<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE
LAWS OF ANY FOREIGN JURISDICTION. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF
ANY FOREIGN JURISDICTION, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND SUCH
FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.


                           FRISBY TECHNOLOGIES, INC.
                             STOCK PURCHASE WARRANT


         This Stock Purchase Warrant is issued as of this 23rd day of January,
2002 (effective as of January 10, 2002), by Frisby Technologies, Inc., a
Delaware corporation (the "Company"), to DAMAD Holding AG or permitted assigns
(the "Holder").

         1.       Issuance of Warrant; Term; Price.

                  1.1      Issuance. The Company hereby grants to Holder the
right to purchase 520,833 shares of the Company's common stock, par value $.001
("Common Stock"). The shares of Common Stock issuable upon exercise of this
Warrant are hereinafter referred to as the "Shares."

                  1.2      Term. This Warrant shall be exercisable at any time
and from time to time in whole or in part from the date hereof until 5:00 p.m.
Winston-Salem, North Carolina time on January 9, 2007.

                  1.3      Exercise Price. The exercise price (the "Purchase
Price") per share for which all or any of the Shares may be purchased pursuant
to the terms of this Warrant shall be $1.44, subject to adjustment as provided
herein.

         2.       Adjustment of Purchase Price, Number and Kind of Shares. The
Purchase Price and the number and kind of securities issuable upon the exercise
of this Warrant shall be subject to adjustment from time to time and the
Company agrees to provide notice upon the happening of certain events as
follows.

                  2.1      Adjustment for Issue or Sale at Less than Purchase
Price. If and whenever on or after the date of issuance hereof the Company
shall issue or sell any "Additional Shares" (as defined below) for a
consideration per share less than the Purchase Price in effect immediately
prior to the time of such issue or sale, then forthwith upon such issuance or
sale (the


<PAGE>


"Triggering Transaction"), the Purchase Price shall be reduced to the
Purchase Price (calculated to the nearest cent) determined by dividing:

                  (i)      an amount equal to the sum of (x) the number of
                           shares of Common Stock outstanding immediately prior
                           to such Triggering Transaction (on a Common Stock
                           equivalent basis) multiplied by the Purchase Price
                           then in effect and (y) the consideration, if any,
                           received by the Company upon consummation of such
                           Triggering Transaction, by

                  (ii)     the total number of shares of Common Stock
                           outstanding (on a Common Stock equivalent basis)
                           immediately after such Triggering Transaction.

                  When any adjustment is required to be made in the Purchase
Price, the number of Shares purchasable upon the exercise of this Warrant
(inclusive of any Shares theretofore purchased upon exercise of this Warrant)
shall be changed to the number determined by dividing $750,000 by the Purchase
Price in effect immediately after such adjustment as determined pursuant to
this Section 2.1; provided that in no event shall the number of Shares
purchasable upon the exercise of this Warrant exceed 19.9% of the outstanding
shares of Common Stock on the effective date of such Warrant, as adjusted, if
at all pursuant to Section 2.4.

                  The term "Additional Shares" as used herein shall mean all
shares of Common Stock issued by the Company after the date of issuance hereof,
whether or not subsequently reacquired or retired by the Company, other than:
(a) pursuant to a stock split, reverse stock split, stock dividend or
reclassification or similar organic change involving the Company's capital
stock; (b) pursuant to the exercise of outstanding options or warrants; and (c)
to employees, officers, directors, consultants or other persons performing
services for or on behalf of the Company, in each case to the extent issued
solely in its status as such and not as part of an offering of the Company's
securities, pursuant to any stock option plan, stock purchase plan, management
incentive plan, consulting agreement or other contract or arrangement approved
by the Company's Board of Directors.

                  2.2      Dividends in Stock Adjustment. In case at any time
or from time to time on or after the date hereof the holders of the Common
Stock of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received, or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive, without payment therefor, other or
additional securities or other property (other than cash) of the Company by way
of dividend or distribution, then and in each case, the Holder shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Shares
receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional securities or other property
(other than cash) of the Company that the Holder would have received if the
Holder had been the holder of record of Shares on the record date for such
dividend or distribution (if any) and otherwise on the date of such dividend or
distribution.

                  2.3      Reclassification or Reorganization Adjustment. In
case of any reclassification or change of the outstanding securities of the
Company or of any reorganization of the Company (or any other corporation the
stock or securities of which are at the time


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<PAGE>


receivable upon the exercise of this Warrant) on or after the date hereof, then
and in each such case the Company shall give the Holder at least fifteen (15)
days notice of the proposed effective date of such transaction, and the Holder,
upon the exercise hereof at any time after the consummation of such
reclassification, change or reorganization, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the Common Stock and other securities or
property to which such Holder would have been entitled upon such consummation
if such Holder had exercised this Warrant immediately prior thereto. By
accepting this Warrant, the Holder expressly acknowledges and agrees that
failure by the Company to give, or any defect in, the notice required by this
subsection 2.3 of Section 2 shall not affect the validity, legality or
effectiveness of the reclassification, change or reorganization.

                  2.4      Stock Splits and Reverse Stock Splits. If at any
time on or after the date hereof the Company shall subdivide its outstanding
shares of Common Stock into a greater number of shares, the Purchase Price in
effect immediately prior to such subdivision shall thereby be proportionately
reduced and the number of shares receivable upon exercise of this Warrant shall
thereby be proportionately increased; and, conversely, if at any time on or
after the date hereof the outstanding number of shares of Common Stock shall be
combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall thereby be proportionately
increased and the number of shares receivable upon exercise of this Warrant
shall thereby be proportionately decreased.

                  2.5      Most Favored Nation. If, after the date hereof, the
Company issues any equity securities with rights and preferences superior to,
or more favorable than, those attributed to the Common Stock ("Senior Stock"),
then: (i) to the extent the Holder is then entitled to receive shares of Common
Stock upon exercise of the Warrant, the Holder shall instead be entitled to
receive shares of the Senior Stock issued in the round of equity financing most
recent to the exercise of the Warrant, conditional on the Holder becoming a
party to all related transaction documents entered into by investors in such
round of equity financing; and (ii) all references to "Common Stock," other
than the references in Section 2.1, shall thereafter be deemed references to
"Senior Stock."

         3.       No Fractional Shares. No fractional Share will be issued in
connection with any exercise of this Warrant. In lieu of any fractional Share
that would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined pursuant to Section 7.3
hereof.

         4.       No Stockholder Rights. This Warrant as such shall not entitle
the Holder to vote, receive cash dividends or to any of the other rights of a
stockholder of the Company until the Holder has exercised this Warrant in
accordance with Section 6 or Section 7 hereof.

         5.       Reservation of Stock. The Company covenants that during the
period this Warrant is exercisable, the Company will use its best efforts to
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Shares upon the exercise of this Warrant.
The Company agrees that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock


                                       3
<PAGE>


certificates to execute and issue the necessary certificates for Shares upon
the exercise of this Warrant.

         6.       Exercise of Warrant. This Warrant may be exercised by Holder
by the surrender of this Warrant at the principal office of the Company,
accompanied by payment in full of the Purchase Price for the Shares purchased
thereby. This Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of its surrender for exercise with payment
in full as provided above, and the person or entity entitled to receive the
Shares and other securities issuable upon such exercise, if any, shall be
treated for all purposes as the holder of record of such Shares and other
securities, if any, as of the close of business on such date. As promptly as
reasonably practicable, the Company shall issue and deliver to the Holder a
certificate or certificates for the number of full Shares issuable upon such
exercise, together with cash in lieu of any fraction of a Share as provided
above. The Shares issuable upon exercise hereof shall, upon their issuance, be
fully paid and nonassessable.

         7.       Net Issue Election.

                  7.1      Right to Convert. In addition to and without
limiting the rights of the Holder under the terms of this Warrant, the Holder
shall have the right to convert this Warrant or any portion hereof (the
"Conversion Right") into Shares as provided in this Section 7. Upon exercise of
the Conversion Right with respect to a particular number of Shares (the
"Converted Warrant Shares"), the Company shall deliver to the Holder (without
payment by the Holder of any cash or other consideration) that number of Shares
equal to the quotient obtained by dividing (x) the result obtained by
subtracting (A) the aggregate Purchase Price for the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the
aggregate fair market value of the Converted Warrant Shares on the Conversion
Date (as defined in Section 7.2) by (y) the fair market value of one share of
Common Stock on the Conversion Date. No fractional Share shall be issuable upon
exercise of the Conversion Right, and if the number of Shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to the Holder an amount in cash equal to the fair
market value of the resulting fractional Share on the Conversion Date.

                  7.2      Method of Exercise. The Conversion Right may be
exercised by the Holder by the surrender of this Warrant at the principal
office of the Company together with a written statement in a form reasonably
acceptable to the Company specifying that the Holder thereby intends to
exercise the Conversion Right and indicating the number of Converted Warrant
Shares. Such conversion shall be effective upon such surrender of this Warrant
with such written statement (the "Conversion Date"). Certificates for the
Shares issuable upon exercise of the Conversion Right (or any other securities
deliverable in addition to or in lieu thereof under Section 2) shall be issued
as of the Conversion Date and shall be delivered to the Holder as soon as
reasonably practicable following the Conversion Date.

                  7.3      Determination of Fair Market Value. For purposes of
this Section 7, fair market value of a share of Common Stock as of a particular
date (the "Determination Date") shall mean the average of the closing sales
prices of the Common Stock on the principal securities exchange on which the
Common Stock may at the time be listed, or, if there has been no sales on any
such exchange on any day, the average of the highest bid and lowest asked
prices


                                       4
<PAGE>


on such exchange at the end of such day, or, if on any day the Common Stock is
not so listed, the average of the last sale prices quoted in the NASDAQ System,
or if on any day such security is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of five (5) consecutive trading days beginning with the last
trading day prior to the Determination Date. If, at any time during such five
day trading period, the Common Stock is not listed on any securities exchange
or quoted in the NASDAQ System or the over-the-counter market, the "fair market
value" of a share of Common Stock as of the Determination Date shall be the
fair value thereof as determined in good faith by the Company's Board of
Directors.

         8.       Certificate of Adjustment. Whenever the Purchase Price or
number or type of securities issuable upon exercise of this Warrant is
adjusted, as herein provided, the Company shall promptly upon the request of
the Holder, deliver to the Holder a certificate of an officer of the Company
setting forth the nature of such adjustment and a brief statement of the facts
requiring such adjustment.

         9.       Replacement of Warrants. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of the Warrant and delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company, and reimbursement to
the Company of all reasonable expenses incidental thereto, the Company will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

         10.      Dividends and Distributions. For so long as any part of this
Warrant remains outstanding and unexercised, the Company will, upon the
declaration of a cash dividend upon its Common Stock or other cash distribution
to the Holders of its Common Stock and at least ten (10) days prior to the
record date, notify the Holder hereof of such declaration, which notice will
contain, at a minimum, the following information: (i) the date of the
declaration of the dividend or distribution, (ii) the amount of such dividend
or distribution, (iii) the record date of such dividend or distribution, and
(iv) the payment date or distribution date of such dividend or distribution. By
accepting this Warrant, the Holder expressly acknowledges and agrees that
failure by the Company to give, or any defect in, the notice required by this
Section 10 shall not affect the validity, legality, or effectiveness of the
dividend.

         11.      Miscellaneous. This Warrant shall be governed by the laws of
the State of North Carolina without regard to the principles of conflicts of
laws. The headings in this Warrant are for purposes of convenience of reference
only, and shall not be deemed to constitute a part hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provisions. All notices and other communications
hereunder from the Company to the Holder shall be deemed given: (i) when
delivered personally; (ii) on the next business day after deposit with a
nationally-recognized overnight courier with charges prepaid; or (iii) three
(3) days after sent by United States First Class Mail, postage prepaid, in each
case to the address of Holder set forth on the signature page hereof or
hereafter furnished to the Company in writing by the Holder.

         12.      Taxes. The Company shall pay all issue taxes and other
governmental charges (but not including any taxes based on the income, revenue
or capital gains of a Holder or any


                                       5
<PAGE>


transfer taxes payable as a result of a transfer of this Warrant or any Shares
that is otherwise permitted hereunder) that may be imposed in respect of the
issuance or delivery of the Shares or any portion thereof.

         13.      Amendment. Any term of this Warrant may be amended with the
written consent of the Company and the Holder. Any amendment effected in
accordance with this Section 13 shall be binding upon the Holder, each future
holder of this Warrant, and the Company.

         14.      Remedies. In the event of any default or threatened default
by the Company in the performance of or observance with any of the terms of
this Warrant, it is agreed that remedies at law are not and will not be
adequate for the Holder and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.

         15.      Investment Representations.

                  (i)      By its acceptance hereof, the Holder hereby
represents that (a) this Warrant is, and the Shares will be, acquired for
investment for its own account, not as a nominee or agent, and not with a view
to the sale or distribution of any part thereof; and (b) it does not have any
contract, undertaking, agreement, or arrangement with any person to sell,
transfer or grant participations to such person, or to any third person, with
respect to the Warrant or the Shares.

                  (ii)     The Holder understands that this Warrant and the
Shares have not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), on the grounds that the issuance of the Warrant and the
Shares are exempt from registration under the 1933 Act, and that the Company's
reliance on such exemption is predicated in part upon the Holder's
representations and warranties set forth herein.

                  (iii)    The Holder represents that it is an accredited
investor, as defined under Regulation D of the 1933 Act, as amended,
experienced in evaluating companies such as the Company, is able to fend for
itself in the transactions contemplated by this Warrant, has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investments, and has the ability to bear the economic
risks of its investments. The Holder further represents that it has had the
opportunity to consult with its own legal counsel with respect hereto, and has
had access, during the course of the transactions and prior to the issuance of
this Warrant, to all such information as it deemed necessary or appropriate and
that it has had, during the course of the transactions and prior to the
issuance of this Warrant, the opportunity to ask questions of, and receive
answers from, the Company concerning the terms and conditions of the offering
and to obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access.

                  (iv)     The Holder understands that the Warrant and the
Shares may not be sold, transferred or otherwise disposed of without
registration under the 1933 Act or an exemption therefrom and that, in the
absence of an effective registration statement covering the Warrant (or the
Shares) or an available exemption from registration under the 1933 Act, the
Warrant and the Shares must be held indefinitely. In particular, the Holder is
aware that the Warrant and the


                                       6
<PAGE>


Shares may not be sold pursuant to Rule 144 promulgated under the 1933 Act
unless all of the conditions of that Rule are met.

                  (v)      The Holder represents and covenants that it will
sell, transfer or otherwise dispose of the Warrant or the Shares only (i) in a
manner consistent with its representations set forth herein and in compliance
with all applicable laws and (ii) following delivery to the Company of an
opinion of counsel satisfactory in form and substance to the Company to the
effect that such sale, transfer or disposition does not violate the 1933 Act or
applicable state securities laws.

                  (vi)     The Holder understands that each certificate or
instrument representing the Warrant or the Shares will be endorsed with
restrictive legends similar to that set forth on the first page hereof.




           (The remainder of this page is intentionally left blank.)


                                       7
<PAGE>


         IN WITNESS WHEREOF, the undersigned officer of the Company has set his
hands as of the date first above written.


                                    FRISBY TECHNOLOGIES, INC.
                                    3195 Centre Park Boulevard
                                    Winston-Salem, North Carolina  27107


                                    By:      /s/ Gregory S. Frisby
                                       ----------------------------------------
                                       Gregory S. Frisby,
                                       Chief Executive Officer


Accepted and Agreed:

DAMAD HOLDING AG
Lindenstrasse 14
CH - 6340 Baar
SWITZERLAND

By:      /s/ Daniel Guggenheim
   -------------------------------
Name: Daniel Guggenheim
Title: Vice Chairman


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