Document:

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                                                                   EXHIBIT 10.11

                          AMENDMENT AND LIMITED WAIVER
                              TO SECURITY AGREEMENT

         This Amendment and Limited Waiver to Security Agreement (Accounts
Receivable, Inventory and Equipment) (this "Amendment") dated as of November 14,
2001, is entered into by and between GALAXY NUTRITIONAL FOODS, INC. ("Borrower")
and FINOVA CAPITAL CORPORATION ("FINOVA"), in reference to that certain Security
Agreement (Accounts Receivable, Inventory and Equipment) between them dated
November 1, 1996 (as amended from time to time, the "Loan Agreement";
capitalized terms used herein, unless otherwise defined, shall have the meanings
set forth in the Loan Agreement).

         A.       FINOVA currently provides financial accommodations to Borrower
pursuant to the terms of the Loan Agreement.

         B.       Borrower has notified FINOVA that Events of Default have
occurred under the Loan Agreement due to Borrower's failure to comply with the
minimum Total Debt Service Coverage Ratio and the Capital Expenditure
limitations set forth therein.

         C.       Borrower has requested that FINOVA grant a waiver of the
Events of Default and amend the Loan Agreement as provided herein. FINOVA
consents to Borrower's requests on the terms and subject to the conditions set
forth in this Amendment.

         NOW THEREFORE, the parties hereto agree as follows:

         1.       Waiver. FINOVA hereby waives Borrower's duty to comply with
the minimum ratio of Operating Cash Flow/Actual to Total Contractual Debt
Service set forth in Section 6.18 of the Loan Agreement for the fiscal quarter
ended September 30, 2001. FINOVA also hereby waives Borrower's duty to comply
with the Capital Expenditure limitation set forth in Section 6.19 of the Loan
Agreement for the twelve (12) months ended September 30, 2001. The limited
waivers provided herein shall apply solely to the covenant violations described
above as of the periods referenced above. In all other respects, Borrower shall
comply with the terms of the Loan Agreement and the instruments, documents and
agreements executed in connection therewith, as amended hereby.

         2.       Amendments. The Loan Agreement is amended as follows:

                  (a)      Section 3.1 of the Loan Agreement is deleted in its
         entirety and replaced with the following:

                           3.1.     FINOVA is authorized to charge the
                  Borrower's loan account as an advance on the first day of each
                  month as follows (a) all costs and expenses; (b) interest on
                  Borrower's monthly average loan balance (inclusive of all
                  advances made pursuant to paragraph 2.1 of this Agreement,
                  together with all costs and expenses charged to Borrower's
                  account) which shall be payable by Borrower to FINOVA on the
                  Borrower's monthly average Revolving Line of Credit at the per

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                  annum Prime Rate (as defined below) plus two percent (2%) per
                  annum (the "Interest Rate") and (c) Letter of Credit Fees ("LC
                  Fee") in the amount of two percent (2%) of the face amount of
                  any such Letters of Credit previously issued for the account
                  of Borrower. As used herein, the term "Prime Rate" shall be
                  deemed to mean the prime commercial rate as published from
                  time to time in the Wall Street Journal, in effect on the date
                  hereof (whether or not such rate is the lowest rate available
                  by FINOVA) and as same may be adjusted upwards or downwards
                  from time to time. Any change in the Interest Rate shall
                  become effective on the first day following the day in which
                  the Prime Rate shall have been increased or decreased, as the
                  case may be. The Interest Rate shall be calculated based on a
                  three hundred sixty (360) day year for the actual number of
                  days elapsed and shall be charged to Borrower on all
                  Obligations. All interest charged or chargeable to Borrower
                  shall be deemed as an additional advance and shall become part
                  of the Obligations.

                  (c)      Section 9.1 of the Loan Agreement is deleted in its
         entirety and replaced with the following:

                           9.1.     This Agreement shall become effective upon
                  acceptance by FINOVA and shall continue in full force and
                  effect for a term ending October 15, 2002, unless and until
                  terminated pursuant to the terms hereof. FINOVA may terminate
                  this Agreement upon the occurrence of an Event of Default. No
                  termination of this Agreement, however, shall relieve or
                  discharge Borrower of Borrower's duties, obligations and
                  covenants hereunder until all Obligations have been paid in
                  full and FINOVA's continuing security in and to the Collateral
                  shall remain in effect until all such Obligations have been
                  fully discharged.

                  (d)      Section 9.2 of the Loan Agreement is deleted in its
         entirety and replaced with the following:

                           9.2.     If FINOVA terminates this Agreement upon the
                  occurrence of an Event of Default or if Borrower terminates
                  this Agreement as to future transactions other than on the
                  Renewal Date or any anniversary of any Renewal Date, in view
                  of the impracticality and extreme difficulty in ascertaining
                  FINOVA's actual damages and by mutual agreement of the parties
                  as to a reasonable calculation of FINOVA's lost profits as a
                  result thereof, Borrower agrees that it should immediately pay
                  to FINOVA by wire transfer, certified check or bank cashier's
                  check, Borrower's Obligations owing thereunder, plus
                  liquidated damages in an amount equal to one percent (1%) of
                  the Line of Credit. Prior to its actual receipt of payment as
                  aforesaid, FINOVA shall be free to exercise, without
                  limitation, all of its rights under this Agreement or under
                  any other agreement it may then have with Borrower. Borrower's
                  default of any provision under this Agreement may be
                  considered and construed, at the sole option of FINOVA, as a
                  termination of this Agreement by Borrower. The liquidated
                  damages provided for in this paragraph 9.2 shall be deemed
                  included in the Obligations and shall be presumed to be the
                  amount of damages sustained by

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                  FINOVA due to the Borrower's early termination and Borrower
                  agrees that such damages are reasonable and appropriate under
                  the circumstances currently existing.

         3.       Notwithstanding anything to the contrary in the Loan Agreement
or any of the instruments, documents or agreements executed in connection
therewith, effective as of the date hereof, FINOVA shall no longer cause Letters
of Credit to be issued for the benefit of Borrower and no outstanding Letters of
Credit shall be extended or renewed beyond their current expiry date.

         4.       In addition to all other reporting requirements contained in
the Loan Agreement or in any other instruments, documents or agreements existing
between Borrower and FINOVA, Borrower shall provide to FINOVA weekly accounts
receivable agings and other information regarding its accounts receivable as
FINOVA shall request, in its sole discretion, no later than Wednesday of each
week for the preceding week.

         5.       The Borrower acknowledges that it owes the following amounts
on or before December 31, 2001: (i) Obligations to pay the deferred portion of
the waiver fee which is due and payable on December 31, 2001 in the amount of
$75,000 ("FINOVA Deferred Waiver Fee") pursuant to the terms of that certain
Amendment and Limited Waiver to Security Agreement dated July 13, 2001 between
FINOVA and Borrower; (ii) Obligations to pay the deferred waiver fee which is
due and payable on December 31, 2001 in the amount of $20,000 ("FMC Deferred
Waiver Fee") pursuant to the terms of that certain Amendment and Limited Waiver
dated July 13, 2001 between FINOVA Mezzanine Capital, Inc. and Borrower, (iii)
Obligations to FINOVA Mezzanine Capital, Inc. pursuant to its Amended and
Restated Secured Promissory Note dated July 31, 2001, in the original principal
amount of $815,000, which is due and payable on December 29, 2001 ("Mezz Term
Note"), and (iv) Obligations to pay the Waiver Fee which is due and payable on
December 31, 2001 in the amount of $50,000 ("FINOVA Waiver Fee") pursuant to the
terms of this certain Amendment and Limited Waiver to Security Agreement dated
November 14, 2001 between FINOVA and Borrower. Borrower hereby authorizes FINOVA
to cause advance(s) to be made under the revolving line of credit and to utilize
the proceeds of such advance(s) to satisfy Borrower's Obligations to pay the
FINOVA Deferred Waiver Fee, the FMC Deferred Waiver Fee, and the FINOVA Waiver
Fee (items i, ii, and iv, respectively) as and when due. In addition, Borrower
agrees to pay to FINOVA the first $815,000 immediately upon receipt of any new
capital raised prior to December 29, 2001 to ensure timely payment of the Mezz
Term Note.

         6.       Reaffirmation. Except as amended by the terms herein, the Loan
Agreement and each of the other documents, instruments and agreements executed
and delivered in connection therewith remain in full force and effect in
accordance with their terms. If there is any conflict between the terms and
conditions of the Loan Agreement and the terms and provisions of this Amendment,
the terms and provisions of this Amendment shall govern.

         7.       Fee. In consideration of the waiver and amendments granted
herein, Borrower shall pay to FINOVA a fee in the amount of $50,000, which shall
be deemed fully earned on the date hereof and due and payable on December 31,
2001.

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         8.       Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

         9.       Governing Law. This Amendment shall be governed by and
construed according to the laws of the State of New York.

         10.      Attorneys' Fees and Waiver of Jury Trial. Borrower agrees to
pay, on demand, all attorneys' fees and costs incurred in connection with the
preparation, negotiation, documentation and execution of this Amendment. If any
legal action or proceeding shall be commenced at any time by any party to this
Amendment in connection with its interpretation, enforcement or otherwise
concerning its terms, the prevailing party in such action or proceeding shall be
entitled to reimbursement of its reasonable attorneys' fees and costs in
connection therewith, in addition to all other relief to which the prevailing
party may be entitled. Each of the parties hereto hereby waives any and all
rights to a trial by jury in any such action or proceeding.

                                   FINOVA CAPITAL CORPORATION,
                                   a Delaware corporation

                                   By: /s/ Michael J. McCauley

                                   Print Name:  Michael J. McCauley
                                   Title/Capacity:  Vice President

                                   GALAXY NUTRITIONAL FOODS, INC.
                                   a Delaware corporation

                                   By: /s/ Angelo S. Morini

                                   Print Name:  Angelo S. Morini
                                   Title/Capacity:  Chairman, President & CEO

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                                                                   EXHIBIT 10.12

                              INTELLECTUAL PROPERTY
                               SECURITY AGREEMENT

         THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT ("Security Agreement"),
is made as of November 14, 2001, from GALAXY NUTRITIONAL FOODS, INC., a Delaware
corporation (the "Grantor") f/k/a Galaxy Foods Company, in favor of FINOVA
CAPITAL CORPORATION, a Delaware corporation (the "Lender").

                                    RECITALS:

         WHEREAS, pursuant to that certain Security Agreement (Accounts
Receivable, Inventory and Equipment) dated November 1, 1996 (as amended,
extended, modified, restructured or renewed from time to time, the "Loan
Agreement") by and between Grantor and Lender, Lender has agreed to make
revolving credit loans to Grantor from time to time in an aggregate principal
amount not to exceed $13,000,000 at any one time (the "Loan") to Grantor;

         WHEREAS, Grantor owns certain Intellectual Property listed on Schedule
A hereto;

         WHEREAS, Grantor desires to mortgage, pledge and grant to Lender, for
the benefit of Lender, a security interest in all of its right, title and
interest in, to and under the Collateral, including without limitation, the
property listed on the attached Schedule A, together with any renewal or
extension thereof, and all Proceeds (as hereinafter defined) thereof, to secure
the payment of the Obligations (as defined in the Loan Agreement); and

         WHEREAS, it is a condition precedent to the obligation of the Lender to
make any further revolving credit loans available to Grantor under the Loan
Agreement, that Grantor execute this Agreement.

                                   AGREEMENT:

         NOW, THEREFORE, in consideration of the premises and to induce Lender
to continue making revolving credit loans available to Grantor under the Loan
Agreement, Grantor hereby agrees with Lender, as follows:

         1.       Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meaning ascribed thereto in the Loan Agreement,
and the following terms shall have the following meanings:

         "Collateral" has the meaning assigned to it in the Loan Agreement and,
in addition, includes the Intellectual Property and the Other Proprietary
Property, whether now owned or hereafter acquired by Grantor or in which Grantor
now has or at any time in the future may acquire any right, title or interest.

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         "Copyrights" means all types of protective rights (or applications
therefor) for any work that constitutes copyrightable subject matter, including
without limitation, literary works, musical works, dramatic works, pictorial,
graphic and sculptural works, motion pictures and other audiovisual works, sound
recordings, architectural works, in any country of the world and including,
without limitation, any works referred to in Schedule A hereto.

         "Copyright License" means any written agreement material to the
operation of Grantor's businesses, providing for the grant by or to Grantor of
any right to reproduce a copyrighted work, to prepare derivative works based on
a copyrighted work, to distribute copies of a copyrighted work, to perform a
copyrighted work or to display a copyrighted work, or to engage in any other
legally protected activity with respect to a copyrighted work including, without
limitation, any thereof referred to in Schedule A hereto.

         "Intellectual Property" means all Patent Applications, Patents, Patent
Licenses, Trademark Applications, Trademarks, Trademark Licenses, Copyrights,
Copyright Licenses, Trade Secrets, Inventions and other proprietary property or
technology, and agreements relating thereto, including, without limitation, any
and all improvements and future developments material to the operation of
Grantor's businesses, as defined herein and/or referred to in Schedule A hereto.

         "Invention" means any new and useful process, machine, manufacture, or
composition of matter, or any new and useful improvement thereof that is
material to the operation of Grantor's businesses and developed by Grantor, its
employees or agents, whether or not the subject of Patent(s) or Patent
Application(s).

         "Other Proprietary Property" means all types of protectable intangible
property rights other than Patents, Trademarks and Copyrights, including without
limitation, Trade Secrets, computer software and the like, including, without
limitation, all such rights referred to in Schedule B hereto.

         "Patents" means all types of exclusionary or protective rights granted
(or applications therefor) for inventions in any country of the world
(including, without limitation, letters patent, plant patents, utility models,
breeders' right certificates, inventor's certificates and the like), and all
reissues and extensions thereof and all provisionals, divisions, continuations
and continuations-in-part thereof, including, without limitation, all such
rights referred to in Schedule A hereto.

         "Patent License" means any agreement material to the operation of
Grantor's business, whether written or oral, providing for the grant by or to
Grantor of any right to manufacture, use or sell any Invention covered by a
Patent, including, without limitation, any thereof referred to in Schedule A
hereto.

         "Proceeds" means "proceeds," as such term is defined in Section
9-102(a) of the UCC and, to the extent not included in such definition, shall
include, without limitation, (a) any and all proceeds of any insurance,
indemnity, warranty, guaranty or letter of credit payable to Grantor, from time
to time with respect to any of the Collateral, (b) all payments (in any form
whatsoever) paid or payable to Grantor from time to time in connection with any
taking of all or any part of the Collateral

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by any governmental authority or any Person acting under color of governmental
authority), (c) all judgments in favor of Grantor in respect of the Collateral
and (d) all other amounts from time to time paid or payable or received or
receivable under or in connection with any of the Collateral.

         "Security Agreement" means this Intellectual Property Security
Agreement, as amended, supplemented or otherwise modified from time to time.

         "Trade Secret" means any of Grantor's scientific or technical
information, design, processes, patterns, procedures, formulas, recipes or
improvement which is secret and of value.

         "Trademarks" means (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other sources of business identifiers used in any country in
the world, whether registered or unregistered, and the goodwill associated
therewith, now existing and material to the businesses of Grantor or hereafter
acquired, and (b) all registrations, recordings and renewals thereof, and all
applications in connection therewith, issued by or filed in a national, state or
local governmental authority of any country, including, without limitation, all
such rights referred to in Schedule A hereto.

         "Trademark License" means any agreement, material to the businesses of
Grantor, written or oral, providing for the grant by or to Grantor of any right
to use any Trademark, including, without limitation, any thereof referred to in
Schedule A hereto.

         "UCC" means the Uniform Commercial Code as from time to time in effect
in the State of Arizona.

         2.       Grant of Security Interest. As collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, Grantor hereby
assigns and grants to Lender for the benefit of Lender a continuing first
priority security interest in all of Grantor's right, title and interest in and
to the Collateral, including all Proceeds and products thereof, whether or not
included in Schedule A or Schedule B.

         3.       Representations and Warranties Concerning the Intellectual
Property. Grantor represents and warrants that:

                  (a)      Schedule A and Schedule B hereto include all
         Intellectual Property and Other Proprietary Property owned by Grantor
         in its own name or as to which Grantor has any colorable claim of
         ownership that are material to the business of Grantor as of the date
         hereof.

                  (b)      To Grantor's best knowledge, Grantor is the sole
         legal and beneficial owner of the entire right, title and interest in
         and to the Intellectual Property and the Other Proprietary Property,
         and/or has the right to use all such Intellectual Property and Other
         Proprietary Property pursuant to a valid license or other agreement.

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                  (c)      To Grantor's best knowledge, Grantor's rights in and
         to the Intellectual Property are valid, subsisting, unexpired,
         enforceable and have not been abandoned.

                  (d)      All licenses, franchise agreements and other
         agreements conveying rights in and to the Intellectual Property and
         Other Proprietary Property are identified on Schedule A and Schedule B
         hereto and are in full force and effect. To the best knowledge of
         Grantor, Grantor is not in default under any such agreement, and no
         event has occurred which might constitute a default by Grantor under
         any such agreement.

                  (e)      Except as set forth in Schedule A, all of the
         Intellectual Property is free and clear of any and all liens, security
         interests, options, licenses, pledges, assignments, encumbrances and/or
         agreements of any kind, and Grantor has not granted any release,
         covenant not to sue, or non-assertion assurance to any third party with
         respect to any of the Intellectual Property.

                  (f)      To Grantor's knowledge, all prior transfers and
         assignments of the interests of any and all predecessors in the
         Intellectual Property of Grantor were duly and validly authorized,
         executed, delivered, recorded and filed as required to vest Grantor
         with complete, unrestricted ownership rights therein.

                  (g)      Grantor has not, within the three (3) months prior to
         the date of execution of this Agreement, executed and/or delivered any
         assignment, transfer or conveyance of any of the Intellectual Property,
         recorded or unrecorded.

                  (h)      No proceedings have been instituted or are pending
         or, to Grantor's knowledge, threatened that challenge Grantor's rights
         to use the Intellectual Property or Other Proprietary Property, or to
         register or maintain the registration of the Intellectual Property. No
         holding, decision or judgment has been rendered by any governmental
         authority which would limit, cancel or question the validity of any of
         the Intellectual Property. No action or proceeding is pending (i)
         seeking to limit, cancel or question the validity of any of the
         Intellectual Property or Grantor's ownership thereof or (ii) which, if
         adversely determined, would reasonably be likely to have a material
         adverse effect on the value of any of the Intellectual Property.

                  (i)      To the best of Grantor's knowledge, the current
         conduct of Grantor's business and Grantor's rights in and to all of the
         Intellectual Property and Other Proprietary Property do not conflict
         with or infringe any proprietary right of any third party in any way
         which materially adversely affects the business or financial condition
         of Grantor. Further, except as set forth in Schedule A and Schedule B,
         Grantor is not aware of any claim by any third party that such conduct
         or such rights conflict with or infringe any valid proprietary right of
         any third party in any way which affects the business or financial
         condition of Grantor. To Grantor's best knowledge, Grantor is not
         making and has not made use of any confidential information of any
         third party except pursuant to express agreement of such third party.

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                  (j)      Grantor is unaware of any infringement by any other
         party upon its Intellectual Property rights. Grantor affirmatively
         covenants that it will exert commercially reasonable efforts to prevent
         any infringement by third parties of Grantor's Intellectual Property
         rights or any theft of Grantor's Other Proprietary Property at
         Grantor's sole cost; provided, that the foregoing shall not require
         that Grantor apply for or effect any registration of its Intellectual
         Property.

         4.       Covenants. Grantor covenants and agrees with Lender that, from
and after the date of this Security Agreement until the Obligations are paid in
full:

                  (a)      From time to time, upon the written request of
         Lender, and at the sole expense of Grantor, Grantor will promptly and
         duly execute and deliver such further instruments and documents and
         take such further action as Lender may reasonably request for the
         purpose of obtaining or preserving the full benefits of this Security
         Agreement and of the rights and powers herein granted, including,
         without limitation, the filing of any financing or continuation
         statements under the UCC in effect in any jurisdiction with respect to
         the liens created hereby. Grantor also hereby authorizes Lender to file
         any such financing or continuation statement without the signature of
         Grantor to the extent permitted by applicable law. A carbon,
         photographic or other reproduction of this Security Agreement shall be
         sufficient as a financing statement for filing in any jurisdiction;
         provided, however, that Lender agrees that it shall not file this
         Security Agreement or a carbon, photographic or reproduction hereof in
         the State of Florida; unless the filing of this Security Agreement (as
         opposed to a UCC Financing Statement or other document) is the only
         means by which Lender can perfect its security interest granted under
         this Security Agreement.

                  (b)      Grantor will not create, incur or permit to exist,
         will take all commercially reasonable actions to defend the Collateral
         against, and will take such other commercially reasonable action as is
         necessary to remove, any lien or claim on or to the Collateral, other
         than the liens created hereby, as permitted pursuant to the Loan
         Agreement, and licenses and similar rights (but not security interests)
         granted by Grantor to third parties and will take all commercially
         reasonable actions to defend the right, title and interest of Lender in
         and to any of the Collateral against the claims and demands of all
         persons whomsoever.

                  (c)      Grantor will not sell, transfer or otherwise dispose
         of any of the Collateral, or attempt, offer or contract to so do,
         except as required by any applicable agreement, license or sub-license
         currently in effect, except that Grantor may grant to third parties
         such licenses and sub-licenses as Grantor may deem desirable or
         appropriate in the conduct of Grantor's business.

                  (d)      Grantor will advise Lender promptly, in reasonable
         detail, at its address set forth in the Loan Agreement, (i) of any lien
         (other than liens created hereby or permitted

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         under the Loan Agreement) on, or claim asserted against, Collateral and
         (ii) of the occurrence of any other event which could reasonably be
         expected to have a material adverse effect on the aggregate value of
         the Collateral or on the liens created hereunder.

                  (e)      (i)      Grantor (either itself or through licensees)
                  will, except with respect to any Trademark that Grantor shall
                  reasonably determine is of immaterial economic value to it or
                  otherwise if Grantor reasonably determines not to so do, (A)
                  continue to use each Trademark on each and every trademark
                  class of goods applicable to its current line as reflected in
                  its current catalogs, brochures and price lists in order to
                  maintain such Trademark in full force free from any claim of
                  abandonment for non-use, (B) maintain as in the past the
                  quality of products and services offered under such Trademark,
                  (C) use reasonable efforts to employ such Trademark with the
                  appropriate notice of registration, (D) not adopt or use any
                  mark which is confusingly similar or a colorable imitation of
                  such Trademark unless within thirty (30) days after such use
                  or adoption Lender, for its benefit, shall obtain a perfected
                  security interest in such mark pursuant to this Security
                  Agreement, and (E) not to (and not permit any licensee or
                  sublicensee thereof to) knowingly do any act or omit to do any
                  act whereby any Trademark may become invalidated.

                           (ii)     Grantor will not, except with respect to any
                  Patent that Grantor shall reasonably determine is of
                  immaterial economic value to it or otherwise if Grantor
                  reasonably determine so to do, do any act, or omit to do any
                  act, whereby any Patent may become abandoned or dedicated.
                  Without the prior written consent of Lender, which consent
                  shall not be unreasonably withheld, Grantor shall not abandon
                  any right to file a patent application, or abandon any pending
                  patent application or patent if such abandonment would have a
                  material adverse effect on the business of Grantor.

                           (iii)    Grantor will promptly notify Lender if it
                  knows, or has reason to know, that any application relating to
                  any Patent, Trademark or Copyright may become abandoned or
                  dedicated, or of any adverse determination or material
                  development (including, without limitation, the institution
                  of, or any such determination or development in, any
                  proceeding in the United States Patent and Trademark office or
                  any court or tribunal in any country) regarding Grantor's
                  ownership of any Patent, Trademark or Copyright, or its right
                  to register the same or to keep and maintain the same.

                           (iv)     Whenever Grantor, either by itself or
                  through any agent, employee, licensee or designee, shall file
                  an application for any Patent or for the registration of any
                  Trademark or Copyright with the United States Patent and
                  Trademark Office, the United States Copyright Office, or any
                  similar office or agency in any other country or any political
                  subdivision thereof, Grantor shall report such filing to
                  Lender within five (5) business days after the last day of the
                  fiscal quarter in which such filing occurs. Upon request of
                  Lender, Grantor shall execute and deliver any and all

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                  reasonably necessary agreements, instruments, documents, and
                  papers as Lender may reasonably request to evidence Lender's
                  security interest in any newly filed Patent, Copyright or
                  Trademark and the goodwill and general intangibles of Grantor
                  relating thereto or represented thereby, and Grantor hereby
                  constitutes Lender its attorney-in-fact to execute and file
                  all such writings for the foregoing purposes, all acts of such
                  attorney being hereby ratified and confirmed; such power being
                  coupled with an interest is irrevocable until the Obligations
                  are paid in full.

                           (v)      Grantor, except with respect to any Patent,
                  Trademark or Copyright Grantor shall reasonably determine is
                  of immaterial economic value to it or otherwise if Grantor
                  reasonably determines not to so do, will take all reasonable
                  and necessary steps, including, without limitation, in any
                  proceedings before any tribunal, office or agency in any other
                  country or any political subdivision thereof, to maintain and
                  pursue each application (and to obtain the relevant
                  registration or Patent) and to maintain each Patent and each
                  registration of Trademarks and Copyrights, including, without
                  limitation, filing of applications, applications for reissue,
                  renewal or extensions, the payment of maintenance fees,
                  participation in reexamination, opposition and infringement
                  proceedings, and the filing of renewal applications,
                  affidavits of use and affidavits of incontestability, when
                  appropriate. Any expenses incurred in connection with such
                  activities shall be paid by Grantor.

                           (vi)     In the event Grantor knows or has reason to
                  know that any Patent, Trademark or Copyright included in the
                  Collateral is infringed, misappropriated or diluted by a third
                  party, Grantor shall promptly notify Lender after it learns
                  thereof and shall, unless Grantor shall reasonably determine
                  that such Patent, Trademark or Copyright is of immaterial
                  economic value to Grantor which determination Grantor shall
                  promptly report to Lender, promptly sue for infringement,
                  misappropriation or dilution, or take such other actions as
                  Grantor shall reasonably deem appropriate under the
                  circumstances to protect such Patent, Trademark or Copyright.

                           (vii)    Grantor will furnish to Lender each year, on
                  the anniversary date of the execution of this Agreement,
                  statements, schedules and an inventory identifying and
                  describing the Collateral, including without limitation, all
                  Intellectual Property acquired subsequent to the date of this
                  agreement and not identified on Schedule A and Schedule B, all
                  transfers, assignments, licenses or sub-licenses of the
                  Collateral by Grantor, and such other information in
                  connection with the Collateral as Lender may reasonably
                  request, all in reasonable detail. Any such Intellectual
                  Property shall automatically become part of the Collateral.

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         5.       Lender's Appointment as Attorney-in-Fact.

                  (a)      Grantor hereby irrevocably constitutes and appoints
         Lender and any officer or agent thereof, with full power of
         substitution, as its true and lawful attorney-in-fact with full
         irrevocable power and authority in the place and stead of Grantor and
         in the name of Grantor or in its own name, from time to time after the
         occurrence, and during the continuation of, an Event of Default in
         Lender's reasonable discretion, for the purpose of carrying out the
         terms of this Security Agreement, to take any and all appropriate
         action and to execute any and all documents and instruments which may
         be necessary or desirable to accomplish the purposes of this Security
         Agreement, and, without limiting the generality of the foregoing,
         Grantor hereby grants Lender the power and right, on behalf of Grantor
         without notice to or assent by Grantor, to do the following:

                           (i)      at any time when any Event of Default shall
                  have occurred and is continuing in the name of Grantor or its
                  own name, or otherwise, to take possession of and endorse and
                  collect any checks, drafts, notes, acceptances or other
                  instruments for the payment of moneys due under, or with
                  respect to, any Collateral and to file any claim or to take
                  any other action or proceeding in any court of law or equity
                  or otherwise deemed appropriate by Lender for the purpose of
                  collecting any and all such moneys due with respect to such
                  Collateral whenever payable;

                           (ii)     to pay or discharge taxes and liens levied
                  or placed on or threatened against the Collateral, to effect
                  any repairs or any insurance called for by the terms of this
                  Security Agreement and to pay all or part of the premiums
                  therefor and the costs thereof; and

                           (iii)    (A) to direct any party liable for any
                  payment under any of the Collateral to make payment of any and
                  all moneys due or to become due thereunder directly to Lender
                  or as Lender shall direct, (B) to ask or demand for, collect,
                  receive payment of and receipt for, any and all moneys, claims
                  and other amounts due or to become due at any time in respect
                  of or arising out of any Collateral, (C) to sign and endorse
                  any invoices, freight or express bills, bills of lading,
                  storage or warehouse receipts, drafts against debtors,
                  assignments, verifications, notices and other documents in
                  connection with any of the Collateral, (D) to commence and
                  prosecute any suits, actions or proceedings at law or in
                  equity in any court of competent jurisdiction to collect the
                  Collateral or any portion thereof and to enforce any other
                  right in respect of any Collateral, (E) to defend any suit,
                  action or proceeding brought against Grantor with respect to
                  any Collateral, (F) to settle, compromise or adjust any suit,
                  action or proceeding described in the preceding clause and, in
                  connection therewith, to give such discharges or releases as
                  Lender may deem appropriate, (G) to assign any Trademark or
                  Copyright (along with goodwill of the business to which such
                  Trademark or Copyright pertains), throughout the world for
                  such term or terms, on such conditions, and in such manner, as
                  Lender shall in its sole discretion

                                      -8-
<PAGE>

                  determine, and (H) generally, to sell, transfer, pledge and
                  make any agreement with respect to or otherwise deal with any
                  of the Collateral as fully and completely as though Lender
                  were the absolute owner thereof for all purposes, and to do,
                  at Lender's option and Grantor's expense, at any time, or from
                  time to time, all acts and things which Lender deems necessary
                  to protect, preserve or realize upon the Collateral and the
                  liens of Lender thereon and to effect the intent of this
                  Security Agreement, all as fully and effectively as Grantor
                  might do. Grantor hereby ratifies all that said attorneys
                  shall lawfully do or cause to be done by virtue hereof. This
                  power of attorney is a power coupled with an interest and
                  shall be irrevocable.

                  (b)      Grantor also authorizes Lender, at any time and from
         time to time, to execute, in connection with the sale provided for in
         Section 8 hereof, any endorsements, assignments or other instruments of
         conveyance or transfer with respect to the Collateral.

                  (c)      The powers conferred on Lender hereunder are solely
         to protect the interests of Lender in the Collateral and shall not
         impose any duty upon Lender to exercise any such powers. Lender shall
         be accountable only for amounts that it actually receives as a result
         of the exercise of such powers, and neither it nor any of its partners,
         officers, directors, employees or agents shall be responsible to
         Grantor for any act or failure to act hereunder, except for their own
         negligence or willful misconduct or failure to comply with mandatory
         provisions of applicable law.

         6.       Performance by Lender of Grantor's Obligations. If Grantor
fails to perform or comply with any of its agreements contained herein and
Lender, as provided for by the terms of this Security Agreement, and after
simultaneous written notice to Grantor, shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, then the
expenses of Lender incurred in connection with such performance or compliance,
together with interest thereon at the highest default rate provided in the Note,
shall be payable by Grantor to Lender on demand and shall constitute Obligations
secured hereby.

         7.       Proceeds. It is agreed that if an Event of Default shall occur
and be continuing, then (a) all Proceeds received by Grantor consisting of cash,
checks and other cash equivalents shall be held by Grantor in trust for Lender,
segregated from other funds of Grantor, and shall, forthwith upon receipt by
Grantor, be turned over to Lender in the exact form received by Grantor (duly
endorsed by Grantor to Lender, if required), and (b) any and all such Proceeds
received by Lender (whether from Grantor or otherwise) shall promptly be applied
by Lender against, the Obligations (whether matured or unmatured), such
application to be in such order as set forth in the Loan Agreement.

         8.       Remedies Upon Default. Upon an Event of Default under and as
defined in the Loan Agreement, Lender may pursue any or all of the following
remedies, without any notice to Grantor except as required below:

                                      -9-
<PAGE>

                  (a)      Lender may give written notice of default to Grantor,
         following which Grantor shall not dispose of, conceal, transfer, sell
         or encumber any of the Collateral (including, but not limited to, cash
         proceeds) without Lender's prior written consent, even if such
         disposition is otherwise permitted hereunder in the ordinary course of
         business. Any such disposition, concealment, transfer or sale after the
         giving of such notice shall constitute a wrongful conversion of the
         Collateral. Lender may obtain a temporary restraining order or other
         equitable relief to enforce Grantor's obligation to refrain from so
         impairing Lender's Collateral.

                  (b)      Lender may take possession of any or all of the
         Collateral. Grantor hereby consents to Lender's entry into any of
         Grantor's premises to repossess Collateral, and specifically consents
         to Lender's forcible entry thereto as long as Lender causes no
         significant damage to the premises in the process of entry (drilling of
         locks, cutting of chains and the like do not in themselves cause
         "significant" damage for the purposes hereof) and provided that Lender
         accomplishes such entry without a breach of the peace.

                  (c)      Lender may dispose of the Collateral at private or
         public sale. Any required notice of sale shall be deemed commercially
         reasonable if given at least five (5) days prior to sale. Lender may
         adjourn any public or private sale to a different time or place without
         notice or publication of such adjournment, and may adjourn any sale
         either before or after offers are received. The Collateral may be sold
         in such lots as Lender may elect, in its sole discretion. Lender may
         take such action as it may deem necessary to repair, protect, or
         maintain the Collateral pending its disposition.

                  (d)      Lender may exercise its lien upon and right of setoff
         against any monies, items, credits, deposits or instruments that Lender
         may have in its possession and that belong to Grantor or to any other
         person or entity liable for the payment of any or all of the
         Obligations.

                  (e)      Lender may exercise any right that it may have under
         any other document evidencing or securing the Obligations or otherwise
         available to Lender at law or equity.

         9.       Limitation on Duties Regarding Preservation of Collateral.
Lender's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under the UCC or otherwise,
shall be to deal with it in the same manner as Lender would deal with similar
property for its own account. Neither Lender nor any of its partners, directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of Grantor or otherwise.

         10.      Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and are
powers coupled with an interest.

         11.      Severability. Any provision of this Security Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such

                                      -10-
<PAGE>

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.

         12.      Section Headings. The section headings used in this Security
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.

         13.      No Waiver: Cumulative Remedies. Lender shall not by any act
(except by a written instrument pursuant to Section 14 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of Lender, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by Lender of any right or remedy hereunder on any occasion shall not be
construed as a bar to any right or remedy which Lender would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.

         14.      Waivers and Amendments; Successors and Assigns. None of the
terms or provisions of this Security Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
Grantor and Lender, provided that any provision of this Security Agreement may
be waived by Lender in a written letter or agreement executed by Lender or by
facsimile transmission from Lender. This Security Agreement shall be binding
upon the successors and assigns of Grantor and shall inure to the benefit of
Lender and its successors and assigns.

         15.      Notices. Any and all notices, elections or demands permitted
or required to be made under this Security Agreement shall be in writing, signed
by the party giving such notice, election or demand and shall be delivered
personally, telecopied, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery or telecopy or three (3) business days after the date of mailing (or
the next business day after delivery to such courier service), as the case may
be, shall be the date of such notice, election or demand. For the purposes of
this Security Agreement:

The Address of Lender is:               FINOVA Capital Corporation
                                        1000 First Avenue
                                        King of Prussia, PA  19406
                                        Attention: Michael McCauley
                                        Telecopy No.: 610/491-8444

                                      -11-
<PAGE>

with a copy to:                         FINOVA Capital Corporation
                                        355 S. Grand Avenue
                                        Suite 2500
                                        Los Angeles, CA  90071
                                        Attention: Michael Rosner, Esq.
                                        Telecopy No.: 213/253-1582

The Address of Grantor is:              Galaxy Nutritional Foods, Inc.
                                        2441 Viscount Row
                                        Orlando, FL 32809
                                        Attention: Angelo Morini
                                        Telecopy No.: 407/855-1099

with a copy to:                         Baker & Hostetler
                                        200 S. Orange Avenue
                                        Suite 2300
                                        Attention: Jeff Decker
                                        Telecopy No.: 407/841-0168

         16.      Governing Law. This Security Agreement shall be governed by,
and construed and interpreted in accordance with, the laws of the State of
Arizona applicable to contracts to be wholly performed in such State, or to the
extent required, by federal law.

         17.      Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.

         18.      Consent to Jurisdiction; Exclusive Venue. Grantor hereby
irrevocably consents to the Jurisdiction of the Arizona state courts or the
United States District Court sitting in Maricopa County, Arizona for the purpose
of any litigation to which Lender may be a party and which concerns this
Security Agreement or the Obligations. It is further agreed that venue for any
such action shall lie exclusively with courts sitting in Maricopa County,
Arizona unless Lender agrees to the contrary in writing.

         19.      Waiver of Trial by Jury. LENDER AND GRANTOR 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 AGREEMENT OR
THE LOAN DOCUMENTS.

                                      -12-
<PAGE>

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

                                     GRANTOR:

                                     GALAXY NUTRITIONAL FOODS, INC.,
                                     a Delaware corporation

                                     By:      /s/ Angelo S. Morini
                                         -------------------------
                                     Title:   Chairman, President & CEO
                                            ----------------------------

                                     LENDER:

                                     FINOVA CAPITAL CORPORATION,
                                     a Delaware corporation

                                     By:      /s/ Michael J. McCauley
                                         -------------------------------
                                     Title:   Vice President
                                            ----------------------------

                                      -13-
<PAGE>

                                   SCHEDULE A

                                      -14-
<PAGE>

                                   SCHEDULE B

                                      -15-

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