Document:

<PAGE>

                                                                    EXHIBIT 10.7

                          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 July 13,
2001, is entered into by and between GALAXY NUTRITIONAL FOODS, INC., f/k/a
GALAXY FOODS COMPANY, ("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 year
ended March 31, 2001 and the fiscal quarter ended June 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 fiscal year ended March
31, 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.       Interest. The Loan Agreement is amended by deleting Section
3.1 thereof in its entirety and replacing such section 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
                  daily 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 annum
                  Prime Rate (as defined below) plus two percent (2%) per

                                       -1-
<PAGE>

                  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 issued for the account of Borrower,
                  the aggregate face amount of which shall not exceed
                  $1,000,000, which amount shall be fully reserved by FINOVA
                  from Borrower's Revolving Line of Credit availability. 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 of the month following the month 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.

                  3.       Debt Service Coverage Ratio. The Loan Agreement is
amended by deleting Section 6.18 thereof in its entirety and replacing such
section with the following:

                           6.18. Total Debt Service Coverage Ratio. Borrower's
                  Operating Cash Flow/Actual for the consecutive three (3) month
                  period ending as of September 30, 2001 must be at least .8 to
                  1.0 times the amount necessary to meet Borrower's Total
                  Contractual Debt Service for such three (3) month period;
                  Borrower's Operating Cash Flow/Actual for the consecutive six
                  (6) month period ending as of December 31, 2001 must be at
                  least .9 to 1.0 times the amount necessary to meet Borrower's
                  Total Contractual Debt Service for such six (6) month period;
                  Borrower's Operating Cash Flow/Actual for the consecutive nine
                  (9) month period ending as of March 31, 2002 must be at least
                  1.2 to 1.0 times the amount necessary to meet Borrower's Total
                  Contractual Debt Service for such nine (9) month period; and
                  Borrower's Operating Cash Flow/Actual for the consecutive
                  twelve (12) month period ending as of the last day of each of
                  Borrower's fiscal quarters commencing with Borrower's fiscal
                  quarter ending June 30, 2002 must be at least 1.4 to 1.0 times
                  the amount necessary to meet Borrower's Total Contractual Debt
                  Service for the applicable twelve (12) month period, all
                  calculated on a consolidated basis.

                  4.       Unfinanced Capital Expenditures. The Loan Agreement
is amended by deleting section 6.19 thereof in its entirety and replacing such
section with the following:

                           6.19 Unfinanced Capital Expenditures. Borrower shall
                  not make or incur any unfinanced Capital Expenditures if,
                  after giving effect thereto, the aggregate amount of all
                  unfinanced Capital Expenditures by Borrower for any fiscal
                  year would exceed Two Hundred Fifty Thousand Dollars
                  ($250,000). For the purposes hereof, the term "Capital
                  Expenditures" shall mean all expenditures made and liabilities
                  incurred in accordance with GAAP for the acquisition of any
                  fixed asset or improvement, replacement, substitution or
                  addition thereto

                                       -2-
<PAGE>

                  which has a useful life of more than one year and including,
                  without limitation, those arising in connection with capital
                  leases.

                  5.       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.

                  6.       Fee. In consideration of the waiver and amendments
granted herein, Borrower shall pay to FINOVA a fee in the amount of $100,000,
which shall be deemed fully earned on the date hereof and due and payable in two
(2) installments, the first of which shall be in the amount of Twenty-five
Thousand Dollars ($25,000) and shall be due and payable on the date hereof and
the second of which shall be in the amount of Seventy-five Thousand Dollars
($75,000) and shall be due and payable on December 31, 2001, unless the
Obligations are sooner accelerated pursuant to the terms of the Loan Agreement,
in which case the second installment shall be due and payable on the date of
such acceleration.

                  7.       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.

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

                                       -3-
<PAGE>

                  9.       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

                                     /s/ Frank Monzo

                                     Frank Monzo
                                     Vice President

                                     GALAXY NUTRITIONAL FOODS, INC.
                                     a Delaware corporation

                                     /s/ Angelo S. Morini

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

                                       -4-<PAGE>

                                                                    EXHIBIT 10.8

                                  July 12, 2001

Cynthia Hunter
Galaxy Nutritional Foods, Inc.
Suite 136
2901 Titan Row
Orlando, FL 32809

Dear Ms. Hunter:

Galaxy Nutritional Foods, Inc. (the "Company") has requested that FINOVA
Mezzanine Capital, Inc. ("FMC") waive certain defaults and modify certain
covenant requirements contained in that certain Loan Agreement dated September
30, 1999, and as amended August 3, 2000, by and between the Company as Borrower
and FMC as Lender (the "wan Agreement"). Unless otherwise defined, all
capitalized terms herein shall have the meaning given by the Loan Agreement.

Based upon the representation and agreement of the Company to 1) amend and
restate its existing promissory notes in the principal amounts of $4,000,000.00
and $815,000.00, respectively, to provide that interest on each note shall
accrue at 3 rate of 13. 5% per annum and further provide that the maturity of
the $4,000,00000 note shall be August 1, 2003; and 2) pay a waiver fee of
$20,000.00 to FMC no later than December 31, 2001 (collectively the "Waiver
Conditions"), FMC hereby agrees:

         1.       FMC hereby waives the existing Events of Default under
Sections 3.22 and 3.23 of the Loan Agreement related to Funded Debt to EBITDA
Ratio Requirements (3.22) and Debt Service Coverage Ratio Requirements (3.23)
for the quarters ended March 31, 2001 and June 30, 2001.

         2.       FMC hereby consents that there shall not be deemed to exist an
Event of Default under the Funded Debt 10 EBUDA Ratio Requirements contained in
Section 3.22 of the Loan Agreement so long as the Company's Funded Debt to
EBITDA Ratio on September 30,2001, calculated on three-month trailing basis,
shall not exceed 26 to 1; such Ratio on December 31. 2001, calculated on a
six-month trailing basis, shall not exceed 10 to 1; such Ratio on March 31,
2001, calculated on a nine-month trailing basis, shall not exceed 5.8 to 1; and
such Ratio for all quarters ending thereafter, calculated on a twelve-month
trailing basis, shall not exceed 4.5 to 1.

         3.       FMC hereby consents that there shall not deemed to exist an
Event of Default under the Debt Service Coverage Ratio Requirements of Section
3.23 of the Loan Agreement so long as the Company permits its Debt Service
Coverage Ratio on September 30, 2001, calculated on a three-month trailing
basis, to be no less then .80 to 1; such Ratio on December 31, 2001, calculated
on a six-month trailing basis, to be no less then .90 to I; such Ratio on March
31, 2002, calculated on a nine-month trailing basis to be no less than 1.2 to 1;
and such Ratio for all quarters ending thereafter, calculated on a 12-month
trailing basis, to be no less than 1.4 to 1.

<PAGE>

Cynthia Hunter
July 12, 2001
Page 2

FMC's waivers, consents, and agreements herein are expressly conditioned upon
the Company's satisfaction of each of the Waiver Conditions.

Except as specifically waived hereby, the Loan Agreements and other entered
into, executed or delivered in connection therewith (collectively, the "Loan
Documents") shall remain in full force and effect and are hereby ratified and
confirmed, and the execution, delivery and performance of this limited waiver
and consent shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of the undersigned under the Loan Documents.
Without limiting the generality of the foregoing, the waiver set forth above
shall be limited precisely as set forth above, and nothing in this limited
waiver and consent shall be deemed (i) to constitute a waiver of compliance by
Borrower with respect to any other provision of the Loan Agreement or other Loan
Documents, or (ii) to prejudice any right or remedy that the undersigned may now
have in the future under or in connection with the Loan Agreement or any other
Loan Documents.

If you have any questions, please do not hesitate to contact me.

                                    Very truly yours,

                                    /s/ Myles MacDonald

                                    Myles MacDonald
                                    Vice president

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}]]