SECOND AMENDMENT TO LOAN AGREEMENT


     THIS SECOND AMENDMENT TO LOAN AGREEMENT ("Second  Amendment") is made as of
the 15th day of January,  2001, by and between Bank of America, N.A., a national
banking  association  (the  "Bank") and Frisby  Technologies,  Inc.,  a Delaware
corporation ("Borrower").

                              W I T N E S S E T H:
                              --------------------

     WHEREAS, Bank and Borrower are parties to that certain Loan Agreement dated
as of February 29, 2000 (the "Loan Agreement"),  pursuant to which Bank extended
a revolving line of credit to the Borrower (the "Loan"), in the principal amount
of $2,000,000 (all capitalized  terms appearing herein and not otherwise defined
shall have the meanings ascribed to such terms in the Loan Agreement); and

     WHEREAS,  the Loan was  scheduled  to  mature  on July  31,  2000,  but the
maturity  date thereof was extended to September  30, 2000 pursuant to the terms
of that certain renewal Promissory Note dated May 12, 2000; and

     WHEREAS, the maturity date of the Loan was further extended to December 31,
2000,  pursuant to the terms of that certain  Amendment to Loan Agreement  dated
September 29, 2000 (the "First Amendment"); and

     WHEREAS,  the Borrower has repaid a portion of the principal balance of the
Loan and has  requested  that the Bank  further  extend  the  maturity  date for
payment of the remaining principal balance of the Loan to June 30, 2001; and

     WHEREAS,  the Bank has agreed to such extension of the maturity date of the
Loan, subject to certain terms and conditions; and

     WHEREAS,  the parties hereto wish to set forth their agreement with respect
to the foregoing matters herein;

     NOW, THEREFORE,  in consideration of the premises,  the Bank's agreement to
extend the maturity date of the Loan, the mutual  promises set forth below,  and
other valuable  consideration,  the receipt and  sufficiency of which are hereby
acknowledged, the parties hereto agree hereby as follows:

     1.  Extension of Maturity  Date.  The  Maturity  Date of the Loan is hereby
extended from December 31, 2000 to June 30, 2001,  which date shall hereafter be
the "Maturity Date" for purposes of the Loan Agreement.

     2. Amendments to Loan Agreement. The parties hereto agree to amend the Loan
Agreement as follows:

     (a)  Section 2(A)(i), as amended by the First Amendment, is further amended
          by deleting the words and figures "Two Million  Dollars  ($2,000,000)"
          in the first sentence  thereof,  and  substituting in lieu thereof the
          words  and  figures  "One  Million,   Five  Hundred  Thousand  Dollars
          ($1,500,000)".

     (b)  Section 2(A)(i), as amended by the First Amendment, is further amended
          by deleting the date "December 31, 2000" in the last sentence thereof,
          and substituting in lieu thereof the date "June 30, 2001".

     (c)  Section  2(A)(iii),  as  amended  by the First  Amendment,  is further
          amended by deleting the words and figures  "two  hundred  basis points
          (2.00%)"  and  substituting  in lieu  thereof  the words  and  figures
          "twenty-five basis points (.25%)".

     (d)  The Borrowing  Base  Certificate  (Exhibit A-1 to the  Borrowing  Base
          Agreement),  as amended by the First Amendment,  is further amended by
          deleting the figure  "2,000,000" in line 10 thereof,  and substituting
          in lieu  thereof  the  figure  "$1,500,000".  The form of the  revised
          Borrowing Base Certificate is attached hereto as Exhibit A.

     3. Guaranties.  Each of the Guarantors shall execute an  acknowledgment  of
this Second Amendment (the "Acknowledgment"), in form satisfactory to the Bank.

     4. Conditions  Precedent to Amendment.  The Bank's obligation to enter into
this  Second  Amendment  shall  be  subject  to the  satisfaction  of all of the
following  conditions,  in form and substance reasonably  acceptable to the Bank
and the Bank's counsel, not later than January 15, 2001:

     A.  Note   Modification.   Borrower  has  executed  and  delivered  a  note
modification agreement (the "Second Note Modification"), in form satisfactory to
the Bank,  evidencing  the  extension of the  Maturity  Date,  the  reduction in
interest  rate  and  the  reduction  in face  amount,  all as set  forth  in the
foregoing amendments.

     B.  Guaranty  Amendments.  Each  Guarantor  has executed  and  delivered an
Acknowledgment.

     C.  Letter of Credit.  Borrower  has  delivered  to Bank the  original of a
standby  letter of credit for the benefit of the Bank, in the face amount of One
Million Five Hundred Thousand Dollars  ($1,500,000),  which letter of credit has
been issued by, or confirmed through, a United States bank that is acceptable to
Bank.  Such letter of credit shall be in such form and shall  contain such terms
as may be reasonably  acceptable to Bank, and shall be drawable  unconditionally
by Bank  immediately  upon the  failure by Borrower to repay the Loan in full by
June 30, 2001. The letter of credit shall be subject to no conditions to drawing
other than submission of a sight draft and a written  certificate by Bank to the
effect that such  payment in full of the Loan has not been  received by June 30,
2001. The expiry date of the letter of credit must be on or after July 16, 2000.


     D.  Payment of Interest.  Borrower has paid all accrued  interest due as of
December 31, 2000 in the amount of $50,258.93.

     E.  Payment of  Expenses.  Borrower  has paid all of the  Bank's  costs and
expenses,   including  the  reasonable  attorneys'  fees  incurred  by  Bank  in
connection with the negotiation and preparation of this Second Amendment and any
prior loan documentation related to the Loan.

     F. No Defaults.  No condition or event of default under the Loan  Documents
shall exist.

     G.  Miscellaneous.  All other Loan Documents or items that are  customarily
provided in loan transactions of this type and all other loan documents or items
reasonably required by Bank.

     H. No Material  Adverse  Effect.  No event has  occurred or failed to occur
that would have a Material  Adverse  Effect on the  financial  condition  of the
Borrower or any  Guarantor  as set forth in their most recent  annual  financial
statements and  internally-prepared  monthly financial  statements  submitted to
Bank.

     5. Costs,  Expenses and  Attorneys'  Fees.  Borrower  shall pay to Bank all
costs and expenses,  including  reasonable  attorneys' fees, incurred by Bank in
connection  with (a) Bank's  continued  administration  of the Loan, and (b) any
further modification or amendment to or collection of the Loan.

     6. Representations and Warranties.  Borrower represents and warrants to the
Bank as follows:

          (a) Power and  Authority;  Enforceability.  Borrower has the power and
     authority to execute and deliver this Second  Amendment  and to perform the
     terms and conditions of the Loan Agreement and the other Loan Documents, as
     previously  amended and as amended and  modified by this Second  Amendment.
     The execution and delivery of this Second Amendment by the Borrower and the
     performance  of the  Loan  Agreement  and  the  other  Loan  Documents,  as
     previously amended and as amended and modified by this Second Amendment, do
     not and will not violate  any law,  rule or  regulation,  or  constitute  a
     breach of the articles of incorporation,  bylaws or resolutions of Borrower
     or any  agreement  to which  Borrower is a party or by which its assets are
     bound.  The Loan  Agreement  and the other Loan  Documents,  as  previously
     amended and as amended and  modified by this Second  Amendment,  constitute
     legal, valid and binding obligations of Borrower, enforceable in accordance
     with  their   respective   terms,   subject  to   bankruptcy,   insolvency,
     reorganization,  and similar  laws and other law  generally  affecting  the
     enforceability of creditors' rights and to general principles of equity.

          (b) No  Default.  Upon  the  execution  and  delivery  of this  Second
     Amendment  by the  Borrower,  the  Borrower  will not be in  default in the
     performance, observance or fulfillment of any of the obligations, covenants
     or conditions  contained in the Loan Agreement or the other Loan Documents,
     as amended and modified by this Second Amendment, or any other agreement or
     instrument to which any of them is a party.

          (c) Representations. The representations and the information furnished
     by the  Borrower to the Bank with regard to this Second  Amendment  are and
     shall continue to be true and not misleading in all material  respects.  In
     addition,  the  representations  and warranties of the Borrower to the Bank
     contained herein, in the Loan Agreement, in the other Loan Documents and in
     any other  document or instrument  executed or delivered by the Borrower in
     connection therewith,  are and shall continue to be true and not misleading
     in all material respects,  except as otherwise  disclosed in writing to the
     Bank and approved by the Bank prior to the date hereof.

     7. Covenants. The Borrower covenants and agrees that, unless the Bank shall
otherwise consent in writing, the Borrower shall:

          (a)  Compliance  with  Covenants.  Continue  to comply with all of the
     terms,  covenants and  agreements  contained in the Loan  Agreement and the
     other Loan Documents,  as previously amended and as amended and modified by
     this Second Amendment.

          (b) Further Assurances.  Execute and deliver such further instruments,
     and take such further  action as the Bank may reasonably  request,  in each
     case to further  effect the  purposes of the Loan  Agreement  and the other
     Loan  Documents,  as  previously  amended  and as  modified  by this Second
     Amendment.

     8.  Ratification;  Release.  Except as previously  amended and as expressly
amended hereby,  the Loan Agreement shall be and remain in full force and effect
in  accordance  with its terms.  The Borrower  stipulates  and agrees that there
exists  no  defense,  claim  of  setoff,  or claim  in  avoidance  of any of its
liabilities  or  obligations  under or  pursuant  to the Loan  Agreement,  as so
amended.  Borrower further irrevocably  waives,  releases and discharges any and
all claims or causes of action against Bank, its directors, officers, employees,
agents and representatives,  that exist as of the date of this Second Amendment,
whether known or unknown,  which arise out of or in connection  with the Loan or
the Loan Documents, or any action or omission of Bank in connection therewith.

     9. Miscellaneous.

     (a) All  references  to the "Loan  Agreement" in the Loan  Agreement  shall
hereafter  mean and refer to the Loan  Agreement  as  previously  amended and as
amended hereby.

     (b) All  references  to the "Loan  Agreement"  in the other Loan  Documents
shall  hereafter mean and refer to the Loan Agreement as previously  amended and
as amended hereby.

     (c) In the event of any conflict between the terms of this Second Amendment
and the Loan  Documents,  the terms of this Second  Amendment  shall control and
govern.

     (d) All capitalized  terms used herein that are not otherwise defined shall
have the meanings ascribed to such terms in the Loan Agreement.

     10.  Counterparts.  This  Second  Amendment  may be  executed  in  separate
counterparts, and said counterparts taken together shall be deemed to constitute
one and the same instrument. An executed copy of this Second Amendment delivered
by telecopier shall have the same effect as an originally  executed copy of this
Second Amendment.

     11. NO ORAL AGREEMENT.  THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

     IN WITNESS  WHEREOF,  the parties hereto have executed the foregoing Second
Amendment to Loan Agreement as of the date first above written.


                                             BORROWER:


                                             FRISBY TECHNOLOGIES, INC.
 ATTEST:
                                             By:
                                                 ---------------------
 ----------------------                      Title:
     SECRETARY                                      ------------------
  [Corporate Seal]



                                             BANK:


                                             BANK OF AMERICA, N.A.

                                             By:
                                                ----------------------
                                             Title:
                                                   -------------------

<PAGE>

                                    EXHIBIT A

                                   [Attached]

<PAGE>


                                   EXHIBIT A-1
                           BORROWING BASE CERTIFICATE

Status as of _______________, 20___.

In accordance with the terms of the Borrowing Base Agreement attached as Exhibit
A to that  Loan  Agreement  dated  February  29,  2000,  by and  between  Frisby
Technologies,  Inc. and Bank of America,  N.A., as amended,  we hereby represent
and warrant as follows:
<TABLE>
<CAPTION>


<S>                                                                    <C>
1.       Total Accounts Receivable                                     $____________

2.       Less ineligible accounts receivable
         (as set forth in the Borrowing Base
         Agreement)                         $____________

3.       Eligible Accounts Receivable       $____________

4.       80% of Eligible Accounts Receivable                           $____________

5.       Eligible Inventory:                $____________

6.       50% of Eligible Inventory                                     $____________

7.       Net Book Value ("NBV")
         of Equipment                       $____________

8.       50% of NBV of Equipment                                       $____________

9.       Line 4 + Line 6 + Line 8                                      $____________

10.      Maximum loan amount                                           $1,500,000.00

11.      Outstanding balance as of report date                         $____________

12.      Borrowing Base (lesser of line 9 or line 10
         minus line 11)                                                $____________

13.      Less aggregate outstanding letters of credit                  $____________

14.      Net available for further advances                            $____________

15.      If line 14 is negative, amount to be
         repaid immediately to Bank                                    $____________

</TABLE>

     The undersigned does hereby certify that the foregoing is true and correct.
The  undersigned  does  further  acknowledge  that the Bank is relying upon this
certificate and any supporting documents to grant or continue to grant credit to
it, and further  warrants and represents  that no event of default has occurred,
or would, with the passage of time or the giving of notice, or both, occur under
the above-referenced Loan Agreement.

Borrower:
--------

FRISBY TECHNOLOGIES, INC.

By:
   ----------------------------
Title:
      -------------------------
<PAGE>
Bank of America, N.A.


                       SECOND NOTE MODIFICATION AGREEMENT

                      BY AND BETWEEN BANK OF AMERICA, N.A.
                                ("BANK"/"LENDER")
                                       AND
                            FRISBY TECHNOLOGIES, INC.
                                (the "BORROWER")


                                             EFFECTIVE AS OF: DECEMBER 31, 2000

On May 12, 2000, Borrower executed a renewal Promissory Note (the "Note") in
favor of Bank/Lender. The Note was in the original principal face amount of
$2,000,000.00, with a stated final maturity date of September 30, 2000. By that
certain Note Modification Agreement dated as of September 30, 2000 (the "First
Modification"), the maturity date of the Note was extended to December 31, 2000.
The principal balance of the Note as of the effective date of this Agreement is
$1,453,468.75. Bank/Lender remains the owner and holder of the Note and,
pursuant to that certain Second Amendment to Loan Agreement dated as of January
15, 2001 (the "Second Amendment"), has agreed with Borrower to modify certain
provisions of the Note. Now, therefore, in consideration of these premises and
the exchange of other good and valuable consideration, the receipt of which is
hereby acknowledged, Bank/Lender and Borrower agree to modify the Note as
follows:

          [X]     The maturity date is changed to:   June 30, 2001
                                                     ----------------------

          [X]     The interest rate is changed to:   Prime Rate plus .25%
                                                     ----------------------

          [X]     The payment terms are changed to: Accrued interest payable
                  monthly in arrears. All principal, together with accrued but
                  unpaid interest on the Note, shall be payable in full on June
                  30, 2001. Principal of the Note shall also be prepaid in
                  accordance with the terms of that certain Amendment to Loan
                  Agreement dated September 29, 2000 between the Borrower and
                  the Bank (the "First Amendment).

         [X]      The principal face amount of the
                  Note is changed to:                         $1,500,000.00
                                                              -------------

The term "Borrower" as used in this Agreement shall be construed as singular or
plural to correspond with the number of persons executing this Agreement as
Borrower.

All other terms, conditions and covenants in the Note shall be and remain in
full force and effect. When executed by Bank/Lender and Borrower, this Agreement
shall be attached to and become a part of the Note.

NOTICE OF FINAL AGREEMENT.

THIS WRITTEN AGREEMENT, TOGETHER WITH THE FIRST AND SECOND AMENDMENTS,
REPRESENTS THE FINAL AGREEMENT BETWEEN BORROWER AND BANK/LENDER AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN BORROWER AND BANK/LENDER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
BORROWER AND BANK/LENDER.

IN WITNESS WHEREOF, the undersigned has caused this Second Note Modification
Agreement to be executed under seal by Borrower on this ______ day of January,
2001.

Bank of America, N.A.                                Borrower:

By:
   --------------------
Title:
      -----------------
                                                     FRISBY TECHNOLOGIES, INC.
ATTEST:                                              By:
                                                         ---------------------


Title:
----------------------
     SECRETARY
  [Corporate Seal]

<PAGE>
                           ACKNOWLEDGMENT BY GUARANTOR


     THIS ACKNOWLEDGMENT BY GUARANTOR (this "Acknowledgment"), is made as of the
15th day of January,  2001,  by GREGORY S.  FRISBY,  an  individual  resident of
Forsyth  County,  North  Carolina  ("Guarantor"),  and BANK OF AMERICA,  N.A., a
national banking association ("Bank"), as follows:

                              W I T N E S S E T H:
                              --------------------

     WHEREAS,  pursuant to that certain  Continuing and  Unconditional  Guaranty
dated  February  29,  2000 (the  "Guaranty"),  Guarantor  personally  guaranteed
payment of all of the indebtedness and obligations of Frisby Technologies, Inc.,
a Delaware corporation (the "Borrower") to Bank; and

     WHEREAS,  by that certain  Acknowledgment  and  Amendment  Agreement  dated
September 29, 2000, the Guarantor acknowledged an extension of the maturity date
of the Borrower's revolving line of credit from the Bank (the "Loan") and agreed
to remove any limitation as to the amount of the Guaranty; and

     WHEREAS,  Borrower has again requested the Bank to extend the maturity date
of the Loan; and

     WHEREAS,  the Bank has agreed to so extend the  maturity  date of the Loan,
pursuant to the terms of a Second  Amendment to Loan Agreement  dated as of even
date  herewith  between  the Bank and the  Borrower  (the  "Second  Amendment"),
provided, among other things, that the Guarantor acknowledge that payment of the
Loan, as so extended,  is guaranteed by the Guarantor  pursuant to the Guaranty;
and

     WHEREAS,  the Guarantor  wishes to acknowledge that the Guaranty covers and
applies to the Loan, as extended pursuant to the terms of the Second Amendment;

     NOW, THEREFORE,  in consideration of the premises and to induce the Bank to
extend  the  maturity  date of the Loan,  the  parties  hereto  agree  hereby as
follows:

     1. Acknowledgment of Guaranty.  Guarantor does hereby acknowledge and agree
that the Guaranty,  as amended,  is in full force and effect in accordance  with
the terms thereof, and that the same covers and applies to the Loan, as the same
has been  amended  previously  and in  accordance  with the terms of the  Second
Amendment.

     2.  Ratification of Guaranty.  The Guarantor  hereby  stipulates and agrees
that there exists no defense,  claim of setoff,  or claim in avoidance of any of
its liabilities or obligations under or pursuant to the Guaranty, as amended.

     3.   Counterparts.   This   Acknowledgment  may  be  executed  in  separate
counterparts, and said counterparts taken together shall be deemed to constitute
one and the same instrument.  An executed copy of this Acknowledgment  delivered
by telecopier shall have the same effect as an originally  executed copy of this
Acknowledgment.

     4. NO ORAL  AGREEMENT.  THIS WRITTEN  ACKNOWLEDGMENT  REPRESENTS  THE FINAL
AGREEMENT  BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

     IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  the  foregoing
Acknowledgment by Guarantor as of the date first above written.



                                            _____________________________ (SEAL)
                                            GREGORY S. FRISBY


                                            BANK OF AMERICA, N.A.

                                            By: __________________________
                                            Title: ________________________

<PAGE>
                           ACKNOWLEDGMENT BY GUARANTOR


     THIS ACKNOWLEDGMENT BY GUARANTOR (this "Acknowledgment"), is made as of the
15th day of  January,  2001,  by JEFFRY D.  FRISBY,  an  individual  resident of
Forsyth  County,  North  Carolina  ("Guarantor"),  and BANK OF AMERICA,  N.A., a
national banking association ("Bank"), as follows:

                              W I T N E S S E T H:
                              --------------------

     WHEREAS,  pursuant to that certain  Continuing and  Unconditional  Guaranty
dated  February  29,  2000 (the  "Guaranty"),  Guarantor  personally  guaranteed
payment of all of the indebtedness and obligations of Frisby Technologies, Inc.,
a Delaware corporation (the "Borrower") to Bank; and

     WHEREAS,  by that certain  Acknowledgment  and  Amendment  Agreement  dated
September 29, 2000, the Guarantor acknowledged an extension of the maturity date
of the Borrower's revolving line of credit from the Bank (the "Loan") and agreed
to remove any limitation as to the amount of the Guaranty; and

     WHEREAS,  Borrower has again requested the Bank to extend the maturity date
of the Loan; and

     WHEREAS,  the Bank has agreed to so extend the  maturity  date of the Loan,
pursuant to the terms of a Second  Amendment to Loan Agreement  dated as of even
date  herewith  between  the Bank and the  Borrower  (the  "Second  Amendment"),
provided, among other things, that the Guarantor acknowledge that payment of the
Loan, as so extended,  is guaranteed by the Guarantor  pursuant to the Guaranty;
and

     WHEREAS,  the Guarantor  wishes to acknowledge that the Guaranty covers and
applies to the Loan, as extended pursuant to the terms of the Second Amendment;

     NOW, THEREFORE,  in consideration of the premises and to induce the Bank to
extend  the  maturity  date of the Loan,  the  parties  hereto  agree  hereby as
follows:

     1. Acknowledgment of Guaranty.  Guarantor does hereby acknowledge and agree
that the Guaranty,  as amended,  is in full force and effect in accordance  with
the terms thereof, and that the same covers and applies to the Loan, as the same
has been  amended  previously  and in  accordance  with the terms of the  Second
Amendment.

     2.  Ratification of Guaranty.  The Guarantor  hereby  stipulates and agrees
that there exists no defense,  claim of setoff,  or claim in avoidance of any of
its liabilities or obligations under or pursuant to the Guaranty, as amended.

     3.   Counterparts.   This   Acknowledgment  may  be  executed  in  separate
counterparts, and said counterparts taken together shall be deemed to constitute
one and the same instrument.  An executed copy of this Acknowledgment  delivered
by telecopier shall have the same effect as an originally  executed copy of this
Acknowledgment.

     4. NO ORAL  AGREEMENT.  THIS WRITTEN  ACKNOWLEDGMENT  REPRESENTS  THE FINAL
AGREEMENT  BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

     IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  the  foregoing
Acknowledgment by Guarantor as of the date first above written.



                                           _____________________________ (SEAL)
                                           JEFFRY D. FRISBY


                                           BANK OF AMERICA, N.A.

                                           By: __________________________
                                           Title: ________________________