Company, directly or indirectly, owns 51% of the capital
stock or holds an equity or similar interest and (ii) which conducts substantive
business activities or holds material assets) that on and after the date hereof,
so long as this Note shall remain in effect, or the Principal Amount of, or
interest thereon, or any fee, expense or amount payable hereunder or with
respect to this Note shall be unpaid, it will perform the obligations set forth
in this Section 6A:

(i) Conduct of Business. The Company will, and cause each of its Subsidiaries
to, use its best efforts to conduct its business in a manner consistent with
past practices, do or to be done all things necessary to preserve relationship
with its material vendors, customers, distributors, sales representatives and
others having material business relationships with the Company or any of its
Subsidiaries, and inform and consult with the Payee on any key decisions
involving any capital expenditure in excess of $300,000;

(ii) Taxes and Levies. The Company will, and cause each of its Subsidiaries to,
promptly pay and discharge all taxes, assessments, and governmental charges or
levies imposed upon the Company or any of its Subsidiaries, or upon any of their
income and profits, or upon any of their property, before the same shall become
delinquent, as well as all claims for labor, materials and supplies which, if
unpaid, might become a lien or charge upon such properties or any part thereof;
provided, however, that neither the Company nor any of its Subsidiaries shall be
required to pay and discharge any such tax, assessment, charge, levy or claim so
long as the validity thereof shall be contested in good faith by appropriate
proceedings and the Company and each of its Subsidiaries shall set aside on its
books adequate reserves in accordance with generally accepted accounting
principles ("GAAP") with respect to any such tax, assessment, charge, levy or
claim so contested; provided, further, that this Section 6A(ii) shall not apply
to those claims for labor, materials and supplies which the Payee consents in
writing shall be excluded herewith, notwithstanding that such claims, if unpaid,
might become a lien or charge upon such properties or any part thereof.

(iii) Maintenance of Existence. The Company will, and cause each of its
Subsidiaries to, do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect its corporate existence, rights
(character and statutory) and franchises, except where the failure to comply
would not have a Material Adverse Effect (as defined herein) on the Company or
any of its Subsidiaries;

(iv) Maintenance of Property. The Company will, and cause each of its
Subsidiaries to, at all times maintain, preserve, protect and keep its property
used or useful in the conduct of its business in good repair, working order and
condition, and from time to time make all needful and proper repairs, renewals,
replacements and improvements thereto as shall be reasonably required in the
conduct of its business and protect and maintain its licenses and its patents,
copyrights, trademarks and trade secrets and all registrations and application
for registration thereof except where the failure to take such action would not
reasonably be expected to have a Material Adverse Effect;

o Compliance with Laws. The Company will, and cause each of its Subsidiaries to,
use its best efforts to comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, any governmental agency,
in respect of the conduct of its business and the ownership of its properties
(including without limitation applicable statutes, regulations and orders
relating to equal employment opportunities or environmental standards or
controls), except such as are being contested in good faith by appropriate
proceedings, except where failure to comply would not have a Material Adverse
Effect;

(v) Insurance. The Company will, and cause each of its Subsidiaries to, keep
adequately insured all property of a character usually insured by similar
corporations and carry such other insurance as is usually carried by similar
corporations;

(vi) Books and Records. The Company will, and cause each of its Subsidiaries to,
at all times keep true and correct books, records and accounts reflecting all of
its business affairs and transactions in accordance with GAAP. Such books and
records shall be open at reasonable times and upon reasonable notice to the
inspection of the Payee or its agents, subject to customary confidentiality
restrictions but in no event more than once in each month absent a good-faith
showing of need for such restrictions;

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(vii) Notice of Certain Events. The Company will, and cause each of its
Subsidiaries to, give prompt written notice (with a description in reasonable
detail) to the Payee of:

(a) the occurrence of any Event of Default or any event which, with the giving
of notice or the lapse of time, would constitute an Event of Default; and

(b) the delivery of any notice effecting the acceleration of any indebtedness
which singly or together with any other accelerated indebtedness exceeds
$25,000;

(c) the issuance by any court or governmental agency or authority of any
injunction, order, decision or other restraint prohibiting, or having the effect
of prohibiting, the making of or invalidating, or having the effect of
invalidating, any material provision of this Agreement, of the initiation of any
litigation or similar proceedings seeking any such injunction, order, decision,
or other restraint;

(d) the filing or commencement of any action, suit or proceeding against the
Company or any of its Subsidiaries, whether at law or in equity or by or before
any court of any Federal, state, municipal or other governmental agency or
authority, which is brought by or on behalf of any governmental agency or
authority, or in which injunctive or other equitable relief is sought and such
relief, if obtained, would materially impair the right or ability of the Company
to perform it obligations under this Note;

(e) the commencement of any claim, litigation, proceeding or tax audit not
covered by insurance when the amount claimed is in any individual claim,
litigation, proceeding or tax audit in excess of $50,000 or, in the aggregate,
$100,000; and

(f) of any material development materially and adversely affecting the business,
properties, liabilities, obligations, financial condition, prospects, operations
or results of operations of the Company and its Subsidiaries, taken as a whole;

(viii) Financial Statements and Information. The Company shall furnish or cause
to be furnished to the Payee:

(a) within 90 days after the end of each fiscal year (or such time as permitted
under Rule 12b-25 of the Securities Exchange Act of 1934, as amended; provided
however, that in no event shall the Company be permitted more than one extension
pursuant to either Section 6A(ix)(a) or (b)), a copy of the audited consolidated
balance sheet of the Company and its Subsidiaries, together with the related
statements of income, changes in stockholder's equity, changes in cash flows as
of the end of and for such fiscal year, all reported on by the accountants to
the effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Company and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;

(b) within 45 days after the end of each of the first three fiscal quarters of
each fiscal year (or such time as permitted under Rule 12b-25 of the Securities
Exchange Act of 1934, as amended; provided, however, that in no event shall the
Company be permitted more than one extension pursuant to either Section
6A(ix)(a) or (b); provided, further, however, that the extension with respect to
the restatement of the quarterly report for the period ending September 30, 2001
shall not be deemed to count as an extension pursuant to (i) above), a copy of
the consolidated balance sheet of the Company and each of its Subsidiaries
together with the related statements of income and cash flows as of the end of
and for such fiscal quarter and the then elapsed portion of the fiscal year, all
certified by one of its financial officers as presenting fairly in all material
respects the financial conditions and results of operations of the Company and
its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;

(c) promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed by the Company or
any of its Subsidiary with the SEC or with any national securities exchange, or
distributed by the Company or any of its Subsidiaries to its shareholders, as
the case may be; and

(d) promptly following any request therefor, such other information regarding
the business, financial condition or operations of the Company or compliance
with the terms of this Note, as the Payee may reasonably request, subject to
customary confidentiality agreements and without causing undue expense to the
Company or undue distraction of its employees or management.

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B. Negative Covenants. The Company covenants and agrees with respect to the
Company and each of its Subsidiaries that, so long as this Note shall remain in
effect, or the Principal Amount of, or interest thereon, or any fee, expense or
amount payable hereunder or with respect to this Note shall be unpaid, it will
perform the obligations set forth in this Section 6B:

(i) Business in the Ordinary Course. The Company will, and will cause each of
its Subsidiaries to, (i) refrain from engaging in transactions other than in the
ordinary course of business consistent with past practice; (ii) operate its
respective businesses in accordance and in compliance with all applicable laws,
ordinances, rules or regulations or orders, including, without limitation
environmental laws, and all permits, authorizations, consents and approvals;
(iii) maintain all permits and licenses in effect and, if necessary, make all
appropriate filings for the renewal of any permits or licenses; (iv) refrain
from entering into any transaction involving capital expenditures or commitments
therefor (including any borrowings in connection with such transaction except
for the agreement with Jano Holdings Limited) of more than $100,000,
individually, or $500,000 in the aggregate, or the disposal of any properties or
assets (other than inventory in the ordinary course) with a value of more than
$25,000, individually, or $50,000, in the aggregate, except in the case of
foregoing clauses (ii) and (iii) where the failure to take such action would not
reasonably be expected to have a Material Adverse Effect, and except, in the
case of all of the foregoing clauses, with respect to any financing transaction,
or as otherwise contemplated by the agreements entered into in connection with
this Note;

(ii) Merger, Liquidation, Dissolution. The Company will not, and will not permit
any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge
into or with, any other corporation or other entity (other than a merger or
consolidation of a wholly-owned subsidiary of the Company.), except that any
wholly-owned subsidiary may merge with another wholly-owned subsidiary or with
the Company (so long as the Company is the surviving corporation and no Event of
Default shall occur as a result thereof); provided, however, that the Company
may permit its Subsidiaries to liquidate or dissolve only on the condition that
all of the assets of such Subsidiaries are immediately transferred to the
Company and only if such liquidation or dissolution, as the case may be, would
not result in a Material Adverse Effect;

(iii) Sales of Assets. The Company will not, and will not permit any of its
Subsidiaries to, sell, transfer, lease or otherwise dispose of, or grant
options, warrants or other rights with respect to, all or a substantial part of
its properties or assets to any person or entity, provided that this clause
(iii) shall not restrict any disposition made in the ordinary course of business
and consisting of capital goods which are obsolete or have no remaining useful
life;

(iv) Redemptions. The Company will not redeem or repurchase any outstanding
equity and/or debt securities of the Company or its Subsidiaries (or securities
convertible into or exchangeable for equity securities of such entity);

(v) Indebtedness. Other than indebtedness for borrowed money of the Company or
any of its Subsidiaries existing on the date of this Note and identified on the
schedule delivered to the Payee on the date hereof, neither the Company nor any
of its Subsidiaries will hereafter create, incur, assume or suffer to exist,
contingently or otherwise, any indebtedness for borrowed money, except in the
ordinary course of business (consistent with past practice) but not to exceed
$50,000 at any time outstanding;

(vi) Negative Pledge. Other than Liens existing on the date of this Note and
expressly identified in the schedule delivered to the Payee on the date hereof,
the Company will not, and will not permit any of its Subsidiaries to, hereafter
create, incur, assume or suffer to exist any mortgage, pledge, hypothecation,
assignment, security interest, encumbrance, lien (statutory or other),
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement and any financing lease) (each, a "Lien") upon any of its
property, revenues or assets, whether now owned or hereafter acquired, except:

o Liens for taxes, assessments or other governmental charges or levies not at
the time delinquent or thereafter payable without penalty or being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;

o Liens of carriers, warehousemen, mechanics, materialman and landlords incurred
in the ordinary course of business for sums not overdue or being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;

                                    - 116 -
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o Liens (other than Liens arising under the Employee Retirement Income Security
Act of 1974, as amended, or Section 412(n) of the Internal Revenue Code of 1986,
as amended) incurred in the ordinary course of business in connection with
workers' compensation, unemployment insurance or other forms of governmental
insurance or benefits, or to secure performance of tenders, statutory
obligations, leases and contracts (other than for borrowed money) entered into
in the ordinary course of business or to secure obligations on surety or appeal
bonds; and

o Judgment Liens in existence less than 30 days after the entry thereof or with
respect to which execution has been stayed in an amount not to exceed $25,000
singly or in the aggregate (the liens described in (a)-(d) being referred to
herein as "Permitted Liens");

(vii) Investments. The Company will not, and will not permit any of its
Subsidiaries to, purchase, own, invest in or otherwise acquire, directly or
indirectly, any stock or other securities or make or permit to exist any
investment or capital contribution or acquire any interest whatsoever in any
other person or entity or permit to exist any loans or advances for such
purposes except for the development of its business and (i) investments in
direct obligations of the United States of America or any agency thereof, (ii)
obligations guaranteed by the United States of America, (iii) certificates of
deposit or other obligations of any bank or trust company organized under the
laws of the United States or any state thereof and having capital and surplus of
at least $500,000, (iv) existing investments in Subsidiaries and the development
of new subsidiaries, or (v) an investment in any subsidiary created for the
purpose of making that investment;

(viii) Transactions with Affiliates. The Company will not, and will not permit
any of its Subsidiaries to, enter into any transaction, including, without
limitation, the purchase, sale, lease or exchange of property, real or personal,
the purchase or sale of any security, the borrowing or lending of any money, or
the rendering of any service, with any person or entity affiliated with the
Company or any of its Subsidiaries (including officers, directors and
shareholders owning five (5%) percent or more of the Company's outstanding
capital stock), except (i) in the ordinary course of and pursuant to the
reasonable requirements of its business and upon fair and reasonable terms not
less favorable than would be obtained in a comparable arms-length transaction
with any other person or entity not affiliated with the Company and, where the
transaction is valued at in excess of $5,000 with the prior written consent of
the Payee, which shall not be unreasonably withheld, (ii) transactions pursuant
to existing agreements as set forth on the schedule delivered to the Payee on
the date hereof and (iii) transactions contemplated by the agreements entered
into in connection with this Note;

(ix) Fundamental Changes. The Company will not, and will not permit any of its
Subsidiaries to, consolidate or merge with any other person or entity, or to
permit any other person or entity to merge into or consolidate with it or any of
its Subsidiaries (other than a merger, consolidation or any other combination of
a wholly-owned subsidiary of the Company);

(x) Acquisitions. The Company will not, and will not permit any of it
Subsidiaries to, at any time, acquire all or substantially all of the assets or
any of the capital stock of any person or entity;

(xi) Restricted Payments. The Company will not, and will not permit any of its
Subsidiaries to, declare, play or make any dividend or other distribution,
direct or indirect, on account of any shares of capital stock in such person or
entity now or hereafter outstanding (other than a dividend payable solely in
shares of such capital stock to the holders of such shares) or any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition,
direct or indirect, of any shares of any class of its capital stock now or
hereafter outstanding (collectively, "Restricted Payments"), except:

(a) any wholly-owned subsidiary of the Company may make Restricted Payments to
the Company; and

(b) Restricted Payments made by any Subsidiary of the Company to the Company in
amounts sufficient to enable the Company, as the consolidated taxpayer for
itself and its Subsidiaries, if applicable, to pay taxes when due;

(xii) Lines of Business. Except as contemplated by the agreements entered into
in connection with this Note, the Company will not, and will not permit any of
its Subsidiaries to, materially change the nature of the business of the Company
and its Subsidiaries as conducted on the date hereof or enter into any new
business which materially increase the risk profile of the Company and its
Subsidiaries, taken as a whole; and

(xiii) Amendment of Documents. The Company will not, and will not permit any of
its Subsidiaries to, modify, amend, supplement or terminate, or agree to modify,
amend, supplement or terminate, their organizational documents in any way that
could result in a Material Adverse Effect without the written consent of the
Payee; provided, however, that with respect to the following (to the extent

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deemed to result in a Material Adverse Effect), such consent shall not be
unreasonably withheld: (i) amendment to the by-laws of the Company or any
Subsidiary to preclude actions by written consent or nominations of directors
other than through a prescribed nominations process, and (ii) amendment to the
Company's or any Subsidiaries' certificate of incorporation to increase its
authorized common stock.

(xiv) Stock Option Plan; Board of Directors. Notwithstanding anything to the
contrary set forth in this Note, the Company will not, and not permit any of its
Subsidiaries to, without the written consent of the Lender (a) adopt a stock
option plan, or to increase the number of shares of common stock issuable
pursuant to an existing stock option plan or (b) amend its by-laws to increase
the number of directors serving on its board of directors.

16. Events of Default.

A. The term "Event of Default" shall mean any of the events set forth in this
Section 7A:

(i) Non-Payment of Obligations. The Company shall default in the payment of the
principal or accrued interest of this Note as and when the same shall become due
and payable, whether by acceleration or otherwise.

(ii) Non-Performance of Affirmative Covenants. The Company shall default in the
due observance or performance of any covenant set forth in (a) clauses (i),
(iii), (vi), (viii) and (ix) of Section 6A or (b) clauses (ii), (iv), (v) and
(vii) of Section 6A and such default of clauses (ii), (iv), (v) and (vii) of
Section 6A shall continue remedial for ten (10) Business Days.

(iii) Non-Performance of Negative Covenants. The Company shall default in the
due observance or performance of any covenant set forth in Section 6B.

(iv) Bankruptcy. The Company (or any of its Subsidiaries) shall:

o apply for, consent to, or acquiesce in, the appointment of a trustee,
receiver, sequestrator or other custodian for the Company or any of its
Subsidiaries, or any of their property, or make a general assignment for the
benefit of creditors; or

o in the absence of such application, consent or acquiesce in the appointment of
a trustee, receiver, sequestrator or other custodian for the Company or any of
its Subsidiaries, or for any part of their property; or

o permit or suffer to exist (i) the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, (ii) any dissolution, winding up or liquidation
proceeding, in respect of the Company or any of its Subsidiaries, or (iii) the
appointment of a trustee, receiver, sequestrator or other custodian, without
causing the same to be dismissed within forty-five (45) days; and, if such case
or proceeding is not commenced by the Company or converted to a voluntary case,
such case or proceeding shall be consented to or acquiesced in by the Company or
any of its Subsidiaries, or shall result in the entry of an order for relief; or

o take any corporate or other action authorizing, or in furtherance of, any of
the foregoing; or

(v) Cross-Default. The Company (or any of its Subsidiary) shall default in the
payment when due of any amount payable under any other obligation for money
borrowed in an amount exceeding Fifty Thousand Dollars ($50,000); or

(vi) Cross-Acceleration. Any indebtedness for borrowed money of the Company (or
any of its Subsidiaries) identified on the schedule delivered to the Payee on
the date hereof in an aggregate principal amount exceeding Twenty Five Thousand
Dollars ($25,000) shall be duly declared to be or shall become due and payable
prior to the stated maturity thereof; or

(vii) Orders, Judgments or Decrees. If any order, judgment, or decree shall be
entered in any proceeding against the Company (or any Subsidiary) requiring such
party to divest itself of a substantial part of its or his assets, or awarding a
money judgment or judgments against any such entity aggregating more than
$25,000, and if, within thirty (30) days after entry thereof, such order,
judgment or decree shall not have been discharged or execution thereof stayed
pending appeal; or if, within thirty (30) days after the expiration of any such
stay, such judgment, order or decree shall not have been discharged; or

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(viii) Invalidity of Note or Security Documents. This Note or any other Security
Document shall for any reason cease to be, or shall be asserted by the Company
not to be, a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, or the security interest or Lien purported to be
created by any of the Security Documents shall for any reason cease to be, or be
asserted by the Company not to be, a valid, first priority perfected security
interest in any Collateral (except to the extent otherwise permitted under any
of the Security Documents); or

(ix) Other Breaches, Defaults. The Company shall default and/or be in breach of
any representation, warranty or covenant made by the Company to the Payee
provided under this Note, any Security Document, the Warrant, the Letter
Agreement, the Engagement Letter or any other agreement between the Company and
either the Payee or Bioaccelerate Limited related to the subject matter
contained in such agreements or documents.

B. Rights and Remedies Cumulative. No right or remedy herein conferred upon the
Payee is intended to be exclusive of any other right or remedy contained herein
or in any instrument or document delivered in connection with or pursuant to
this Note or the Security Documents, and every such right or remedy shall be
cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.

C. Rights and Remedies Not Waived. No course of dealing between the Company and
the Payee or any failure or delay on the part of the Payee in exercising any
rights or remedies of the Payee and no single or partial exercise of any rights
or remedies hereunder or under the Security Documents shall operate as a waiver
or preclude the exercise of any other rights or remedies hereunder.

17. Representations of the Company. The Company represents and warrants to the
Payee that:

A. Corporate Organization; Etc. The Company and its Subsidiaries are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdiction in which they are incorporated, and have the full
corporate power and authority to carry on their business as they are now being
conducted and to own the properties and assets they now own; are duly qualified
or licensed to do business as a foreign corporation in good standing in the
jurisdictions in which such qualification is required, except where the failure
to so qualify or to be so licensed would not have a Material Adverse Effect on
its business, financial condition, results of operations or on its ability to
continue to conduct its business as currently conducted. The copies of the
articles of incorporation and by-laws (or other relevant organization documents)
and any amendments thereto of the Company and each of its Subsidiaries
heretofore delivered to the Payee are complete and correct copies of such
instruments as currently in effect. As used in this Note, "Material Adverse
Effect" means any material adverse effect on the business, properties, assets,
operations, results of operations, prospects or financial condition of the
Company and its Subsidiaries, taken as a whole. The term "Material Adverse
Effect" does not include any material developments adversely affecting (i) the
industry in which the Company is engaged generally or (ii) the national economy,
security, stability or peace of the United States or any country, taken as a
whole.

B. Capitalization. The authorized, issued and outstanding capital stock of the
Company prior to the consummation of the transactions contemplated hereby is set
forth in Schedule 8B. All of such outstanding shares have been and are, or upon
issuance will be, validly issued, fully paid and non-assessable. Except as
disclosed in the schedule delivered to the Payee on the date hereof, (i) no
shares of the Company's capital stock are subject to preemptive rights under
Delaware law or any other similar rights or any liens or encumbrances suffered
or permitted by the Company; (ii) there are no outstanding debt securities
issued by the Company (other than as may be issued pursuant to the Letter
Agreement); (iii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act; (v) there are no outstanding securities of
the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vi) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of this Note; and (vii) the Company does
not have any stock appreciation rights or "phantom stock" plans or agreements or
any similar plan or agreement. All prior sales of securities of the Company or
any of its Subsidiaries were either registered under the 1933 Act and applicable
state securities laws or exempt from such registration, and no security holder
has any rescission rights with respect thereto except to the extent any such
rights would not reasonably be expected to have a Material Adverse Effect.

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<PAGE>

C. Title. Except as set forth in or contemplated by the schedule to be delivered
to the Payee on the date hereof, the Company has good and marketable title to
all material properties and assets owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except as not prohibited by Section
6(B)(vi) hereof or such as are not significant or important in relation to the
Company's business; all of the material leases and subleases under which the
Company is the lessor or sublessor of properties or assets or under which the
Company holds properties or assets as lessee or sublessee are in full force and
effect, and the Company is not in default in any material respect with respect
to any of the terms or provisions of any of such leases or subleases, and no
material claim has been asserted by anyone adverse to rights of the Company as
lessor, sublessor, lessee or sublessee under any of the leases or subleases
mentioned above, or affecting or questioning the right of the Company to
continued possession of the leased or subleased premises or assets under any
such lease or sublease. .

D. Intellectual Property Rights. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted. Except
as set forth on the schedule delivered to the Payee on the date hereof, none of
the Company's trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights has expired or terminated, or is expected to expire
or terminate within two years from the date of this Note, except where such
expiration or termination would not have either individually or in the aggregate
a Material Adverse Effect. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademarks,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secrets or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
such schedule, no claim, action or proceeding has been made or brought against,
or to the Company's knowledge, has been threatened against, the Company or its
Subsidiaries regarding trademarks, trade name rights, patents, patent rights,
inventions, copyrights, licenses, service names, service marks, service mark
registrations, trade secrets or other infringement, except where such
infringement, claim, action or proceeding would not reasonably be expected to
have either individually or in the aggregate a Material Adverse Effect. Except
as set forth on such schedule, the Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties
except where the failure to do so would not reasonably be expected to have
either individually or in the aggregate a Material Adverse Effect.

E. Litigation. Except as set forth in or contemplated by the schedule delivered
to the Payee on the date hereof, there is no material action, suit,
investigation, customer complaint, claim or proceeding at law or in equity by or
before any court, arbitrator, governmental instrumentality or authority or other
agency now pending or, to the knowledge of the Company, threatened against the
Company, the adverse outcome of which would be reasonably likely to have a
Material Adverse Effect. The Company is not subject to any judgment, order,
writ, injunction or decree of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which have a Material Adverse Effect.

F. Taxes. Except as set forth in or contemplated by the schedule delivered to
the Payee on the date hereof, the Company has filed all Federal, state, local
and foreign tax returns which are required to be filed by it or otherwise met
its disclosure obligations to the relevant agencies and all such returns are
true and correct in all material respects. The Company has paid or adequately
provided for all tax liabilities of the Company as reflected on such returns or
determined to be due on such returns or pursuant to any assessments received by
it or which it is obligated to withhold from amounts owing to any employee,
creditor or third party. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim. The Company has properly
accrued all taxes required to be accrued by GAAP consistently applied. The tax
returns of the Company have never been audited by any state or Federal
authorities. The Company has not waived any statute of limitations with respect
to taxes or agreed to any extension of time with respect to any tax assessment
or deficiency.

G. Compliance With Laws; Licenses; Etc. The business of the Company and its
Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any governmental entity except for such violations the sanctions
for which either individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect, and the Company has not received
notice of any violation of or noncompliance with any Federal, state, local or
foreign, laws, ordinances, regulations and orders applicable to its business

                                    - 120 -
<PAGE>

which has not been cured, the violation of, or noncompliance with which, would
be reasonably likely to have a Material Adverse Effect. The Company has all
material licenses and permits and other governmental certificates,
authorizations and permits and approvals (collectively, "Licenses") required by
every Federal, state and local government or regulatory body for the operation
of its business as currently conducted and the use of its properties, except
where the failure to be licensed or possess a permit would not reasonably be
expected to have a Material Adverse Effect. The Licenses are in full force and
effect and to the Company's knowledge no violations currently exist in respect
of any License and no proceeding is pending or threatened to revoke or limit any
thereof.

H. Existing Indebtedness. The schedule delivered to the Payee on the date hereof
is a complete and correct list of all indebtedness for borrowed money of the
Company and its Subsidiaries in an unpaid principal amount exceeding $10,000,
showing as to each item of such indebtedness the obligor, the aggregate
principal amount outstanding and a brief description of any security therefor
(after giving effect to the application of the proceeds of the sale of this
Note). The Company is not in default in any material respect in the performance
or observance of any of the terms, covenants or conditions contained in any
instrument evidencing any such indebtedness and no event has occurred and is
continuing which, with notice or the lapse of time or both, would become such a
default.

I. Security Interest. Assuming that the Security Documents are in proper form
and are perfected in accordance with applicable laws and regulations on the date
thereof, the Security Documents create and grant to the Payee a legal, valid and
perfected first priority security interest in the Collateral. The Collateral is
not subject to any other Lien or security interest whatsoever except Permitted
Liens.

J. Subsidiaries. As of the date hereof, (i) the Company has only the
Subsidiaries set forth on, and the authorized, issued and outstanding capital
stock of each Subsidiary is as set forth on, the schedule delivered to the Payee
on the date hereof and (ii) the ownership interests in each Subsidiary of the
Company are duly authorized, validly issued, fully paid and nonassessable and
are owned beneficially and of record by the persons set forth on such schedule,
free and clear of all Liens. As of the date hereof, the Subsidiaries of the
Company have not issued any securities convertible into, or options or warrants
for, any common or preferred equity securities thereof, except as set forth on
such schedule. Except as set forth on such schedule, there are no agreements,
voting trusts or understandings binding on the Company or any of its
Subsidiaries restricting the transfer of the voting securities of any of the
Company's Subsidiaries or affecting in any manner the sale, pledge, assignment
or other dispositions thereof, including any right of first refusal, option,
redemption, call or other right with respect thereto, whether similar or
dissimilar to any of the foregoing.

K. Investment Companies and Other Regulated Entities. Neither the Company nor
any of its Subsidiaries is (i) an "investment company" or a company "controlled"
by an "investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended, or (ii) a "holding company" as
defined in, or subject to regulation under, the Public Utility Holding Company
Act of 1935 or the Federal Power Act, as amended.

L. Absence of Certain Restrictions. No indenture, certificate of designation for
preferred stock, agreement or instrument to which the Company or any of its
Subsidiary is a party (other than this Note or any Note issued pursuant to the
Letter Agreement), prohibits or limits in any way, directly or indirectly the
ability of any such Subsidiary to make Restricted Payments or repay any
indebtedness to the Company or to another Subsidiary of the Company.

M. ERISA. Each Pension Plan is in compliance with the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the rules and
regulations issued thereunder, as from time to time in effect ("ERISA") and the
Code, where applicable, in all material respects and no ERISA Event has occurred
or is reasonably expected to occur that, when taken together with all other
ERISA Events for which liability is reasonably expected to occur, is reasonably
expected to result in a Material Adverse Effect. As used in this Note, "Pension
Plan" means, at any date of determination, any employee pension benefit plan,
the funding of which (under Section 302 of ERISA or Section 412 of the Code)
are, or at any time within the six years immediately preceding such date, were
in whole or in part, the responsibility of the Company or any of its
Subsidiaries, or any person or entity which is a member of any group of
organizations within the meaning of Section 414(b) or (c) of the Code (or,
solely for the purposes of potential liability under Section 302(c)(11) of
ERISA, and Section 412(n) of the Code, Sections 414(m) or (o) of the Code) which
the Company or any of its Subsidiaries is a member (each, an "ERISA Affiliate").
As used in this Note, "ERISA Event" means (i) a "reportable event", as defined
in Section 4043 of ERISA with respect to a Pension Plan (other than an event for
which the 30-day notice period is waived), (ii) the existence with respect to

                                    - 121 -
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any Pension Plan of an "accumulated funding deficiency" (as defined in Section
412 of the Code or Section 302 of ERISA), whether or not waived; (iii) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Pension Plan; (iv) the incurrence by the Company or its Subsidiaries or any
ERISA Affiliate of any liability under Title IV of ERISA with respect to the
termination of any Pension Plan; (v) the receipt by the Company or any of its
Subsidiaries or any ERISA Affiliate from the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA (or any
governmental authority succeeding to the functions thereof) or a plan
administrator of any notice relating to an intention to terminate any Pension
Plan or Pension Plans or to appoint a trustee to administer any Pension Plan;
(vi) the incurrence by the Company or any of its Subsidiaries or any ERISA
Affiliate of any liability with respect to the withdrawal or partial withdrawal
from any Pension Plan or Multiemployer Plan (as defined in Section 4003(a)(3) of
ERISA); or (vii) the receipt by the Company or any of its Subsidiaries or ERISA
Affiliate of any notice, concerning the imposition of Withdrawal Liability (as
defined in Part I of Subtitle E of Title IV of ERISA) or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

                         N. Authorization; No Violation.

(a) The Company has full corporate power and authority necessary to enter into
this Note and the Security Documents to carry out the transactions contemplated
by the Documents. The Board of Directors of the Company has taken such necessary
action to authorize the execution and delivery of this Note and the Security
Documents and the consummation of the transactions contemplated thereby. This
Note and the Security Documents have been duly executed and delivered by the
Company and are legal, valid and binding obligations of the Company enforceable
against it in accordance with its terms except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought.

o Neither the execution and delivery of any of the Security Documents nor the
consummation of the transactions contemplated thereby will violate any provision
of the articles or certificate of incorporation or by-laws or other
organizational documents of the Company, be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any debt
or obligation pursuant to, or result in the creation or imposition of any
security interest, lien or other encumbrance upon any property or assets of the
Company, any agreement or commitment to which the Company is a party or by which
the Company is bound or to which the property of the Company is subject, or
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority applicable to the Company.

18. Miscellaneous.

A. Parties in Interest. All covenants, agreements and undertakings in this Note
binding upon the Company or the Payee shall bind and inure to the benefit of the
successors and permitted assigns of the Company and the Payee, respectively. The
Payee shall not be entitled to assign this Note without the written consent of
the Company, which consent shall not be unreasonably withheld.

B. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of New York without regard to the conflicts of laws
or principles thereof. The parties hereto hereby agree that any suit or
proceeding arising directly and/or indirectly pursuant to or under this
instrument or the consummation of the transactions contemplated hereby, shall be
brought solely in a federal or state court located in the City, County and State
of New York. By its execution hereof, the parties hereby covenant and
irrevocably submit to the in personam jurisdiction of the federal and state
courts located in the City, County and State of New York and agree that any
process in any such action may be served upon any of them personally, or by
certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon them
in New York City. The parties hereto waive any claim that any such jurisdiction
is not a convenient forum for any such suit or proceeding and any defense or
lack of in personam jurisdiction with respect thereto. In the event of any such
action or proceeding, the party prevailing therein shall be entitled to payment
from the other party hereto of its reasonable counsel fees and disbursements in
an amount judicially determined.

C. Waiver of Jury Trial. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN
CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PAYEE OR THE COMPANY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S PURCHASING THIS NOTE.

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D. Expenses and Fees. All fees, costs and expenses of every kind and nature,
including but not limited to the reasonable attorneys' fees and legal expenses,
incurred by Payee in connection with the collection, administration, or
enforcement of its rights under this Note or in defending or prosecuting any
actions or proceedings arising out of or related to any amounts due to Payee
under this Note shall be borne and paid by the Company upon written demand by
the Payee and until paid, shall be added to the amounts due hereunder and bear
interest at a rate per annum equal to 6% over base.

E. Repricing of Options. No representation or covenant shall be deemed to be
breached in the event that the Company effectuates a repricing of any options
previously issued pursuant to a stock option plan in accordance with the terms
therewith as a result of the receipt by Holder of any Warrant; provided,
however, that under no circumstances shall such repricing result in an exercise
price less than the Warrant Share Price.

F. Entire Agreement. This Note (including any schedule referenced herein), the
Security Documents and the Letter Agreement set forth the entire agreement of
the parties with respect to the subject matter hereof and thereof, superseding
and replacing any agreement or understanding that may have existed between the
parties prior to the date hereof in respect to such subject matter.

IN WITNESS WHEREOF, this Note has been executed and delivered on the date first
specified above by the duly authorized representative of the Company.

                          BIOACCELERATE HOLDINGS, INC.

                    By: _____________________________________
                        Name:
                        Title:

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                               SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this "Agreement") is dated as of September 28th, 2004,
by BIOACCELERATE HOLDINGS, INC., a Nevada corporation (the "Grantor"), in favor
of Lifescience Ventures Limited, a BVI, corporation (the "Lender").

                                    Recitals

WHEREAS, pursuant to that certain letter agreement (the "Letter Agreement") of
even date herewith between the Grantor and Lender, Lender has made available a
senior, secured credit facility in the aggregate principal amount of up to
Twelve Million Five Hundred Thousand Dollars ($12,500,000);

WHEREAS, pursuant to that certain Note of even date herewith, issued by the
Grantor in favor of the Lender (as the same may from time to time be amended,
modified, supplemented or restated, the "Note"), Grantor has promised to pay the
Obligations (as defined herein) to the Lender; and

WHEREAS, the obligations of the Lender under the Letter Agreement are subject to
the condition, among others, that Grantor shall have executed and delivered to
Lender this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by Grantor, Grantor hereby represents,
covenants and agrees with Lender as follows:

55. Definitions.

      a.    When used in this Agreement the following terms shall have the
            following meanings (such meanings being equally applicable to both
            the singular and plural forms of the terms defined):

"Collateral" has the meaning assigned to such term in Section 2 of this
Agreement.

"Contracts" means all contracts (including any customer, vendor, supplier,
service or maintenance contract), leases, licenses, undertakings, purchase
orders, permits, franchise agreements or other agreements (other than any right
evidenced by Chattel Paper, Documents or Instruments), whether in written or
electronic form, in or under which Grantor now holds or hereafter acquires any
right, title or interest, including, without limitation, with respect to an
Account, any agreement relating to the terms of payment or the terms of
performance thereof.

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"Copyrights" means all of the following now owned or hereafter acquired or
created (as a work for hire for the benefit of Grantor) by Grantor or in which
Grantor now holds or hereafter acquires or receives any right or interest, in
whole or in part: (a) all copyrights, whether registered or unregistered, held
pursuant to the laws of the United States, any State thereof or any other
country; (b) registrations, applications, recordings and proceedings in the
United States Copyright Office or in any similar office or agency of the United
States, any State thereof or any other country; (c) any continuations, renewals
or extensions thereof; (d) any registrations to be issued in any pending
applications, and shall include any right or interest in and to work protectable
by any of the foregoing which are presently or in the future owned, created or
authorized (as a work for hire for the benefit of Grantor) or acquired by
Grantor, in whole or in part; (e) prior versions of works covered by copyright
and all works based upon, derived from or incorporating such works; (f) income,
royalties, damages, claims and payments now and hereafter due and/or payable
with respect to copyrights, including, without limitation, damages, claims and
recoveries for past, present or future infringement; (g) rights to sue for past,
present and future infringements of any copyright; and (h) any other rights
corresponding to any of the foregoing rights throughout the world.

"Obligations" has the meaning set forth in Section 3 of this Agreement.

"Patents" means all of the following in which Grantor now holds or hereafter
acquires any interest: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof and all applications for
letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country; (b) all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof; (c) all
petty patents, divisionals and patents of addition; (d) all patents to issue in
any such applications; (e) income, royalties, damages, claims and payments now
and hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (f) rights to sue for past, present and future infringements
of any patent.

"Trademark" means any of the following in which Grantor now holds or hereafter
acquires any interest: (a) all trademarks, whether registered or unregistered,
held pursuant to the laws of the United States, and State thereof, or any
country (b) registrations, applications, recordings and proceedings in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country; (c) any
continuations, renewals or extensions thereof; (d) any registrations to be
issued in any pending applications (e) income, royalties, damages, claims and
payments now and hereafter due and/or payable with respect to trademarks,
including, without limitation, damages, claims and recoveries for past, present
or future infringement; (g) rights to sue for past, present and future
infringements of any trademark; and (h) any other rights corresponding to any of
the foregoing rights throughout the world.

"UCC" means the Uniform Commercial Code as the same may from time to time be in
effect in the State of New York; provided, however, in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of Lender's security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, the term "UCC" shall mean the Uniform Commercial Code (including the
Articles thereof) as in effect at such time in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions. In
addition, the following terms shall have the meanings set forth for such terms
in the UCC: "Account," "Account Debtor," "Chattel Paper" (including tangible and
electronic chattel paper), "Commercial Tort Claims," "Commodity Account,"
"Deposit Account," "Documents," "Equipment," "Fixtures," "Fixture Filing,"
"General Intangible" (including, without limitation, Payment Intangibles,
Copyrights, Patents, Trademarks, designs, drawings, technical information,
marketing plans, customer lists, trade secrets, proprietary or confidential
information, inventions (whether or not patentable), procedures, know-how,
models and data), "Instrument," "Intellectual Property," "Inventory" (including
all goods held for sale or lease or to be furnished under a contract of service,
and including returns and repossessions), "Investment Property" (including
Securities, Securities Accounts and Securities entitlements), "Letter-of-Credit
Right" (whether or not the letter of credit is evidenced by a writing), "Payment
Intangibles," "Proceeds," "Promissory Notes," "Securities," "Securities
Account," "Securities Entitlement" and "Supporting Obligations." Each of the
foregoing terms shall include all of such items now owned, or hereafter
acquired, by Grantor.

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<PAGE>

b. Except as otherwise defined herein, all capitalized terms used in this
Agreement have the meanings stated in the Note.

56. Grant of Security. As collateral security for the full, prompt, complete and
final payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Obligations, Grantor hereby grants to
Lender a lien on and security interest in, all of Grantor's right, title and
interest in, to and under the following, whether now owned or hereafter acquired
(all of which being collectively referred to herein as the "Collateral"):

a. All Accounts of Grantor (including, but not limited to, and notwithstanding
anything in this Agreement to the contrary, any and all proceeds, money or
accounts under all Contracts (without exception).

b. All Chattel Paper of Grantor;

c. All Contracts of Grantor;

d. All Deposit Accounts of Grantor;

e. All Documents of Grantor;

f. All Equipment of Grantor;

g. All Fixtures of Grantor;

h. All General Intangibles of Grantor;

i. All Instruments of Grantor, including, without limitation, Promissory Notes;

j. All Inventory of Grantor;

k. All Investment Property of Grantor;

l. All Letter-of Credit Rights of Grantor;

m. All Supporting Obligations of Grantor;

n. All property of Grantor held by Lender, including, without limitation, all
property of every description now or hereafter in the possession or custody of
or in transit to Lender for any purpose, including, without limitation,
safekeeping, collection or pledge, for the account of Grantor, or as to which
Grantor may have any right or power;

o. All other goods and personal property of Grantor wherever located, whether
tangible or intangible, and whether now owned or hereafter acquired, existing,
leased or consigned by or to Grantor, except those goods and personal property
which are excluded pursuant to Section 2(c) or 2(h) hereunder; and

p. To the extent not otherwise included, all Proceeds of each of the foregoing
and all accessions to, substitutions and replacements for and rents, profits and
products of each of the foregoing.

If Grantor shall at any time acquire a Commercial Tort Claim, Grantor shall
promptly notify the Lender in a writing signed by Grantor of the brief details
thereof and grant to Lender in such writing a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement, with such writing to
be in form and substance reasonably satisfactory to the Lender.

                                    - 126 -
<PAGE>

Grantor hereby authorizes the Lender to file, without Grantor's signature
thereon and at Grantor's expense, financing statements, continuation statements
(including "in lieu" continuation statements) and amendments thereto, that
describe the Collateral and which contain any other information required by Part
5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any
financing statement, continuation statement or amendment, including if Grantor
is an organization, the type of organization and any organization identification
number issued to Grantor.

Grantor accepts that this agreement ranks pari-passu with the facility provided
by Technology Finance Inc on 9th February 2004, and with the agreement being
entered into With Jano Holdings Limited as of the date hereof.

57. Security for Obligations. This Agreement secures the payment of (i) all of
the unpaid principal amount of, and accrued interest on (including any interest
that accrues after the commencement of any bankruptcy proceeding) the Note, (ii)
the obligation of Grantor to pay any fees, costs and expenses of Lender under
the Note, and (iii) all other obligations, liabilities and indebtedness owed by
Grantor to the Lender under the Note, in each case, whether now existing or
hereafter incurred (collectively, the "Obligations").

58. Rights of Lender; Collection of Accounts.

a. Grantor expressly agrees that Grantor shall remain liable under each of its
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder and that Grantor shall perform all of
its duties and obligations thereunder such that the Grantor shall not be deemed
to be in breach of each such Contract. The Lender shall not have any obligation
or liability under any Contract by reason of or arising out of this Agreement or
the granting to the Lender of a lien therein or the receipt by the Lender of any
payment relating to any Contract pursuant hereto, nor shall the Lender be
required or obligated in any manner to perform or fulfill any of the obligations
of Grantor under or pursuant to any Contract, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by them
or the sufficiency of any performance by any party under any Contract, or to
present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to them
or to which they may be entitled at any time or times.

b. The Lender authorizes Grantor to collect its accounts, provided that such
collection is performed in a prudent and businesslike manner, and the Lender
may, upon the occurrence and during the continuation of any Event of Default and
without notice, limit or terminate said authority at any time. Upon the
occurrence and during the continuance of any Event of Default, at the request of
the Lender, Grantor shall deliver to Lender all original and other documents
which created and/or relate to such accounts, including, without limitation, all
original orders, invoices and shipping receipts.

c. The Lender may at any time, upon the occurrence and during the continuance of
any Event of Default, without notifying Grantor of its intention to do so,
notify Account Debtors of Grantor, parties to the Contracts of Grantor, obligors
in respect of Instruments of Grantor and obligors in respect of Chattel Paper of
Grantor that the Accounts and the right, title and interest of Grantor in, to
and under such Contracts, Instruments and Chattel Paper have been assigned to
Lender and that payments thereunder or with respect thereto are to be made
directly to the Lender. Upon the request of the Lender, Grantor shall promptly
so notify such Account Debtors, parties to such Contracts, obligors in respect
of such Instruments and obligors in respect of such Chattel Paper. Upon the
occurrence and during the continuance of any Event of Default, the Lender may,
in Lender's name or in the name of others, communicate with such Account
Debtors, parties to such Contracts, obligors in respect of such Instruments and
obligors in respect of such Chattel Paper to verify with such parties, to the
Lender's satisfaction, the existence, amount and terms of any such Accounts,
Contracts, Instruments or Chattel Paper. Notwithstanding the foregoing, Lender
shall not notify or otherwise communicate with any parties to Contracts or
Account Debtors of Grantor except upon the occurrence of any Event of Default.

d. Without limiting the foregoing and Lender's rights as set forth in the
foregoing, any action by the Lender pursuant to or as described in Section 4(b)
or Section 4(c) hereof shall be in compliance with the provisions set forth in
Section 12(b)(v) hereof.

59. Representations and Warranties of Grantor. Grantor represents and warrants
as follows:

a. Grantor is a corporation duly organized, existing and in good standing under
the laws of the Delaware, (b) has the legal power to own its property and to
carry on its business as now being conducted, and (c) is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to so
qualify or be in good standing would not have a Material Adverse Effect;

b. Grantor is, and as to Collateral acquired by it from time to time after the
date hereof Grantor will be, the owner of all Collateral free from any liens,
other than liens created hereby and other than Permitted Liens;

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c. This Agreement creates, for the benefit and security of Lender in respect of
the Obligations, a legally valid and binding lien on, pledge of, and security
interest in the Collateral and, upon the filing of a UCC Financing Statement,
and any applicable filings with respect to Copyrights, Patents or Trademarks in
respect of the Collateral, such lien, pledge and security interest will be
perfected and will have priority over the claims of any other present and future
creditors of the Company (other than Permitted Liens or liens upon such of the
Collateral that must be perfected by possession or control of such Collateral);
and

d. Grantor's chief executive office, principal place of business and the place
where Grantor maintains its records concerning the Collateral are each presently
located at the address set forth on the signature page hereof; and Grantor's
Federal taxpayer identification number and Grantor's organizational
identification number under the laws of the State in which Grantor, as a
registered organization, was organized are as set forth on the signature page
hereto.

60. As to the Collateral.

a. Notwithstanding anything to the contrary contained herein, the assignment by
Grantor herein stated is intended to be an assignment for security purposes and
is not intended to divest Grantor of its ownership of the Collateral, except as
otherwise provided herein.

b. So long as no Event of Default has occurred and is continuing, (i) Grantor
shall retain title to and record ownership of the Collateral, and (ii) Grantor
shall be entitled to receive any and all income or distributions made with
respect to the Collateral, except as provided in Section 6(c) hereof.

c. Upon the occurrence and during the continuance of an Event of Default, all
income and proceeds of the Collateral which are received by Grantor shall be (i)
received in trust for the benefit of the Lender, (ii) segregated from other
funds of Grantor, and (iii) forthwith paid over by Grantor to the Lender (for
application in accordance with this Agreement) in the same form as so received.

61. Covenants of Grantor. Grantor covenants and agrees with Lender that unless
approved by Lender:

a. Grantor shall not sell, assign (by operation of law or otherwise), or
otherwise transfer any of the Collateral, or attempt or contract to do so, or
grant any option with respect to any of the Collateral, except Inventory in the
ordinary course of business.

b. Grantor shall not, directly or indirectly, create or permit to exist any lien
upon or with respect to any of the Collateral, and shall defend the Collateral
against, and take such other action as is necessary to remove, any lien on the
Collateral, except for the lien created hereby and any Permitted Liens.

c. Grantor shall maintain all tangible Collateral in good condition and repair,
ordinary wear and tear excepted.

d. Grantor shall maintain on the Collateral property damage and liability
insurance in such amounts, against such risks, and in such forms and with such
companies as are customarily maintained by businesses similar to Grantor. Each
such policy shall not be materially altered or canceled, and the coverage will
not be materially reduced, in any case, without at least thirty (30) days' prior
written notice to the Lender. Grantor shall provide the Lender with satisfactory
evidence of such insurance coverage at the request of the Lender.

e. Grantor shall promptly pay when due all property and other taxes, assessments
and government charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral, except to the extent
the validity thereof is being contested in good faith and by appropriate
proceedings and adequate reserves are being maintained in connection therewith;
provided that this Section 7(f) shall not apply to claims for labor, materials
or supplies which Payee consents in writing shall be excluded herewith,
notwithstanding that such claims, if unpaid, might become a lien or charge upon
such properties or any part thereof.

f. Grantor shall keep and maintain at its own cost and expense satisfactory and
reasonably complete records of the Collateral. Grantor shall furnish the Lender
with such information regarding the Collateral as the Lender may reasonably
request from time to time and shall allow the Lender, upon reasonable notice,
access during normal business hours to inspect the Collateral and Grantor's
records, accounts and books pertaining to the Collateral, provided that no
restriction as to normal business hours shall be required during the continuance
of an Event of Default.

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<PAGE>

g. Grantor shall not knowingly take or omit to take any action, the taking or
omission of which might impair Lender's lien on the Collateral or adversely
affect the value of the Collateral.

h. Upon the occurrence and during the continuance of any Event of Default,
Grantor shall not grant any extension of the time of payment of any of its
Accounts, Chattel Paper, Instruments or amounts due under any of its Contracts
or Documents, compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partly, any Person liable for the payment
thereof, or allow any credit or discount whatsoever thereon other than trade
discounts and rebates granted in the ordinary course of Grantor's business.

i. Grantor shall (i) protect, defend and maintain the validity and
enforceability of the Copyrights, Patents and Trademarks, (ii) use commercially
reasonable efforts to detect infringements of the Copyrights, Patents and
Trademarks and promptly advise the Lender in writing of material infringements
detected, and (iii) not allow any material Copyrights, Patents or Trademarks to
be abandoned, forfeited or dedicated to the public without the written consent
of the Lender, unless any such abandonment is appropriate in accordance with
reasonable and customary business practice.

j. Grantor shall not execute or authorize to be filed in any public office any
UCC financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) except UCC financing statements filed or to
be filed in respect of and covering the lien created by this Agreement.

k. Grantor shall not amend, modify, waive, take any action or fail to take any
action with respect to all or a portion of any Contract which Grantor reasonably
expects or should expect would adversely affect Lender's interest in the
Collateral (including, but not limited to, the value of the Collateral) or which
affect the timing, value or amount of any proceeds due under any Contract.

62. Further Assurances. Grantor agrees, at any time and from time to time, at
the expense of Grantor, and upon request of the Lender, to promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Lender to
exercise and enforce Lender's rights and remedies hereunder with respect to any
Collateral, including, without limitation, (i) delivering and causing to be
filed any financing or continuation statements (including "in lieu" continuation
statements) under the UCC with respect to the security interests granted hereby,
(ii) obtaining "control" by or on behalf of Lender of any Investment Property,

Deposit Accounts, Letter-of-Credit Rights or Electronic Chatter Paper (with
reference to applicable provisions of the UCC with respect to "control" for such
items of Collateral), (iii) placing the interest of the Lender as lien holders
on the certificate of title (or similar evidence of ownership) of any Equipment
constituting Collateral owned by Grantor which is covered by a certificate of
title (or similar evidence of ownership), (iv) filing or cooperating with the
Lender in filing any forms or other documents required to be recorded with the
United States Patent and Trademark Office, United States Copyright Office, or
any actions, filings, recordings or registrations in any foreign jurisdiction or
under any international treaty, required to secure or protect Lender's interest
in the Collateral, (v) transferring Collateral to the possession of the Lender
(if a security interest in such Collateral can only be perfected by possession),
(vi) executing and delivering or causing to be delivered written notice to
insurers of Lender's security interest in, or claim in or under, any policy of
insurance (including unearned premiums), and (vii) using its best efforts to
obtain acknowledgements from bailees having possession of any Collateral and
waivers of liens from landlords and mortgagees of any location where any of the
Collateral may from time to time be stored or located. If Grantor executes and
delivers any document or instrument pursuant to this Section 8, such document or
instrument shall be in form and substance reasonably satisfactory to the Lender
and a copy thereof shall be provided by Grantor to the Lender; and if Grantor
takes any other action pursuant to this Section 8, such action shall be taken
with the prior written consent of the Lender and notice thereof shall be given
by Grantor to the Lender.

63. Security Interest Absolute. All rights of the Lender and the assignment and
security interest hereunder, and all obligations of Grantor hereunder, shall
remain in full force and effect and shall secure the Obligations, and shall be
absolute and unconditional, irrespective of:

a. any change in the time, manner or place of payment of, or in any other term
of, all or any of the Obligations or any other amendment or waiver of or any
consent to any departure from the Note; or

b. any taking, exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to departure from any guaranty,
for all or any of the Obligations; or

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c. any manner of application of any Collateral, or proceeds thereof, to all or
any of the Obligations or any manner of sale or other disposition of any
Collateral; or

d. any other circumstances other than releases, waivers and the like by the
Lender that might otherwise constitute a defense available to, or a discharge
of, Grantor's obligations hereunder or Lender's security interest hereunder.

64. Continuing Security Interest; Sale of Participations; Release of Collateral.
This Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the payment in full of the
Obligations (subject to Section 14 hereof), (ii) be binding upon Grantor, its
successors and its permitted assigns under the Note, and (iii) inure to the
benefit of, and be enforceable by (subject to the terms hereof), the Lender and
its successors and assigns. No sales of participations in, and no other sales,
assignments, transfers or other dispositions of, any agreement governing or
instrument evidencing the Obligations or any portion thereof or interest therein
by the Lender shall in any manner affect the lien granted to the Lender
hereunder. Subject to Section 14 hereof, upon the payment in full of the
Obligations, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to Grantor. Upon any such termination, the Lender
will, at Grantor' expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination. The Lender shall,
at the request of Grantor, deliver any document reasonably necessary to release
any lien granted hereunder with respect to any Collateral Grantor is
transferring.

65. Lender's Duties. The powers conferred on the Lender hereunder are solely to
protect Lender's interest in the Collateral as a secured party and shall not
impose any duty upon the Lender to exercise any such powers. Except for the safe
custody of any Collateral in Lender's possession and the accounting for money
actually received by Lender hereunder, the Lender shall not have any duty as to
any Collateral or as to the taking of any necessary steps to preserve any rights
pertaining to any Collateral. The Lender shall not have any responsibility or
liability for the collection of any proceeds of any Collateral or by reason of
any invalidity, lack of value or uncollectability of any of the Collateral. The
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in the Lender's possession if such Collateral is
accorded treatment substantially equal to that which the Lender accords its own
property.

66. Events of Default; Remedies Upon Default; Actions by Lender.

a. The occurrence of an Event of Default under and as defined in the Note shall
constitute an "Event of Default" hereunder.

b. If any Event of Default shall have occurred:

i. The Lender may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to Lender (or any
of them), all the rights and remedies of a secured party on default under the
UCC (whether or not the UCC applies to the affected Collateral), and may also,
without notice of any kind or demand of performance or other demand (all and
each of which demands and notices are hereby expressly waived to the maximum
extent provided by the UCC and other applicable law) reclaim, take possession,
recover, store, maintain, finish, repair, prepare for sale or lease, advertise
for sale or lease and sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or at the
Lender's offices or elsewhere, for cash, on credit, or for future delivery, and
upon such other terms as the Lender may deem commercially reasonable. In
connection with the liquidation, sale or other disposition of the Collateral,
the Lender is granted a non-exclusive, royalty-free license or other right to
use, without charge, Grantor' labels, patents, copyrights, trade secrets, trade
names, trademarks, service marks, or any similar property as it pertains to the
Collateral, in completing a liquidation, sale or other disposition of the
Collateral. The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. Grantor agrees that in any sale of any
of the Collateral, whether at a foreclosure sale or otherwise, the Lender is
hereby authorized to comply with any limitation or restriction in connection
with such sale as it may be advised by counsel is necessary in order to avoid
any violation of applicable law (including compliance with such procedures as

                                    - 130 -
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may restrict the number of prospective bidders and the Lender, require that such
prospective bidders and the Lender have certain qualifications and restrict such
prospective bidders and the Lender to Persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of such Collateral), and Grantor further agrees that
such compliance shall not result in such sale being considered or deemed not to
have been made in a commercially reasonable manner, nor shall the Lender be
liable or accountable to Grantor for any discount allowed by reason of the fact
that such Collateral is sold in compliance with any such limitation or
restriction.

ii. Grantor authorizes the Lender, on the terms set forth herein, to enter the
premises where the Collateral (or any part of it) is located, to take possession
of the Collateral (or any part of it), and to pay, purchase, contract, or
compromise any encumbrance, charge or lien which, in the opinion of the Lender,
appears to be prior or superior to its security interest. Grantor further
agrees, at the Lender's request, to assemble the Collateral and make it
available to the Lender at places which the Lender shall reasonably select. To
the maximum extent permitted by applicable law, Grantor hereby waives all
claims, damages, and demands against the Lender arising out of the repossession,
retention or sale of the Collateral.

iii. The Lender may sell Collateral without giving warranties as to such
Collateral. The Lender may specifically disclaim any warranties of title or the
like. The foregoing will not be considered adversely to affect the commercial
reasonableness of any sale of Collateral.

iv. If the Lender sells any of the Collateral upon credit, Grantor will be
credited only with, and at the time of, payments actually made by the purchaser
in such sale received by the purchaser and applied to the indebtedness of such
purchaser. In the event the purchaser in such sale fails to pay for the
Collateral, the Lender may resell the Collateral and Grantor shall be credited
with the proceeds of the resale in accordance with the preceding sentence. In
the event the Lender purchase any of the Collateral being sold, the Lender may
pay for the Collateral by crediting some or all of the amounts described in
clauses first, second, third and fourth of Section 12(b)(vi) hereof.

v. Any cash held by the Lender as Collateral and all cash proceeds received by
the Lender in respect of any sale of, collection from, or other realization
upon, all or any part of the Collateral or the exercise of any other remedies
consequent upon an Event of Default shall be applied in whole or in part by the
Lender against all or any part of the Obligations in the following order:

First, to the Lender in an amount sufficient to pay in full the Obligations,
including all reasonable fees, costs, expenses, liabilities and advances
incurred or made by the Lender in connection with the sale, disposition or other
realization of the Collateral, including without limitation, reasonable
attorneys' fees;

Second, upon payment in full of all the Obligations, to Grantor or to whomsoever
may be lawfully entitled to receive such surplus.

vi. Grantor shall remain liable for any deficiency if the proceeds of any sale
or disposition of the Collateral are insufficient to fully pay the Obligations,
and Grantor also shall be liable for the reasonable costs and expenses
(including reasonable attorneys' fees and expenses) incurred by Lender to
collect such deficiency.

vii. Grantor hereby waives presentment, demand, protest or any notice (to the
maximum extent permitted by applicable law) of any kind in connection with this
Agreement or any Collateral.

67. Expenses. Grantor shall upon demand pay to the Lender the amount of any and
all reasonable expenses, including the reasonable and necessary fees and
expenses the Lender's counsel and of any experts and agents, which the Lender
may incur in connection with (a) the administration of this Agreement, (b) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (c) the exercise or enforcement of any
of the rights of the Lender hereunder, or (d) the failure by Grantor to perform
or observe any of the provisions hereof or of under the Note.

68. Reinstatement. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Grantor for
liquidation or reorganization, should Grantor become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Grantor's property and assets, and
shall continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

                                    - 131 -
<PAGE>

69. Amendments, Etc. No amendment or waiver of any provision of this Agreement,
nor consent to any departure by Grantor herefrom, shall in any event be
effective unless the same shall be in writing and signed by the parties
necessary to amend the Note, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

70. Cumulative Remedies. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. The Lender shall not by any act, delay,
omission or otherwise be deemed to have waived any of their respective rights or
remedies hereunder, nor shall any single or partial exercise of any right or
remedy hereunder on any one occasion preclude the further exercise thereof or
the exercise of any other right or remedy.

71. Lender May Perform; Reimbursement; Power of Attorney.

a. If Grantor fails to perform any obligation of Grantor under this Agreement,
the Lender may, but shall not have the obligation to, without prior notice to or
obtaining the consent of Grantor, perform that obligation on behalf of Grantor,
including, without limitation, obtaining insurance coverage for the Collateral
and satisfying tax obligations or liens on the Collateral. Grantor shall
reimburse the Lender on demand for all reasonable expenses and reasonable
attorneys' fees incurred by the Lender in performing any such obligation,
including interest at the interest rate specified in the Note.

b. Grantor hereby absolutely and irrevocably constitutes and appoints the Lender
as Grantor's true and lawful agent and attorney-in-fact, with full power of
substitution, in the name of Grantor: (a) to take any and all such action as the
Lender or any of its agents, nominees or attorneys may, in its or their sole and
absolute discretion, reasonably determine as necessary or advisable for the
purpose of maintaining, preserving or protecting the security constituted by
this Agreement or any of the rights, remedies, powers or privileges of the
Lender under this Agreement; and (b) generally, in the name of Grantor to
exercise all or any of the powers, authorities and discretions, conferred on or
reserved to the Lender by or pursuant to this Agreement, and (without prejudice
to the generality of any of the foregoing) to seal and deliver or otherwise
perfect any deed, assurance, agreement, instrument or act as the Lender may deem
proper in or for the purpose of exercising any of such powers, authorities or
discretions, in each case. Grantor hereby ratifies and confirms, and hereby
agrees to ratify and confirm, whatever lawful acts the Lender or any of its
agents, nominees or attorneys shall do or purport to do in the exercise of the
power of attorney granted to the Lender pursuant to this Section 17(b), which
power of attorney, being given for security, is irrevocable. Notwithstanding
anything to the contrary in this Section 17(b), no such action as Grantor's true
and lawful agent and attorney-in-fact may be taken by Lender except upon the
occurrence of any Event of Default.

72. Addresses for Notices. All notices and other communications to any party
provided for hereunder shall be in writing and mailed by registered or certified
mail, return receipt requested, to the addresses for the Grantor and the Lender
set forth on the signature pages hereto, or, as to any party, to such other
address as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section 18: All such
notices and other communications shall be effective (i) upon personal delivery
to the party to be notified; (ii) on the date of first attempted delivery after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; (iii) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt.

73. Forbearance; Delay. Any forbearance, failure or delay by the Lender in
exercising any right, power or remedy hereunder shall not preclude the exercise
thereof. Every right, power or remedy of the Lender shall continue in full force
and effect until such right, power or remedy is specifically waived by an
instrument in writing executed by the Lender.

74. Severability. 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 unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

75. Successors and Assigns. This Agreement is for the benefit of the Lender and
its successors and assigns, and in the event of an assignment of all or any of
the Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on the Grantor and its respective successors and
assigns.

                                    - 132 -
<PAGE>

76. Consent To Jurisdiction And Service Of Process. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF GRANTOR AND LENDER
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE GRANTOR AND LENDER IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF GRANTOR AND LENDER WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.

77. Waiver Of Jury Trial. EACH OF GRANTOR AND LENDER WAIVES ITS RIGHT TO A TRIAL
BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
EACH OF GRANTOR AND LENDER AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH
OF GRANTOR AND LENDER FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

78. Advice of Counsel; Construction. Each of Grantor and Lender represents and
warrants that it has discussed this Agreement, including, without limitation,
Section 22 and Section 23 hereof, with its counsel. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of the Agreement.

79. Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meanings or interpretation of this
Agreement or any provision hereof.

80. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York determined without
reference to principles of conflicts of law, except to the extent that the
validity or perfection of any security interest created hereunder, or remedies
hereunder, in respect of any item of the Collateral is governed by the laws of a
jurisdiction other than the State of New York.

81. Counterparts. This Agreement may be executed in counterparts, each of which
shall constitute an original.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.

                          BIOACCELERATE HOLDINGS, INC.

                    By: _____________________________________
                        Name:
                        Title:

                          LIFESCIENCE VENTURES LIMITED

                    By: _____________________________________
                        Name:
                        Title:

                                    - 133 -NOTE AND WARRANT PURCHASE AGREEMENT

      THIS NOTE AND WARRANT PURCHASE AGREEMENT (the "Agreement") is made as of
this 12th day of September, 2005, by and between Galaxy Nutritional Foods, Inc.,
a Delaware corporation (the "Company"), and Frederick A. DeLuca (the
"Investor").

      WHEREAS, the Company desires to issue and sell to selected "accredited
investors" as that term is defined in Regulation D promulgated under the
Securities Act of 1933, as amended, the Note and Warrant (as those terms are
defined below).

      WHEREAS, the Investor has agreed to loan to the Company the Loan Amount
(as defined below) (the "Loan") pursuant to the terms and conditions set forth
herein and in the Note.

      WHEREAS, the Investor acknowledges that the Company is offering notes and
warrants similar to the Note and Warrant issued pursuant to this Agreement to
other "accredited investors" making loans to the Company.

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

                                   ARTICLE I

                                TERMS OF THE LOAN

Section 1.1 The Loan.

      (a) Loan Amount. Subject to the terms and conditions herein and in the
Note, and subject to the provisions of Section 1.1(b) hereof, the Investor
agrees to loan to the Company $1,200,000.00 (the "Loan Amount"), which Loan
shall evidenced by a Promissory Note in favor of the Investor, in the form
attached hereto as Exhibit A (the "Note"), dated the date on which such funds
were received by the Company from the Investor. The Loan shall be made in
accordance with and subject to the terms and conditions of the Note.

      (b) Payment of the Loan Amount. The Loan Amount from the Investor shall be
paid to the Company upon or prior to the execution of this Agreement.

Section 1.2 Use of Proceeds. The proceeds of the Loan shall be used by the
Company primarily for general working capital and other general corporate
purposes for the Company and its affiliates, and as otherwise provided herein.

Section 1.3 Conditions Precedent. The Investor's obligation to make the Loan
shall be subject to the fulfillment to the Investor's satisfaction of the
following conditions:

      (a) Delivery of Note and Warrant. The Investor shall have received a fully
executed Note and a fully executed redeemable warrant certificate to purchase
such number of shares of common stock of the Company equal to 1 share per every
$4 of the Loan Amount in the form attached hereto as Exhibit B (the "Warrant").

<PAGE>

         (b) Delivery of Registration Rights Agreement. The Investor shall have
received a fully executed Registration Rights Agreement in the form attached
hereto as Exhibit C (the "Registration Rights Agreement").

         (c) Representations and Covenants. All of the representations and
warranties of the Company herein shall be true and correct and it shall have
fulfilled all of its obligations hereunder in all material respects.

         (d) Absence of Violation or Litigation. The consummation of the
transactions contemplated hereby shall not be in violation of any law or
regulation applicable to the Company. The Company shall not be subject to any
injunction, stay or restraining order nor shall it be required to make or to
obtain any filings, approvals or consents which shall not have been previously
made or obtained.

         (e) All Proceedings Satisfactory. All organizational and other
proceedings taken by the Company in connection with the transactions
contemplated by this Agreement, and all documents and instruments related
thereto, shall be reasonably satisfactory in form and substance to the Investor,
and the Investor shall have received copies thereof and other materials
(certified, if requested) as it may reasonably request in connection therewith.
The issuance and sale of the Note and the Warrant shall be made in conformity
with all applicable state and federal securities laws.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES.

Section 2.1       Company Representations and Warranties.

(a) Organization and Company Power. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has all required power and authority to carry on its business as
presently conducted, to enter into and perform this Agreement, the Note, the
Warrant, the Registration Rights Agreement and any other agreements contemplated
hereby to which it is a party and to carry out the transactions contemplated
hereby and thereby.

(b) Authorization and Non-Contravention. This Agreement and all documents
executed pursuant hereto are valid and binding obligations of the Company,
enforceable in accordance with their terms. The execution, delivery and
performance of this Agreement and all agreements, documents and instruments
contemplated hereby, the issuance and delivery of the Note and Warrant and, upon
exercise of the Warrant, the issuance and delivery of the equity securities
purchasable upon exercise of the Warrant, have been duly authorized by all
necessary corporate or other action of the Company.

Section 2.2       Securities Law Compliance.

         (a) The Investor agrees that its Note, Warrant, and the securities
issuable upon exercise of the Warrant, are being acquired for investment and
that such Investor will not offer, sell or otherwise dispose of its Note,
Warrant, or any securities issuable upon exercise of the Warrant, except under

                                       2
<PAGE>

circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Securities Act"), or any applicable state securities
laws. Each Note, Warrant and all securities issued upon exercise of the Warrant
(unless registered under the Securities Act and any applicable state securities
laws) shall be stamped or imprinted with a legend in substantially the following
form:

"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE SOLD, OFFERED FOR SALE, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (B) AN EXEMPTION
THEREFROM, AND, IF REQUESTED BY THE COMPANY, THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE TRANSFER IS EXEMPT FROM THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS."

         (b) Restricted Securities. The Investor understands that its Note,
Warrant and the securities issuable upon exercise of the Warrant, will not be
registered at the time of their issuance under the Securities Act for the reason
that the sales provided for in this Agreement are exempt pursuant to Section
4(2) of the Securities Act based on the representations of the Investor set
forth herein. The Investor represents that it is experienced in evaluating
companies such as the Company, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment, and has the ability to suffer the total loss of the investment. The
Investor further represents that it has had the opportunity to ask questions of
and receive answers from the Company concerning the terms and conditions of its
Note, Warrant and the business of the Company, and to obtain additional
information to such Investor's satisfaction. All documents, records and books
pertaining to the Company and this investment have been made available to the
Investor and its representatives, including each Investor's attorney and
accountant, that the books and records of the Company will be available upon
reasonable notice for inspection by the Investor during reasonable business
hours at the Company's principal place of business, and the Investor have had
access to and the opportunity to request information from and ask questions of
the officers and a directors of the Company. The Investor further represents
that it is an "accredited investor" within the meaning of Regulation D under the
Securities Act, as presently in effect. The Investor further represents that the
Note and the Warrant are being acquired for the account of such Investor for
investment only and not with a view to, or with any intention of, a distribution
or resale thereof, in whole or in part, or the grant of any participation
therein. If an Investor is a corporation, business trust, partnership, limited
liability company or other entity, such Investor represents that it was not
formed for the specific purpose of acquiring the securities offered hereby and
has total assets of more than $5,000,000. If an Investor is an individual, such
Investor represents that (A) the Investor is a natural person whose individual
net worth, or joint net worth with spouse, exceeds $1 million at the time of
purchase (in this instance, the term "net worth" means the excess of assets at
fair market value, including home and personal property, over total liabilities,
including mortgages and income taxes on unrealized appreciation of assets); or
(B) the Investor is a natural person who has had individual income of more than
$200,000 in each of the two most recent years (2003 and 2004), or joint income

                                       3
<PAGE>

with that person's spouse of more than $300,000 in each of those years, and
reasonably expects to reach the same income level in the current year (2005).
(The term "individual income" means adjusted gross income as reported for
federal income tax purposes, less any income attributable to a spouse or to
property owned by a spouse, increased by the following amounts (excluding any
amount attributable to a spouse or to property owned by a spouse): (1) the
amount of any interest income received which is tax-exempt under Section 103 of
the Internal Revenue Code of 1986, as amended (the "Code"); (2) the amount of
losses claimed as a partner in a limited partnership (as reported on Schedule E
of Form 1040); and (3) any deduction claimed for depletion under Section 611 et
seq. of the Code).

         (c) State of Residence. The Investor represents that it is a legal
resident of, or, if such Investor is an entity, has its principal place of
business in, the state listed on the signature page of this Agreement.

Section 2.3 Advice of Consultants. The Investor has obtained the advice of
independent counsel and tax advisors of Investor's choice in entering into this
Agreement and the transactions contemplated hereby or has knowingly elected not
to receive such counsel.

                                  ARTICLE III

                              TRANSFER RESTRICTIONS

Section 3.1 Transfers Void. The Investor agrees that it may not sell, give,
transfer, assign or otherwise dispose of its Note or Warrant, except as
expressly permitted by Section 3.2 hereof. Any purported sale, gift, transfer,
assignment or other disposition, or pledge of or grant of security interest in,
any Note or Warrant in violation of this Article III shall be null and void.

Section 3.2 Transfers to Affiliates. The Investor may, at any time, transfer all
of such Investor's Note and Warrant (but not less than all, and not separately),
to any of its affiliates, provided such affiliate is an "accredited investor."

Section 3.3 Legend. The Note and the Warrant shall be stamped or imprinted with
a legend in substantially the following form:

"THIS NOTE/WARRANT IS SUBJECT TO THE PROVISIONS OF A NOTE AND WARRANT AGREEMENT,
INCLUDING THEREIN CERTAIN RESTRICTIONS ON TRANSFER. A COMPLETE AND CORRECT COPY
OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE."

                                   ARTICLE IV

                                     DEFAULT

Section 4.1 Events of Default. With respect to the Investor, if, while any part
of the principal of the Investor's Note remains unpaid, any one of the following
"Events of Default" shall occur:

                                       4
<PAGE>

         (a) An order, judgment or decree shall be entered by any court of
competent jurisdiction, approving a petition seeking reorganization or
liquidation of the Company, or appointing a receiver, trustee or liquidator of
the Company of all or a substantial part of its assets, which such order,
judgment or decree has not been effectively stayed within sixty (60) days after
entry;

         (b) the Company shall (i) from this date forward, admit in writing to
its inability to pay its debts as they mature; (ii) make a general assignment
for the benefit of creditors; (iii) be adjudicated bankrupt or insolvent; (iv)
file a voluntary petition in bankruptcy or a petition or an answer seeking
reorganization or an arrangement with creditors to take advantage of any
insolvency law; (v) file any answer admitting the material allegations of a
petition filed against it in any bankruptcy, reorganization or insolvency
proceeding or fail to dismiss such petition within sixty (60) days after the
filing thereof; or (vi) take any action for the purpose of effecting any of the
foregoing;

         (c) the failure by the Company to observe and perform any material
covenant, condition and agreement under this Agreement which failure is not
cured within thirty (30) days, after written notice from the Investor or
discovery by the Company; and

         (d) the failure by the Company to observe and perform any material
covenant, condition and agreement under the Note or Warrant which failure is not
cured within the applicable cure period (or thirty (30) days if no cure period
is expressly provided for such failure), after written notice from the Investor
or discovery by the Company;

then and in every such event such Investor may, upon written notice to the
Company, declare the Note to be due and payable in full, whereupon the Note
shall become due and payable in full.

                                   ARTICLE V

                                  MISCELLANEOUS

Section 5.1 Notices. All necessary notices, demands and requests permitted or
required under this Agreement shall be in writing and shall be deemed effective
(a) if given by facsimile, when such facsimile is transmitted to the facsimile
number specified below, the appropriate answer back is received and a copy is
sent to such party by an express mail carrier at the address indicated below,
(b) three business days after being mailed by certified mail, return receipt
requested, postage prepaid to the applicable party at the address indicated
below or (c) one business day after being sent by an express mail carrier to the
applicable party at the address indicated below:

If to the Company:                  Galaxy Nutritional Foods, Inc.
                                    2441 Viscount Row
                                    Orlando, Florida 32809
                                    Facsimile: (407) 855-1099
                                    Attention: Michael E. Broll

                                       5
<PAGE>

With copies to:                     Baker & Hostetler LLP
                                    200 S. Orange Avenue, Suite 2300
                                    Orlando, Florida  32801
                                    Facsimile: (407) 841-0168
                                    Attn: Kenneth C. Wright, Esq.

If to the Investor:                 Frederick A. DeLuca
                                    c/o Doctor's Associates, Inc.
                                    325 Bic Drive
                                    Milford, CT 06460
                                    Facsimile:
                                               ---------------------------

or such other address or facsimile number as such party may hereafter specify
for the purpose of receiving notice hereunder. A copy of any notice to the
Investor shall be provided, as described above, to any counsel designated by the
Investor in writing to the Company as above provided.

Section 5.2 No Waiver. No failure to exercise, and no delay in exercising, on
the part of an Investor, any right, power or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided are cumulative and not exclusive of any rights or remedies
provided by law.

Section 5.3 Governing Law; Construction. This Agreement, the Note, the Warrant
and the Registration Rights Agreement shall each be deemed to be a contract made
under the laws of the State of Florida, and shall be construed in accordance
with the laws of the State of Florida. The descriptive headings of the several
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof. This Agreement, the
Note, the Warrant and the Registration Rights Agreement together with the
Exhibits hereto and thereto and all documents, instruments and agreements
executed pursuant hereto, constitute the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, supersede
all prior agreements, understandings or representations pertaining to the
subject matter hereof, whether oral or written, and may not be contradicted by
evidence of any alleged oral agreement. Venue for any action brought under this
Agreement, the Note, the Warrant or the Registration Rights Agreement shall be
in Orange County, Florida.

Section 5.4 Amendments, Waivers and Consents. Any term, covenant or condition of
this Agreement may be amended, omitted or waived (either generally or in a
particular instance and either retroactively or prospectively) only by written
consent of all of the parties hereto.

Section 5.5 Expenses. Any expense incurred by either party (including, without
limitation, reasonable attorneys' fees and disbursements) in connection with the
negotiation, execution, administration or enforcement of this Agreement, the
Note, the Warrant, the Registration Rights Agreement and any other document
executed in connection with the obligations hereunder or thereunder and any
amendment hereto or thereto shall be the sole responsibility and shall be paid
such party.

                                       6
<PAGE>

Section 5.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.

Section 5.7 Attorneys' Fees. In the event of a judicial or administrative
proceeding or action by one party against the other party with respect to the
interpretation or enforcement of this Agreement, the prevailing party shall be
entitled to recover reasonable costs and expenses including reasonable
attorneys' fees and expenses, whether at the investigative, pretrial, trial or
appellate level. The prevailing party shall be determined by the court based
upon an assessment of which party's major arguments or position prevailed.

Section 5.8 Construction of Agreement. This Agreement shall not be construed
more strictly against one party than against the other merely by virtue of the
fact that it may have been prepared primarily by counsel for one of the parties.

                                      * * *

                                       7
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.

                                      "COMPANY"

                                      GALAXY NUTRITIONAL FOODS, INC., a
Delaware corporation

                                      By:      /s/ Michael E. Broll
                                         ----------------------------------
                                               Michael E. Broll
                                               Chief Executive Officer

                                      "INVESTOR"

                                      /s/ Frederick A. DeLuca
                                      -------------------------------------
                                      FREDERICK A. DELUCA, an individual

                                       8
<PAGE>

                                    EXHIBIT A

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE LAW, AND MAY NOT BE SOLD,
DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR (B) SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION AND, IF REQUESTED BY THE MAKER, THE MAKER HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE MAKER THAT THE TRANSFER IS EXEMPT FROM
THE REGISTRATION PROVISIONS UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.

THIS NOTE IS SUBJECT TO THE PROVISIONS OF A NOTE AND WARRANT AGREEMENT,
INCLUDING THEREIN CERTAIN RESTRICTIONS ON TRANSFER. A COMPLETE AND CORRECT COPY
OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE

                                 PROMISSORY NOTE

$______________   September __, 2005

         FOR VALUE RECEIVED, the undersigned, GALAXY NUTRITIONAL FOODS, INC., a
Delaware corporation ("Maker"), promises to pay to the order of _______________,
a _______________ ("Payee"; Payee and any subsequent holder[s] hereof are
hereinafter referred to collectively as "Holder"), at the office of Payee at
__________________________________, or at such other place as Holder may
designate to Maker in writing from time to time, the principal sum of
______________________________ AND NO/100THS DOLLARS ($_________.00), together
with interest on the outstanding principal balance hereof from the date hereof
at the Interest Rate, in lawful money of the United States. Amounts payable
hereunder shall be paid, at Payee's option as specified by Payee in writing from
time to time, either by (i) check delivered to the office of Payee or (ii) wire
transfer of immediately available funds to an account specified by Payee in
writing from time to time. This Note is referred to in and issued pursuant to
that certain Note and Warrant Purchase Agreement, dated as of September ___,
2005, by and between Payee and Maker (as amended from time to time, the
"Agreement").

         The Interest Rate shall be a floating rate calculated at an annual rate
equal to three percent (3.0%) per annum in excess of the Bank Prime Rate of
Interest per the Federal Reserve Bank in effect from time to time, calculated on
the basis of a 360-day year, actual days elapsed, upon the principal balance
hereof from time to time outstanding, but in no event to exceed the Maximum Rate
(as defined below). Each adjustment in the Interest Rate shall be effective on
the day the change in the Bank Prime Rate occurs.

         Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on the
fifteenth (15th) day of October, 2005, and subsequent installments being payable
on the fifteenth (15th) day of each succeeding month thereafter until June 15,
2006 (the "Maturity Date"), at which time the entire outstanding principal
balance, together with all accrued and unpaid interest, shall be immediately due

<PAGE>

and payable in full. If any such day is not a business day, such payment shall
be made on the next succeeding day which is a business day and interest shall
continue to accrue thereon until paid. As used herein, "business day" means a
day, other than a Saturday, Sunday or legal holiday, on which commercial banks
in Orlando, Florida are open for the general transaction of business.

         The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without premium or penalty. Any such
prepayments shall be credited first to any accrued and unpaid interest and then
to the outstanding principal balance hereof.

         The failure of Maker to pay any principal, interest or any other sums
required hereunder when due under this Note shall constitute a default. If (i) a
default shall occur hereunder and such default shall continue for ten (10) days
after notice thereof is delivered by Holder to Maker, or (ii) an Event of
Default shall occur under the Agreement, which Event of Default is not cured
following the giving of any applicable notice and within any applicable cure
period set forth in the Agreement, then, and in such event, the entire
outstanding principal balance of the indebtedness evidenced hereby, together
with any other sums advanced hereunder and/or under any other instrument or
document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of a default as set forth
herein or in the Agreement, which default is not cured following the giving of
any applicable notice and within any applicable cure period set forth herein, at
the option of Holder and without notice to Maker, all accrued and unpaid
interest, if any, shall be added to the outstanding principal balance hereof,
and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at an annual rate (the "Default Rate") equal to
the lesser of (i) the rate that is five percentage points (5.0%) in excess of
the above-specified Interest Rate on the date of such default, or (ii) the
maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate"), regardless of whether or not there has been an acceleration of
the payment of principal as set forth herein.

         In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any endorsers hereof agree to pay to
Holder an amount equal to all such costs, including, without limitation, all
reasonable attorneys' fees and all court costs.

         Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of a default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable

                                       2
<PAGE>

law. No extension of the time for payment of the indebtedness evidenced hereby
or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.

         All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.

         This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Florida, and shall be
enforceable in a court of competent jurisdiction in the State of Florida,
regardless of in which state this Note is being executed.

         HOLDER AND MAKER HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR
COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE, AT LAW OR IN EQUITY,
ARISING OUT OF OR IN ANY WAY RELATING TO THIS NOTE.

         As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.

                                    MAKER:

                                    GALAXY NUTRITIONAL FOODS, INC.
                                    a Delaware corporation

                                    By:
                                       ---------------------------------
                                             Michael E. Broll
                                             Chief Executive Officer

                                       3
<PAGE>

                                    EXHIBIT B

         THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
         NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
         "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT
         BE SOLD, OFFERED FOR SALE, MORTGAGED, PLEDGED, HYPOTHECATED OR
         OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION
         STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
         LAWS, OR (B) AN EXEMPTION THEREFROM AND, IF REQUESTED BY THE COMPANY,
         THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE
         COMPANY TO THE EFFECT THAT THE TRANSFER IS EXEMPT FROM THE REGISTRATION
         PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

         THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A NOTE AND WARRANT
         AGREEMENT, INCLUDING THEREIN CERTAIN RESTRICTIONS ON TRANSFER. A
         COMPLETE AND CORRECT COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION
         AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON
         WRITTEN REQUEST AND WITHOUT CHARGE.

                         WARRANT TO PURCHASE SECURITIES
                                       OF
                         GALAXY NUTRITIONAL FOODS, INC.

                           Void after October 17, 2008

            This Warrant is issued to _____________, or its registered assigns
(the "Holder") by Galaxy Nutritional Foods, Inc., a Delaware corporation (the
"Company"), as of October 17, 2005 (the "Warrant Issue Date"). This Warrant is
issued pursuant to the terms of a Note and Warrant Purchase Agreement dated of
September __, 2005 (the "Purchase Agreement") in connection with a loan by the
Holder to the Company. Capitalized terms used herein, but not otherwise defined,
shall have the meaning ascribed to them in the Purchase Agreement.

            1. Number of Shares Subject to Warrant. Subject to the terms and
conditions hereinafter set forth, the Holder is entitled, upon surrender of this
Warrant at the principal office of the Company, to purchase from the Company, at
a price equal to the Exercise Price (as defined in Section 2 below), shares of
the Warrant Stock.

            For purposes of this Warrant:

            (A)   "Common Stock" shall mean the Company's common stock, $0.01
                  par value.

            (B)   "Expiration Date" shall mean October 17, 2008.

<PAGE>

            (C)   "Warrant Stock" shall mean __________ shares of the Company's
                  Common Stock, subject to adjustment as described in Section 7
                  below.

            (D)   "Shares" shall mean fully paid and non-assessable shares of
                  Common Stock.

            2. Exercise Price. The per share purchase price for the Shares shall
be 95% of the lowest closing sale price of the Common Stock on the AMEX Stock
Exchange (or any successor exchange or quotation system on which the Common
Stock is listed or quoted) during the 60 calendar days immediately preceding the
Warrant Issue Date (the "Exercise Price"). The Exercise Price shall be subject
to adjustment pursuant to Section 7 hereof.

            3. Exercise Period. Except as otherwise provided for herein, this
Warrant shall be exercisable, in whole or in part, at any time and from time to
time after the Warrant Issue Date. From and after 5:00 p.m., Orlando, Florida
time, on the Expiration Date, all Warrants evidenced hereby shall thereafter be
void and of no further force and effect. Whether or not surrendered to the
Company by the Holder, this Warrant shall be deemed canceled upon the expiration
hereof.

            4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 hereof, the purchase rights hereby
represented may be exercised in whole or in part, at the election of the Holder,
by the tender of the Notice of Exercise in substantially the form attached
hereto as Exhibit A and the surrender of this Warrant at the principal office of
the Company and by the payment to the Company in cash, by check, cancellation of
indebtedness or other form of payment acceptable to the Company, of an amount
equal to the then applicable Exercise Price multiplied by the number of Shares
then being purchased.

            5. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter (with appropriate
restrictive legends, as applicable), but in no event more than five (5) business
days following the exercise of this Warrant.

            6. Issuance of Shares. The Company hereby covenants that it will
duly and validly reserve shares of Common Stock for issuance upon exercise of
this Warrant. The Company covenants that the Shares of Warrant Stock, when
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof. The Shares of Warrant Stock issued
hereunder shall have the same rights and obligations pertaining to the other
shares of Common Stock issued previously by the Company.

            7. Adjustment of Exercise Price and Number of Shares. The number of
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:

                  (a) Subdivisions, Combinations and Other Issuances. If the
Company shall at any time prior to the exercise or expiration of this Warrant
subdivide its Common Stock, by split-up or otherwise, or combine its Common

                                       2
<PAGE>

Stock, or issue additional Common Stock as a dividend with respect to any of its
Common Stock, the number of Shares issuable on the exercise of this Warrant
shall forthwith be proportionately increased in the case of a subdivision or
stock dividend, or proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the Exercise Price, provided that
the aggregate Exercise Price payable hereunder for the total number of Shares
purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.

                  (b) Reclassification, Reorganization and Consolidation. In the
event of any corporate reclassification, capital reorganization, consolidation,
spin-off or change in the Common Stock of the Company (other than as a result of
a subdivision, combination, or dividend provided for in Section 7(a) above),
then, as a condition of such event, lawful provision shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall have the right at any time
prior to the expiration of this Warrant to purchase, at a total price equal to
that payable upon the exercise of this Warrant, the kind and amount of shares of
stock and/or other securities and property receivable in connection with such
event by a holder of the same number of shares for which this Warrant could have
been exercised immediately prior to such event. In any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions hereof shall thereafter be applicable with respect to any
shares of stock or other securities and property deliverable upon exercise
hereof, and appropriate adjustments shall be made to the Exercise Price,
provided that the aggregate exercise price payable hereunder for the total
number of Shares purchasable under this Warrant (as adjusted) shall remain the
same.

                  (c) Adjustment to Number of Shares. Upon each adjustment of
the Exercise Price, the number of Shares issuable upon exercise of the Warrant
shall be increased to equal the quotient obtained by dividing (x) the product
resulting from multiplying (i) the number of Shares issuable upon exercise of
the Warrant, and (ii) the Exercise Price, in each case as in effect immediately
before such adjustment by (y) the adjusted Exercise Price.

                  (d) Notice of Adjustment. When any adjustment is required to
be made to the Exercise Price or in the number or kind of Shares purchasable
upon exercise of the Warrant, the Company shall promptly notify the Holder of
such event and of the adjusted Exercise Price or number of Shares or other
securities or property thereafter purchasable upon exercise of this Warrant.

            8. Assumption of Warrant. If at any time, while this Warrant, or any
portion thereof, is outstanding and unexpired there shall be an acquisition of
the Company by another entity by means of a merger, reorganization or
consolidation of the Company or any other transaction in which the owners of the
Company's outstanding voting power immediately prior to such transaction own,
directly or indirectly, less than 51% of the voting power of the resulting or
surviving entity immediately upon completion of such transaction, then, as a
part of such acquisition, lawful provision shall be made so that the Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares of stock or other securities or property of

                                       3
<PAGE>

the successor corporation resulting from such acquisition which a holder of the
Shares deliverable upon exercise of this Warrant would have been entitled to
receive in such acquisition if this Warrant had been exercised immediately
before such acquisition.

            9. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant, but in lieu of any fractional Share the Company shall make a cash
payment therefor on the basis of the closing sale price of the Common Stock on
the AMEX Stock Exchange (or any successor exchange or quotation system on which
the Common Stock is listed or quoted) on the date of exercise.

            10. No Shareholder Rights. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights of a shareholder with respect to the
Shares of Warrant Stock, including (without limitation) the right to vote such
Shares, receive dividends or other distributions thereon, exercise preemptive
rights or be notified of shareholder meetings, and such Holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company. However, nothing in this Section 10 shall limit the right of the
Holder to be provided the notices required under this Warrant.

            11. Compliance With Securities Act; Transferability of Warrant or
Shares.

                  (a) Compliance With Securities Act. The Holder, by acceptance
hereof, agrees that this Warrant, and the Shares issuable upon exercise of this
Warrant, are being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Warrant, or any Shares issuable upon exercise
of this Warrant, except under circumstances which will not result in a violation
of the Securities Act, or any applicable state securities laws. This Warrant and
all Shares issued upon exercise of this Warrant (unless registered under the
Securities Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:

      "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE
      SECURITIES LAW AND MAY NOT BE SOLD, OFFERED FOR SALE, MORTGAGED, PLEDGED,
      HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
      SECURITIES LAWS, OR AN EXEMPTION THEREFROM, AND, IF REQUESTED BY THE
      COMPANY, THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
      THE COMPANY TO THAT EFFECT. THESE SECURITIES HAVE BEEN ACQUIRED FOR
      INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE."

                  (b) Transferability. Subject to compliance with applicable
federal and state securities laws, this Warrant and all rights hereunder are
transferable in whole or in part by the Holder to any person or entity upon
written notice to the Company. The transfer shall be recorded on the books of
the Company upon the surrender of this Warrant, properly endorsed for transfer
by delivery of an Assignment Form in substantially the form attached hereto as
Exhibit B, to the Company at the address set forth in Section 15 hereof, and the
payment to the Company of all transfer taxes and other governmental charges
imposed on such transfer. In the event of a partial transfer, the Company shall
issue to the holders one or more appropriate new warrants.

                                       4
<PAGE>

            12. Restricted Securities. The Holder understands that this Warrant
and the Shares issuable upon exercise of this Warrant, may not be registered at
the time of their issuance under the Securities Act for the reason that the sale
provided for herein and in the Purchase Agreement is exempt pursuant to Section
4(2) of the Securities Act based on the representations of the Holder set forth
herein and in the Purchase Agreement. The Holder represents that it is
experienced in evaluating companies such as the Company, has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to suffer the total loss
of the investment. The Holder further represents that it has had the opportunity
to ask questions of and receive answers from the Company concerning the terms
and conditions of this Warrant, the business of the Company, and to obtain
additional information to such Holder's satisfaction. The Holder further
represents that it is an "accredited investor" within the meaning of Regulation
D under the Securities Act, as presently in effect. The Holder further
represents that this Warrant is being acquired for the account of the Holder for
investment only and not with a view to, or with any intention of, a distribution
or resale thereof, in whole or in part, or the grant of any participation
therein.

            13. Successors and Assigns. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the Holders
hereof and their respective successors and assigns.

            14. Amendments and Waivers. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder.

            15. Notices. All notices required under this Warrant shall be deemed
to have been given or made for all purposes (i) upon personal delivery, (ii)
upon confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile, (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) three business days
after posting when sent by registered or certified mail. Notices shall be sent
to the addresses set forth in the Purchase Agreement.

            16. Captions. The section and subsection headings of this Warrant
are inserted for convenience only and shall not constitute a part of this
Warrant in construing or interpreting any provision hereof.

            17. Governing Law. This Warrant shall be governed by the laws of the
State of Florida, without regard to the choice or conflict of laws principles
thereof.

                                      * * *

                                       5
<PAGE>

            IN WITNESS WHEREOF, the undersigned have caused this Warrant to be
duly executed as of the date first set forth above.

                              COMPANY

                              GALAXY NUTRITIONAL FOODS, INC.

                              By:
                                 --------------------------------------------
                                   Michael E. Broll
                                    Chief Executive Officer

                              HOLDER

                              -----------------------------------------------
                               (Name of Entity, if applicable)

                              By:
                                 --------------------------------------------
                                     (Signature of Individual Executing)

                              (Title, if applicable)

                              -----------------------------------------------
                              (Print Name of Holder if an Individual)

                                       6
<PAGE>

                                    EXHIBIT A

                               NOTICE OF EXERCISE

To:      Galaxy Nutritional Foods, Inc.
         2441 Viscount Row
         Orlando, Florida 32809

            The undersigned hereby elects to [check applicable subsection]:

___   (a)   Purchase Shares (as defined in the attached Warrant) of Galaxy
            Nutritional Foods, Inc., pursuant to the terms of the attached
            Warrant and payment of the Exercise Price per Share required under
            such Warrant accompanies this notice;

            OR

___   (b)   Exercise the attached Warrant or portion thereof for all of
            ___________ Shares under the Warrant pursuant to the net exercise
            provisions of Section 4 of such Warrant.

            The Holder reaffirms all covenants, representations and warranties
made by it in Section 12 and agrees that all such covenants, representations and
warranties shall be deemed to be have been re-made as of the date hereof.

Date:_______________________                         WARRANTHOLDER:

                                                     By:
                                                        -----------------------
                                                          Name:
                                                          Address:

Name in which shares should be registered: _______________

<PAGE>

                                    EXHIBIT B

                                 ASSIGNMENT FORM

To:      Galaxy Nutritional Foods, Inc.
         2441 Viscount Row
         Orlando, Florida 32809

The undersigned hereby assigns and transfers unto _____________________________
of ______________________________________________ (Please typewrite or print in
block letters) the right to purchase ____________ Shares (as defined in the
Warrant) of Galaxy Nutritional Foods, Inc. subject to the Warrant, dated as of
_____________________________, by and between Galaxy Nutritional Foods, Inc. and
the undersigned (the "Warrant").

This assignment complies with the provisions of Section 11 of the Warrant and is
accompanied by funds sufficient to pay all applicable transfer taxes.

In addition, the undersigned and/or its assignee will provide such evidence as
is reasonably requested by, Galaxy Nutritional Foods, Inc., to evidence
compliance with applicable securities laws as contemplated by Sections 11 and 12
of the Warrant.

Date:                                       By:
     -----------------------                   --------------------------

                                            (Print Name of Signatory)

                                            (Title of Signatory)

<PAGE>

                                    EXHIBIT C

                          REGISTRATION RIGHTS AGREEMENT

            REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
September 12, 2005, by and between Galaxy Nutritional Foods, Inc., a Delaware
corporation, with headquarters located at 2441 Viscount Road, Orlando, Florida
32809 (the "Company") and ___________________, a ____________ (the "Investor"),
whose address is ___________________.

                             PRELIMINARY STATEMENTS

      A. In connection with the Note and Warrant Purchase Agreement by and
between the parties of even date herewith (the "Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the Purchase
Agreement, to issue to the Investor a certain Warrant described therein relating
to ___________ shares (subject to certain adjustments as provided in the
Warrant) of the Company's common stock, par value $0.01 per share (the "Common
Stock"); and

      B. To induce the Investor to execute and deliver the Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "1933 Act"), and applicable
state securities laws.

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
hereby agree as follows:

      1. DEFINITIONS.

            a. As used in this Agreement, the following terms shall have the
following meanings:

                  (i) "Investor" means the Investor and any transferee or
assignee thereof who agrees to become bound by the provisions of this Agreement
in accordance with Section 9 hereof.

                  (ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").

                  (iii) "Registrable Securities" means the shares of Warrant
Stock (as defined in the Warrant) and any securities into which such Warrant
Stock may hereafter be reclassified.

                  (iv) "Registration Period" means the period commencing on the
date hereof and expiring on the date that (A) the Investor may sell all of the
Registrable Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act, or (B) the Investor has sold all of the Registrable
Securities.

                  (v) "Registration Statement" means a registration statement of
the Company under the 1933 Act.

            b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Warrant.

<PAGE>

      2. REGISTRATION RIGHTS.

      If at any time during the Registration Period, the Company shall file with
the SEC a Registration Statement, or a pre-effective amendment to a Registration
Statement already filed with the SEC, relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to the Investor who is entitled to registration rights under this Section 2
written notice of the intended filing of such Registration Statement and, if
within twenty (20) days after receipt of such notice, the Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities the Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' judgment, marketing
or other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only a limited portion of the Registrable Securities with
respect to which the Investor has requested inclusion hereunder, such portion to
be determined as hereinafter provided; provided that no portion of the equity
securities which the Company is offering for its own account shall be excluded;
provided, further that the Company shall be entitled to exclude Registrable
Securities to the extent necessary to avoid breaching obligations existing prior
to the date hereof to other stockholders of the Company. Subject to the
foregoing, the Company shall not exclude any Registrable Securities unless the
Company has first excluded all outstanding securities, the holders of which are
not entitled to inclusion of such securities in such Registration Statement or
are not entitled to pro rata inclusion with the Registrable Securities, and,
after giving effect to the immediately preceding clause, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights as of date
hereof. The obligations of the Company under this Section 2 may be waived by the
Investor. If an offering in connection with which the Investor is entitled to
registration under this Section 2 is an underwritten offering, then if the
Investor's Registrable Securities are included in such Registration Statement
the Investor shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.

      3. OBLIGATIONS OF THE COMPANY.

      In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

            a. A Registration Statement filed pursuant to this Agreement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.

            b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times

<PAGE>

during the Registration Period, and, during the Registration Period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement.

            c. The Company shall furnish to the Investor if its Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents as the Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by the Investor.

            d. As promptly as practicable after becoming aware of such event,
the Company shall notify the Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to the Investor as the Investor may reasonably request.

            e. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify the Investor if the Investor holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.

            f. The Company shall hold in confidence and not make any disclosure
of information concerning the Investor provided to the Company unless (i) the
Company determines disclosure of such information is necessary to comply with
federal or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other final, non-appealable order from a court or governmental body
of competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning the Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Investor and allow the Investor, at the Investor's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.

            g. The Company shall use its best efforts to cause all the
Registrable Securities covered by the Registration Statement to be listed on the
American Stock Exchange and on each additional national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange.

            h. The Company shall cooperate with the Investor if it holds
Registrable Securities and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing the

<PAGE>

Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or the Investor may
reasonably request and registered in such names as the managing underwriter or
underwriters, if any, or the Investor may request.

      4. OBLIGATIONS OF THE INVESTOR.

      In connection with the registration of the Registrable Securities, the
Investor shall have the following obligations:

            a. It shall be a condition precedent to the obligations of the
Company to complete the registration of Registrable Securities pursuant to this
Agreement that the Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least twenty (20) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify the Investor
of the information the Company requires from the Investor if the Investor elects
to have any of the Investor's Registrable Securities included in the
Registration Statement.

            b. The Investor, by the Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, or any amendment thereto, unless the Investor has notified
the Company in writing of the Investor's election to exclude all of the
Investor's Registrable Securities from the Registration Statement.

            c. The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(d) or
3(e), the Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(d) or 3(e) and, if so directed by
the Company, the Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in the Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.

            d. The Investor may not participate in any underwritten registration
hereunder unless the Investor (i) agrees to sell the Investor's Registrable
Securities on the basis provided in any underwriting arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements (provided that all such agreements and
documents shall be in substantially the same form as those executed by the
Company and the other selling stockholders participating in such distribution),
and (iii) agrees to pay its pro rata share of all underwriting discounts and
commissions.

            e. The Investor shall give notice to the Company when it has sold
all of the Registrable Securities.

<PAGE>

      5. EXPENSES OF REGISTRATION.

      All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, shall be borne by the
Company.

      6. INDEMNIFICATION.

      In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

            a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) the Investor who holds such Registrable Securities, and
(ii) the directors, officers and each person who controls the Investor within
the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), if any, (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities or expenses (joint or several) (collectively,
"Claims") to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or the omission or
alleged omission to state a material fact therein required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact in any preliminary
prospectus if used prior to the effective date of such Registration Statement,
or contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Investor or controlling person,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c) hereof; (ii) with respect to
any preliminary prospectus, shall not inure to the benefit of any such person
from whom the person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available by the
Company pursuant to Section 3(c) hereof; (iii) shall not be available to the
extent such Claim is based on a failure of the Investor to deliver or to cause
to be delivered the prospectus made available by the Company; and (iv) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investor
pursuant to Section 9.

<PAGE>

            b. In connection with any Registration Statement in which the
Investor is participating, the Investor agrees to indemnify, hold harmless and
defend, to the same extent and in the same manner set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the 1933 Act or the 1934 Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act (collectively and together with an
indemnified Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such violation occurs in reliance upon and
in conformity with written information furnished to the Company by the Investor
expressly for use in connection with such Registration Statement or to the
extent such Claim is based upon any violation or alleged violation by the
Investor of the 1933 Act, 1934 Act or any other law; and the Investor will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim as does not exceed the net
proceeds to the Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investor pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.

            c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.

            d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.

<PAGE>

      7. CONTRIBUTION.

      To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

      8. REPORTS UNDER THE 1934 ACT.

      With a view to making available to the Investor the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investor to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:

            a. make and keep public information available, as those terms are
understood and defined in Rule 144;

            b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and

            c. furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.

      9. ASSIGNMENT OF REGISTRATION RIGHTS.

      The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company promptly after such
assignment, (ii) the Company is, promptly after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement, and applicable law, including federal
and state securities laws.

<PAGE>

      10. AMENDMENT OF REGISTRATION RIGHTS.

      Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the
Investor. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon the Investor and the Company.

      11. MISCELLANEOUS.

            a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

            b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier, in each case addressed to a party. The addresses for
such communications shall be as set forth in the Purchase Agreement or, in
respect of any party, at such other address of which such party shall notify the
other parties in writing.

            c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.

            e. This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.

            f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.

            g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

            h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.

<PAGE>

            i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

      IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.

                                   "Company"

                                   GALAXY NUTRITIONAL FOODS, INC.

                                   By:
                                      -----------------------------------------
Michael E. Broll
                                            Chief Executive Officer

                                   "Investor"

                                   --------------------------------------------
                                    (Name of Entity, if applicable)

                                   By:
                                      -----------------------------------------
                                          (Signature of Individual Executing)

                                   (Title, if applicable)

                                   --------------------------------------------
                                   (Print Name of Investor if an Individual)

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