BANK OF AMERICA, N.A.


                                 LOAN AGREEMENT

     This Loan Agreement (the "Agreement") dated as of February 29, 2000, by and
between BANK OF AMERICA,  N.A., a national banking association  ("Bank") and the
Borrower described below:

     In  consideration  of the Loan described below and the mutual covenants and
agreements  contained herein, and intending to be legally bound hereby, Bank and
Borrower agree as follows:

     1.  DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined
herein,  the  following  terms  shall have the  meaning  set forth with  respect
thereto:

          A. Affiliate.  As to any Person,  each of the Persons that directly or
     indirectly,  through one or more  intermediaries,  owns or controls,  or is
     controlled by or under common  control with,  such Person or any individual
     related to such Person. For the purpose of this definition, "control" means
     the possession, directly or indirectly, of the power to direct or cause the
     direction of  management  and  policies,  whether  through the ownership of
     voting securities, by contract or otherwise.

          B. Borrower. Frisby Technologies, Inc., a Delaware corporation.

          C. Borrower's Address:  3195 Centre Park Boulevard  Winston-Salem,  NC
     27107

          D. Collateral. The property and interests in property securing payment
     and performance of the Loan, as set forth in Section 3 hereof.

          E. Hazardous  Materials.  All materials defined as hazardous wastes or
     substances under any local, state or federal  environmental  laws, rules or
     regulations, and petroleum, petroleum products, oil and asbestos.

          F.  Loans.  Collectively,  the  loans,  credit  facilities  and  Hedge
     Agreements  described  in  Section  2  hereof  and any  other  existing  or
     subsequent  loan or  extension  of credit by Bank to the  Borrower  that is
     subject to this Agreement.

          G. Loan  Documents.  Loan Documents  means this Loan Agreement and any
     and all  promissory  notes  executed  by  Borrower in favor of Bank and all
     other  documents,  instruments,  guaranties,  certificates  and  agreements
     executed  and/or  delivered  by Borrower,  any  guarantor or third party in
     connection with any Loan.

          H. Material  Adverse  Effect.  Any material  adverse effect on (i) the
     business,  assets,  operations or financial or other  condition of Borrower
     and its subsidiaries, (ii) the Borrower's ability to pay the Obligations in
     accordance  with the  terms  thereof,  or (iii)  the  Collateral  or Bank's
     security  interest  in the  Collateral  or the  priority  of such  security
     interest.

          I. Note. the promissory note described in Section 2 hereof.

          J. Obligations. The Loans and all other loans, advances, indebtedness,
     liabilities,  obligations,  covenants and duties  (including  post-petition
     interest on the foregoing,  to the extent lawful)  owing,  arising,  due or
     payable  from the  Borrower  to the Bank of any kind or nature,  present or
     future,  arising under this  Agreement or any of the other Loan  Documents,
     whether  direct or  indirect  (including  those  acquired  by  assignment),
     absolute or  contingent,  primary or  secondary,  due or to become due, now
     existing or hereafter arising. The term includes,  without limitation,  all
     interest,  charges,  expenses,  fees,  attorneys'  fees and any other  sums
     chargeable  to the Borrower by the Bank under this  Agreement or any of the
     other Loan Documents,  as well as all obligations of the Borrower  pursuant
     to any Hedge Agreements.

          K. Permitted Liens. Collectively,  (i) all liens or security interests
     securing  indebtedness  owed to Bank,  (ii) pledges or deposits made in the
     ordinary  course of  business  in  connection  with or to  secure  workers'
     compensation,  unemployment insurance,  pensions or other employee benefits
     accruing  under  provisions  of law or under  agreements  now in force  and
     disclosed  to  Lender,  (iii)  liens  imposed  by law,  such as  carriers',
     warehousemen's,  materialmen's  and vendors' liens and other similar liens,
     incurred  in good faith in the  ordinary  course of business  and  securing
     obligations  that are not  overdue,  or which are being  contested  in good
     faith and against  which,  if  requested  by the Bank,  the  Borrower  will
     establish  reserves  satisfactory  to the Bank,  (iv) zoning  restrictions,
     easements, licenses, reservations,  covenants, conditions, and restrictions
     on the use of property which do not, in the aggregate,  materially  detract
     from the value of Borrower's  property or assets or  materially  impair the
     use thereof in the operation of its  business;  (v) liens for taxes not due
     or which are being  contested in good faith and against which, if requested
     by the Bank, the Borrower will establish reserves satisfactory to the Bank;
     and (vi) purchase money security  interests  granted by the Borrower in the
     ordinary course of its business.

          L. Person. A corporation,  an association,  a joint venture, a limited
     liability  company,  a  partnership,   an  organization,   a  business,  an
     individual, a trust or a government or political subdivision thereof or any
     government agency or any other legal entity.

          M. Prime Rate.  The prime rate of the Bank,  as announced or otherwise
     established  from time to time. The Prime Rate is a reference rate used for
     pricing  commercial and consumer loans and is not  necessarily  the best or
     lowest rate to any borrower on any loan from the Bank.

          N.  Tangible Net Worth.  The amount by which  Borrower's  total assets
     exceed total liabilities in accordance with GAAP, minus (i) goodwill,  (ii)
     contract rights,  (iii) leasehold  improvements,  (iv) assets  representing
     claims on (A) shareholders,  directors, or officers or (B) Affiliates,  and
     (v)  other  assets  constituting  intangible  assets,  including,   without
     limitation,  any patents,  trademarks,  tradenames,  copyrights  or similar
     intellectual property.

     Accounting  Terms.  All  accounting  terms  not  specifically   defined  or
specified  herein shall have the  meanings  generally  attributed  to such terms
under generally accepted accounting  principles ("GAAP"), as in effect from time
to time,  consistently  applied.  All  financial  computations  made  under this
Agreement  for  the  purpose  of  determining   compliance  with  the  financial
requirements  of this  Agreement  shall be made,  and all financial  information
required under this Agreement shall be prepared,  in accordance with GAAP, as in
effect on the date hereof.

     2. LOAN. Subject to the terms of this Agreement, Bank hereby agrees to make
a revolving credit facility available to Borrower, as follows:

          A.  Revolving  Line of Credit.  (i) Subject to the terms hereof,  Bank
     agrees to extend a revolving  line of credit (the  "Revolver") to Borrower,
     in the original principal amount of Two Million Dollars  ($2,000,000),  for
     the purpose of providing temporary  financing of the Borrower's  short-term
     working  capital  needs,  prior to the  closing of a private  placement  of
     capital  stock of the  Borrower  and receipt of the  proceeds  thereof (the
     "Private Placement").  Provided that no default has occurred hereunder, the
     Borrower may obtain advances from time to time under the Revolver,  and may
     repay and  re-borrow  under the  Revolver,  subject to the  Borrowing  Base
     Agreement attached hereto as Exhibit A and by reference made a part hereof.
     To evidence  the  Revolver,  Borrower  shall  execute and deliver to Bank a
     promissory note (the "Note") in the principal  amount of $2,000,000,  which
     Note shall bear  interest and be payable in  accordance  with the terms set
     forth hereinbelow.  The Revolver shall mature and become payable in full on
     July 31, 2000, which date shall be the "Maturity Date".

          (ii) Fees. (a) The Borrower shall pay a commitment fee to the Bank for
     the Revolver in the amount of $40,000,  of which $10,000 will be refundable
     to the  Borrower  if the  Private  Placement  is  closed  and net  proceeds
     therefrom  of not less than  $6,500,000  are  received on or before June 1,
     2000.

                    (b) The Borrower shall also pay an availability  fee for the
               Revolver quarterly in arrears,  in the amount of one-half percent
               (1/2%) of the average unused balance of the Revolver  during each
               quarter.

          (iii)  Interest  and  Principal.  Interest  on  the  principal  amount
     outstanding under the Revolver from time to time shall accrue at a variable
     rate of the Prime Rate,  plus two hundred  basis points  (2.00%) per annum,
     which accrued  interest shall be payable  monthly in arrears.  The interest
     rate payable on the Revolver  shall be subject to change The interest  rate
     shall  become the Prime  Rate plus 50 basis  points  (.50%) if the  Private
     Placement  is closed and gross  proceeds  of not less than  $6,500,000  are
     received by the  Borrower on or before June 1, 2000.  The  principal of the
     Note  shall be  repaid  in full on the  Maturity  Date,  together  with all
     accrued but unpaid interest.

         (iv) Collateral  Security.  Repayment in full of all Obligations of the
Borrower shall be secured by the Collateral.

         (v) Guaranties. Subject to the limitation set forth below, repayment in
full of all  Obligations of the Borrower  shall be  personally,  and jointly and
severally,   guaranteed   by  Gregory  S.  Frisby  and  Jeffry  D.  Frisby  (the
"Guarantors"),  pursuant to guaranty agreements in form satisfactory to the Bank
(the  "Guaranties").  It is  provided,  however,  that  the  Guaranties  will be
released  upon the closing of the Private  Placement and receipt by the Borrower
of gross  proceeds of not less than  $6,500,000  therefrom  on or before June 1,
2000. It is further  provided that each of the  Guarantors  shall be required to
maintain minimum liquidity,  as determined by the Bank, in an amount of not less
than $500,000 at all times,  the  calculation of which minimum  liquidity  shall
exclude all of the Guarantors'  ownership interests in the Borrower and all home
equity lines of credit. Notwithstanding the foregoing agreement to guarantee all
of the  Obligations  of the Borrower,  the  Guarantors  shall not be required to
guarantee payment of any principal amounts  outstanding under the Loan, up to or
equal to Three Hundred Thousand Dollars  ($300,000),  at any time and so long as
the principal amount outstanding under the Loan does not exceed $300,000, and no
default  has  occurred  under  this  Agreement.  If,  however,  at any  time the
principal  amount  outstanding  hereunder does not exceed $300,000 and a default
occurs  (as  described  in Section 8 below),  which  default is not cured by the
Borrower  within thirty (30) days  following  notice  thereof from the Bank, the
Guarantors shall be deemed to be guarantors of all Obligations of the Borrower.

         B. Hedge Agreements  Borrower shall have the option to fix the interest
rate on all or any portion of the Loan, at any time,  through the use of a Hedge
Agreement  purchased  from the Bank at the market  rate for such  products.  For
purposes  hereof, a "Hedge  Agreement" means any agreement  between Borrower and
Bank, or any affiliate of Bank,  now existing or hereafter  entered into,  which
provides for an interest rate or commodity  swap, cap,  floor,  collar,  forward
foreign  exchange  transaction,  currency swap,  cross-currency  swap,  currency
option,  or any  combination  of, or option with  respect  to,  these or similar
transactions,  for the purpose of hedging Borrower's exposure to fluctuations in
interest rates,  currency  valuations or commodity prices.  Notwithstanding  any
other terms of this  Agreement,  any loan subject to a Hedge  Agreement shall be
prepayable only in accordance  with, and subject to any fees imposed under,  the
terms of such Hedging Agreement.

     3. COLLATERAL SECURITY. Payment and performance of the Obligations shall be
secured by the following  Collateral,  and the Borrower hereby grants,  conveys,
transfers  and  assigns to the Bank a security  interest in and lien upon all of
the property described below:

          A. A first and prior assignment of, security interest in and lien upon
     all of the Borrower's  interests in and to all patents for products,  goods
     and items  produced or  manufactured  by the  Borrower,  and all  processes
     employed  in the  production  or  manufacture  thereof,  to the  extent the
     granting of such security interests shall not constitute a violation of law
     or a default  under any  existing  agreement  between the  Borrower and any
     Person with regard to any such patents;

          B. A continuing first priority  security interest in and lien upon all
     of the Borrower's accounts, inventory, and general intangibles, and a first
     priority  security  interest  in  and  lien  upon  all  of  the  Borrower's
     furniture,   machinery  and  equipment,  whether  now  owned  or  hereafter
     acquired, and wherever located, together with all proceeds thereof.

     Borrower  agrees and  undertakes  to execute  and  deliver to the Bank such
deeds of trust, security agreements, pledge agreements,  assignments,  financing
statements,  subordinations,  certificates,  waivers,  estoppel agreements,  and
other  documentation,  in form  acceptable  to the  Bank,  as may be  reasonably
requested by the Bank in connection with the Collateral. Borrower further agrees
that all of the Collateral  shall secure all of the  Obligations of the Borrower
to the Bank. It is  specifically  agreed and  acknowledged by the parties hereto
that  Borrower  has entered  into,  or will enter  into,  a joint  venture  with
Schoeller Textil AG, and that the personal and real property to be owned by such
joint venture shall not be deemed to be Collateral, as herein defined.

     4.  CONDITIONS  PRECEDENT.  The Bank's  agreement to extend the Loan to the
Borrower is subject to the fulfillment,  to the Bank's  satisfaction,  of all of
the following conditions:

          A. Bank shall have  received,  on or before the date hereof (i) a copy
     of the resolutions of the Board of Directors of the Borrower,  certified on
     such date by an officer of the  Borrower,  authorizing  the  execution  and
     delivery of this Agreement,  the borrowings hereunder and the execution and
     delivery of the Note and the other Loan Documents and the  Collateral,  and
     (ii) such additional  documents and requirements as the Bank or counsel for
     the Bank may reasonably request.

          B. The Borrower  shall have executed and  delivered all  documentation
     for the Loan reasonably  requested by the Bank,  which shall be in form and
     content reasonably acceptable to the Bank and its counsel.

          C. The Borrower shall have provided to the Bank, in form  satisfactory
     to the Bank,  all financial and other  information  concerning its business
     and affairs, as reasonably requested by the Bank.

     D. The  Borrower  shall  have  provided  to the Bank,  in form and  content
satisfactory  to the Bank and its counsel,  an opinion of its  counsel,  stating
that (i) the Borrower is a corporation  duly organized,  validly existing and in
good standing under the laws of the State of Delaware, and has the corporate and
legal  authority  to own its  property  and carry on its  business  as now being
conducted;  (ii) this  Agreement  has been duly  executed  and  delivered by the
Borrower  and  constitutes  the  legal,  valid  and  binding  obligation  of the
Borrower,  enforceable  in accordance  with their terms,  subject to bankruptcy,
insolvency,  reorganization and similar laws and other laws generally  affecting
the enforceability of creditors' rights and to general principles of equity; and
(iii) the Loan Documents when duly executed and delivered by the Borrower to the
Bank in accordance with the provisions hereof, will constitute the legal, valid,
and binding  obligations of the Borrower,  enforceable in accordance  with their
terms,  subject to bankruptcy,  insolvency,  reorganization and similar laws and
other laws generally  affecting the  enforceability  of creditors' rights and to
general principles of equity.

          E. All terms and  conditions of the Bank's  commitment  letters to the
     Borrower for the Loan have been satisfied and fulfilled,  to the reasonable
     satisfaction of the Bank.

          F. To the best  knowledge  of the  Borrower,  no event has occurred or
     failed to occur that would have a Material  Adverse Effect on the financial
     condition  of the  Borrower,  as set forth in its  December 31, 1998 annual
     financial statements, and in its subsequent quarterly financial statements.

          G. The Borrower  shall have  certified  that the execution of the Loan
     Documents  shall not cause any default which would have a Material  Adverse
     Effect on  Borrower  under any other  contract  or  agreement  to which the
     Borrower is subject.

          H. The  Borrower  shall  have paid or agreed  to make  payment  of all
     reasonable expenses actually incurred in connection with the closing of the
     Loan, including, without limitation,  insurance premiums, audit charges and
     attorneys' fees.

     5. REPRESENTATIONS AND WARRANTIES.  Borrower hereby represents and warrants
to Bank as follows:

          A. Good Standing. Borrower is a corporation,  duly organized,  validly
     existing and in good  standing  under the laws of the State of Delaware and
     has the  power  and  authority  to own its  property  and to  carry  on its
     business in each jurisdiction in which Borrower does business.

          B. Authority and Compliance.  Borrower has full power and authority to
     execute  and  deliver  the Loan  Documents  and to incur  and  perform  the
     obligations provided for therein, all of which have been duly authorized by
     all  proper  and  necessary  action of the  appropriate  governing  body of
     Borrower.  No consent or  approval of any public  authority  or other third
     party is required as a condition to the validity of any Loan Document,  and
     Borrower  is  in  compliance   with  all  material   laws  and   regulatory
     requirements to which it is subject.

          C. Binding  Agreement.  This  Agreement  and the other Loan  Documents
     executed by Borrower  constitute  valid and legally binding  obligations of
     Borrower,   enforceable  in  accordance   with  their  terms,   subject  to
     bankruptcy,  insolvency,  reorganization  and  similar  laws and other laws
     generally  affecting the enforceability of creditors' rights and to general
     principles of equity.

          D.  Litigation.  There is no material  proceeding  involving  Borrower
     pending or, to the  knowledge of Borrower,  threatened  before any court or
     governmental  authority,   agency  or  arbitration  authority,   except  as
     disclosed in Schedule A attached hereto.

          E. No  Conflicting  Agreements.  There  is no  charter,  bylaw,  stock
     provision  or  other  document  pertaining  to the  organization,  power or
     authority of Borrower and no provision of any existing agreement, mortgage,
     indenture or contract binding on Borrower or affecting its property,  which
     would  conflict  with or in any way  prevent  the  execution,  delivery  or
     carrying out of the terms of this  Agreement and the other Loan  Documents,
     and  violation  of  which  would  have a  Material  Adverse  Effect  on the
     Borrower.

          F.  Ownership  of  Assets.  Borrower  has good  title  to,  or a valid
     leasehold  interest  in, its  assets,  and its assets are free and clear of
     liens,  except  those  granted to Bank,  except as  disclosed in Schedule B
     attached hereto.

          G. Taxes.  All taxes and  assessments due and payable by Borrower have
     been paid or are being  contested in good faith by appropriate  proceedings
     and Borrower has filed all tax returns which it is required to file, or has
     been granted extensions of time to file such tax returns.

          H. Financial Statements.  The audited financial statements of Borrower
     heretofore  delivered to Bank have been  prepared in  accordance  with GAAP
     applied on a consistent basis throughout the period involved,  with respect
     to Borrower,  and fairly present Borrower's  financial  condition as of the
     date or dates  thereof,  and there has been no material  adverse  change in
     Borrower's  or such  companies'  financial  condition or  operations  since
     September 30, 1999. To the best of its knowledge,  all factual  information
     furnished by Borrower to Bank in  connection  with this  Agreement  and the
     other Loan Documents is and will be accurate and complete on the date as of
     which  such  information  is  delivered  to Bank and is not and will not be
     incomplete  by the  omission of any  material  fact  necessary to make such
     information not misleading.

          I. Place of Business. Borrower's chief executive office is located at:
     3195 Centre Park Blvd, North Carolina 27107.

          J. Environmental  Matters.  To the best of Borrower's  knowledge after
     diligent investigation,  the conduct of Borrower's business operations does
     not and will  not  violate  any  federal  laws,  rules  or  ordinances  for
     environmental  protection,  regulations  of  the  Environmental  Protection
     Agency,  any  applicable  local or state law,  rule,  regulation or rule of
     common law or any judicial interpretation thereof relating primarily to the
     environment or Hazardous Materials, and Borrower will not use or permit any
     other party to use any Hazardous Materials at Borrower's places of business
     except such  materials as are  incidental  to  Borrower's  normal course of
     business,  maintenance and repairs and which are handled in compliance with
     all  applicable  environmental  laws.  Borrower  agrees to permit Bank, its
     agents,  contractors  and  employees to enter and inspect any of Borrower's
     places of  business or any other  property  of  Borrower at any  reasonable
     times upon three (3) days prior  notice for the purposes of  conducting  an
     environmental  investigation  and audit (including taking physical samples)
     to insure that Borrower is complying with this covenant. Borrower agrees to
     reimburse Bank on demand for the reasonable costs of one such environmental
     investigation and audit annually.  Borrower shall provide Bank, its agents,
     contractors, employees and representatives with access to and copies of any
     and all  data and  documents  relating  to or  dealing  with any  Hazardous
     Materials  used,  generated,   manufactured,   stored  or  disposed  of  by
     Borrower's  business  operations  within  five  (5)  days  of  the  request
     therefore.

          K. No Material  Adverse Effect.  Neither this Agreement nor any of the
     Loan Documents, nor any written statements when furnished to the Bank by or
     on  behalf  of the  Borrower  in  connection  with  the  Loans  or the Loan
     Documents,  contain  any  untrue  statement  of a  material  fact or omit a
     material fact necessary to make the statements  contained therein or herein
     not misleading. To the best knowledge of the Borrower, there is no material
     fact that the Borrower has not  disclosed to the Bank in writing that would
     reasonably be deemed to have a Material Adverse Effect on the Borrower.

          L. Year 2000 Compliance. Borrower represents that it has (i) initiated
     a  review  and  assessment  of  all  areas  within  its  and  each  of  its
     subsidiaries'  businesses  and  operations  (including  those  affected  by
     suppliers and vendors)  that could be adversely  affected by the "Year 2000
     Problem" (that is, the risk that computer  applications used by Borrower or
     any of its  subsidiaries  may be unable to recognize  and perform  properly
     date-sensitive  functions  involving  certain  dates  prior to and any date
     after December 31, 1999), (ii) developed a plan and timeline for addressing
     the Year 2000 Problem on a timely basis and (iii) to date, implemented that
     plan in  accordance  with  that  timetable.  Borrower  represents  that all
     computer  applications that are material to its or any of its subsidiaries'
     business and operations will on a timely basis be able to perform  properly
     date-sensitive  functions  for all dates  before and after  January 1, 2000
     (that is, be "Year 2000 compliant"), except to the extent that a failure to
     do so will not have a material  adverse  effect on its business,  financial
     condition, or ability to repay the Loan.

          M. Continuation of Representation and Warranties.  All representations
     and warranties  made under this Agreement shall be deemed to be made at and
     as of the date hereof and at and as of the date of any future advance under
     the Loan; provided, however, that the Borrower shall have no duty to update
     any  schedules  or  exhibits to this  Agreement  at the time of any advance
     absent the occurrence of a change that would have a Material Adverse Effect
     on the Borrower.

     6.  AFFIRMATIVE  COVENANTS.  Until  full  payment  and  performance  of all
Obligations of Borrower  under the Loan  Documents,  Borrower will,  unless Bank
consents otherwise in writing (and without limiting any requirement of any other
Loan Document):

          A.  Financial  Condition.  Maintain  Borrower's  financial  condition,
     determined in accordance with GAAP applied on a consistent basis throughout
     the period involved, as follows:

          (i)  Maintain  a  Tangible  Net Worth of not less than  $1,250,000  at
     December 31, 1999 and as of the end of each fiscal quarter thereafter.

          B. Financial  Statements and Other  Information.  Maintain a system of
     accounting  satisfactory  to Bank and in accordance  with GAAP applied on a
     consistent basis throughout the period involved,  permit Bank's officers or
     authorized representatives to visit and inspect Borrower's books of account
     and other records at such reasonable times and as often as Bank may desire.
     Borrower agrees to reimburse the Bank on demand for the reasonable costs of

     one such inspection annually.  Unless written notice of another location is
     given to Bank,  Borrower's  books and records will be located at Borrower's
     chief executive office set forth above. All financial statements called for
     below  shall be  prepared  in form and  content  acceptable  to Bank and by
     independent certified public accountants acceptable to Bank.

In addition, Borrower will:

          (i)  Furnish to Bank  audited  consolidated  financial  statements  of
     Borrower for each fiscal year of Borrower,  within 120 days after the close
     of each such fiscal year.

          (ii)  Furnish  to  Bank  monthly  consolidated   financial  statements
     (including  a balance  sheet and profit and loss  statement)  of  Borrower,
     which shall be prepared by Borrower,  for each month of each fiscal year of
     Borrower, within 30 days after the end of each month.

          (iii) Furnish to Bank a compliance certificate for (and executed by an
     authorized  representative  of) Borrower  concurrently with and dated as of
     the date of delivery  of each of the  financial  statements  as required in
     paragraphs  i and  ii  above,  containing  (a)  a  certification  that  the
     financial  statements  of even  date  are  true  and  correct  and that the
     Borrower  is not in  default  under  the terms of this  Agreement,  and (b)
     computations  and  conclusions,  in such detail as Bank may  request,  with
     respect to compliance  with this  Agreement,  and the other Loan Documents,
     including  computations of all  quantitative  covenants,  which  compliance
     certificate  shall be  substantially  in the  form of  Exhibit  B  attached
     hereto.

          (iv) Furnish to Bank promptly such additional information, reports and
     statements  respecting the business  operations and financial  condition of
     Borrower  from  time to  time,  as Bank  may  reasonably  request.  Without
     limiting the scope of the preceding sentence, Borrower shall furnish Bank a
     copy of its quarterly  report on Form 10-Q promptly upon the filing thereof
     with the Securities and Exchange Commission.

          C. Insurance.  Maintain insurance with responsible insurance companies
     on such of its  properties,  in such  amounts and against  such risks as is
     customarily   maintained  by  similar  businesses  operating  in  the  same
     vicinity,  specifically  to include  fire and extended  coverage  insurance
     covering all assets, business interruption insurance,  workers compensation
     insurance and  liability  insurance,  all to be with such  companies and in
     such amounts as are  satisfactory  to Bank and with respect to insurance on
     the Collateral,  to contain a mortgagee  clause naming Bank as a loss payee
     or an  additional  insured (as  applicable)  as its interest may appear and
     providing  for at least 30 days  prior  notice to Bank of any  cancellation
     thereof.  Satisfactory  evidence of such insurance will be supplied to Bank
     prior to funding under the Loan and 30 days prior to each policy renewal.

          D. Existence and Compliance. Maintain its existence, good standing and
     qualification  to do  business,  where  required  and comply with all laws,
     regulations and governmental  requirements  including,  without limitation,
     environmental  laws  applicable to it or to any of its  property,  business
     operations and transactions.

          E. Adverse  Conditions or Events.  Promptly  advise Bank in writing of
     (i) any condition,  event or act which comes to its attention that Borrower
     reasonably believes would or might have a Material Adverse Effect, (ii) any
     litigation filed by or against Borrower,  an adverse outcome of which could
     reasonably be expected to have a Material Adverse Effect on Borrower, (iii)
     any event that has occurred that would constitute an event of default under
     any Loan  Documents  and (iv) any  uninsured  or partially  uninsured  loss
     through fire, theft, liability or property damage in excess of an aggregate
     of $500,000.00.

          F. Taxes and Other Obligations.  Pay all of its taxes, assessments and
     other  obligations,  including,  but not  limited to taxes,  costs or other
     expenses  arising  out of this  transaction,  as the  same  become  due and
     payable, except to the extent the same are being contested in good faith by
     appropriate proceedings in a diligent manner.

          G.  Maintenance.  Maintain  all  of  its  tangible  property  in  good
     condition  and  repair,  excepting  ordinary  wear and  tear,  and make all
     necessary  replacements  thereof  (provided  that  Borrower  shall  not  be
     required to maintain any obsolete or immaterial property), and preserve and
     maintain  all  licenses,  trademarks,   privileges,   permits,  franchises,
     certificates and the like necessary for the operation of its business.

          H.  Notification of Environmental  Claims.  Borrower shall immediately
     advise Bank in writing of (i) any and all enforcement,  cleanup,  remedial,
     removal, or other governmental or regulatory actions instituted,  completed
     or threatened  pursuant to any applicable  federal,  state,  or local laws,
     ordinances or  regulations  relating to any Hazardous  Materials  affecting
     Borrower's business  operations;  and (ii) all claims made or threatened by
     any third party against Borrower  relating to damages,  contribution,  cost
     recovery,  compensation,  loss  or  injury  resulting  from  any  Hazardous
     Materials.  Borrower shall  immediately  notify Bank of any remedial action
     taken by Borrower with respect to Borrower's business operations.

          I.  Notification  of Lack of Year 2000  Compliance.  Borrower  further
     represents  that it will  promptly  notify  the Bank in the event  Borrower
     discovers or determines that any computer  application  that is material to
     its or any of its subsidiaries'  businesses and operations is not Year 2000
     compliant,  except to the extent that such failure will not have a material
     adverse effect on its business, financial condition or ability to repay the
     Loan.

     7.  NEGATIVE   COVENANTS.   Until  full  payment  and  performance  of  all
obligations of Borrower under the Loan Documents, Borrower will not, without the
prior written consent of Bank (and without limiting any requirement of any other
Loan Documents):

          A.  Ownership and  Management.  Make or permit to be made any material
     change in the ownership or executive management of the Borrower.

          B. Transfer of Assets or Control.  Sell,  lease,  sell and  leaseback,
     assign or otherwise dispose of or transfer any assets, except in the normal
     course of its  business,  or enter  into any  merger or  consolidation,  or
     transfer  control or  ownership  of the  Borrower  or form or  acquire  any
     subsidiary. It is provided,  however, that this covenant shall not prohibit
     Borrower  from  entering  into that certain  joint  venture with  Schoeller
     Textil AG, as has been disclosed to the Bank prior to the date hereof.

          C. Liens.  Grant,  suffer or permit any contractual or  noncontractual
     lien on or security interest in its assets,  other than Permitted Liens. It
     is  expressly  provided,  however,  that  leases for office  equipment  and
     vehicles entered into in the normal course of Borrower's business shall not
     be subject to this covenant.

          D.  Extensions of Credit.  Make any loan or advance to any individual,
     partnership,  corporation or other entity,  except advances to employees of
     the Borrower for expenses incurred in the ordinary course of business.

          E. Borrowings.  Create,  incur,  assume or become liable in any manner
     for any  indebtedness  (for borrowed  money,  lease  payments under capital
     leases,  as surety or guarantor  for the debt for another,  or  otherwise),
     other than to Bank,  except for normal trade debts incurred in the ordinary
     course of Borrower's business;  and existing indebtedness disclosed to Bank
     in writing and acknowledged by Bank prior to the date of this Agreement.

          F. Dividends and Distributions. Pay any dividend (other than dividends
     payable in  capital  stock of  Borrower)  or make any  distribution  on any
     shares of any class of its capital  stock,  other than in the normal course
     of  Borrower's  business,  or apply  any of its  property  or assets to the
     purchase,  redemption  or other  retirement  of any  shares of any class of
     capital stock of Borrower, or in any way amend its capital structure.

          G. Character of Business.  Change the general character of business as
     conducted  at the  date  hereof,  or  engage  in any type of  business  not
     reasonably related to its business as presently conducted.

     8. DEFAULT.  Borrower  shall be in default  under this  Agreement and under
each of the other  Loan  Documents  if it shall  default  in the  payment of any
amounts  due and owing under the Loan.  Borrower  shall also be in default if it
should fail to timely and properly observe,  keep or perform any term, covenant,
agreement  or  condition  in any Loan  Document or in any other loan  agreement,
promissory note, security agreement, deed of trust, assignment,  pledge or other
contract securing or evidencing  payment of any indebtedness of Borrower to Bank
or any affiliate or subsidiary of Bank of America Corporation,  and such default
shall continue uncured for a period of thirty (30) days; provided, further, that
if the  Borrower  has  undertaken  to cure any such  default  and is  diligently
prosecuting  such cure,  to the  reasonable  satisfaction  of Bank, it shall not
constitute a default under this Agreement if the subject default remains uncured
beyond thirty (30) days.

     9. REMEDIES UPON  DEFAULT.  If an event of default shall occur,  Bank shall
have all rights,  powers and remedies available under each of the Loan Documents
as well as all rights and remedies available at law or in equity.

     10. NOTICES.  All notices,  requests or demands which any party is required
or may desire to give to any other party under any  provision of this  Agreement
must be in writing delivered to the other party at the following address:



         Borrower:         Frisby Technologies, Inc.
                           3195 Centre Park Blvd
                           Winston-Salem, NC 27107
                           Attn:    Stephen Villa
                                    Chief Financial Officer

         With a copy to:

                           Ruskin, Moscou, Evans & Faltischek, P.C.
                           170 Old Country Road
                           Mineola, New York 11501
                           Attn: Norman Friedland, Esq.


         Bank:             Bank of America, N.A.
                           380 Knollwood Street
                           Winston-Salem, NC 27103
                           Attn: Ty Daurity
                                    Commercial Banking Officer

or to such other  address as any party may  designate  by written  notice to the
other party. Each such notice,  request and demand shall be deemed given or made
as follows:

          A. If sent by hand delivery, upon delivery;

          B.  If  sent  by a  nationally-recognized  overnight  courier,  on the
     business day following the date sent; or

          C. If sent by mail,  upon the  earlier  of the date of receipt or five
     (5) days after deposit in the U.S. Mail, first class postage prepaid.

     11.  COSTS,  EXPENSES  AND  ATTORNEYS'  FEES.  Borrower  shall  pay to Bank
immediately  upon  demand the full amount of all costs and  expenses,  including
reasonable  attorneys'  fees (to include  outside counsel fees and all allocated
costs of Bank's  in-house  counsel),  incurred  by Bank in  connection  with (A)
negotiation  and  preparation of this Agreement and each of the Loan  Documents,
and (B) Bank's continued administration thereof.  Whenever in the Loan Documents
reference is made to "attorneys'  fees" or "counsel  fees",  each such reference
shall mean and refer to the reasonable fees (and expenses)  actually incurred by
the party retaining such attorneys or counsel.

     12. MISCELLANEOUS. Borrower and Bank further covenant and agree as follows,
without limiting any requirement of any other Loan Document:

          A.  Cumulative  Rights and No Waiver.  Each and every right granted to
     Bank  under any Loan  Document,  or  allowed  it by law or equity  shall be
     cumulative  of each other and may be  exercised  in addition to any and all
     other rights of Bank, and no delay in exercising any right shall operate as
     a waiver thereof,  nor shall any single or partial  exercise by Bank of any
     right preclude any other or future exercise  thereof or the exercise of any
     other right. Borrower expressly waives any presentment,  demand, protest or
     other notice of any kind,  including but not limited to notice of intent to
     accelerate and notice of  acceleration.  No notice to or demand on Borrower
     in any case  shall,  of  itself,  entitle  Borrower  to any other or future
     notice or demand in similar or other circumstances.

          B.  Applicable Law. This Loan Agreement and the rights and obligations
     of the parties hereunder shall be governed by and interpreted in accordance
     with the laws of the State of North Carolina and applicable federal law.

          C. Amendment.  No  modification,  consent,  amendment or waiver of any
     provision of this Loan Agreement,  nor consent to any departure by Borrower
     therefrom,  shall be  effective  unless the same  shall be in  writing  and
     signed by an  officer  of Bank,  and then  shall be  effective  only in the
     specified instance and for the purpose for which given. This Loan Agreement
     is binding upon Borrower,  its  successors  and assigns,  and inures to the
     benefit of Bank,  its  successors  and assigns;  however,  no assignment or
     other transfer of Borrower's rights or obligations  hereunder shall be made
     or be effective without Bank's prior written consent,  nor shall it relieve
     Borrower of any obligations hereunder.  There is no third party beneficiary
     of this Loan Agreement.

          D.  Documents.  All documents,  certificates  and other items required
     under this Loan Agreement to be executed and/or  delivered to Bank shall be
     in form and content satisfactory to Bank and its counsel.

          E. Partial  Invalidity.  The  unenforceability  or  invalidity  of any
     provision of this Loan  Agreement  shall not affect the  enforceability  or
     validity   of  any  other   provision   herein   and  the   invalidity   or
     unenforceability  of any  provision  of any Loan  Document to any person or
     circumstance  shall not  affect  the  enforceability  or  validity  of such
     provision as it may apply to other persons or circumstances.

          F. Indemnification. Borrower shall indemnify, defend and hold Bank and
     its  successors  and assigns  harmless from and against any and all claims,
     demands, suits, losses, damages,  assessments,  fines, penalties,  costs or
     other  expenses  (including  reasonable  attorneys'  fees and court  costs)
     arising from or in any way related to any of the transactions  contemplated
     hereby,  including  but not limited to actual or  threatened  damage to the
     environment,  agency costs of  investigation,  personal injury or death, or
     property  damage,  due  to  a  release  or  alleged  release  of  Hazardous
     Materials,  arising from Borrower's business operations, any other property
     owned by Borrower or in the surface or ground water arising from Borrower's
     business operations,  or gaseous emissions arising from Borrower's business
     operations  or any other  condition  existing  or arising  from  Borrower's
     business  operations  resulting  from  the use or  existence  of  Hazardous
     Materials,  whether such claim proves to be true or false. Borrower further
     agrees that its indemnity  obligations  shall include,  but are not limited
     to, liability for damages resulting from the personal injury or death of an
     employee of the  Borrower,  regardless of whether the Borrower has paid the
     employee under the worker's compensation laws of any state or other similar
     federal or state  legislation  for the  protection of  employees.  The term
     "property  damage" as used in this paragraph  includes,  but is not limited
     to, damage to any real or personal property of the Borrower,  the Bank, and
     of any third parties. The Borrower's obligations under this paragraph shall
     survive the  repayment  of the Loans and  foreclosure  of the Deed of Trust
     securing the Loans.

          G.  Survivability.  All  covenants,  agreements,  representations  and
     warranties  made herein or in the other Loan  Documents  shall  survive the
     making of the Loans and shall  continue in full force and effect so long as
     the  Loans  are  outstanding  or the  obligation  of the  Bank to make  any
     advances under the Line of Credit shall not have expired.

          H. Updated Appraisals and Maintenance of Collateral Value. Bank may at
     its option,  at Borrower's  expense,  obtain an appraisal of any Collateral
     securing  payment  of the  Loan,  which  appraisal  shall  be  prepared  in
     accordance  with  applicable  bank  regulatory  agency  regulations and the
     written instructions from Bank by a third-party  appraiser engaged directly
     by Bank. The costs of each such  appraisal  shall be payable by Borrower to
     Bank on demand.  If such appraisal shows the market value of the Collateral
     has  declined,   Borrower  agrees  that,  upon  demand  by  Bank,  it  will
     immediately  either  pledge  additional  collateral  in form and  substance
     satisfactory  to Bank or make such payments as shall be necessary to reduce
     the principal balance outstanding under the Loan.

     13.  ARBITRATION.  ANY  CONTROVERSY  OR CLAIM  BETWEEN OR AMONG THE PARTIES
HERETO,  INCLUDING  BUT NOT LIMITED TO THOSE  ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON
OR ARISING FROM AN ALLEGED TORT,  SHALL BE DETERMINED BY BINDING  ARBITRATION IN
ACCORDANCE  WITH  THE  FEDERAL  ARBITRATION  ACT  (OR  IF  NOT  APPLICABLE,  THE
APPLICABLE  STATE LAW). THE RULES OF PRACTICE AND PROCEDURE FOR THE  ARBITRATION
OF COMMERCIAL  DISPUTES OF  J.A.M.S./ENDISPUTE,  INC., OR ANY SUCCESSOR  THEREOF
("J.A.M.S."),  AND THE  "SPECIAL  RULES"  SET FORTH  BELOW.  IN THE EVENT OF ANY
INCONSISTENCY,  THE SPECIAL RULES SHALL CONTROL.  JUDGMENT UPON ANY  ARBITRATION
AWARD  MAY BE  ENTERED  IN ANY  COURT  HAVING  JURISDICTION.  ANY  PARTY TO THIS
AGREEMENT MAY BRING AN ACTION,  INCLUDING A SUMMARY OR EXPEDITED PROCEEDING,  TO
COMPEL  ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT  APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.

          A. SPECIAL RULES. THE ARBITRATION  SHALL BE CONDUCTED IN THE COUNTY OF
     THE  BORROWER'S  DOMICILE AT TIME OF THE  EXECUTION OF THIS  AGREEMENT  AND
     ADMINISTERED BY J.A.M.S., WHICH WILL APPOINT AN ARBITRATOR;  IF J.A.M.S. IS
     UNABLE OR LEGALLY PRECLUDED FROM  ADMINISTERING  THE ARBITRATION,  THEN THE
     AMERICAN ARBITRATION  ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
     BE COMMENCED  WITHIN 90 DAYS OF THE DEMAND FOR  ARBITRATION;  FURTHER,  THE
     ARBITRATOR  SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
     COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.

          B. RESERVATION OF RIGHTS.  NOTHING IN THIS ARBITRATION PROVISION SHALL
     BE  DEEMED  TO (I)  LIMIT THE  APPLICABILITY  OF ANY  OTHERWISE  APPLICABLE
     STATUTES  OF  LIMITATION  OR  REPOSE  AND  ANY  WAIVERS  CONTAINED  IN THIS
     AGREEMENT; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT
     BY 12 U.S.C.  SEC. 91 OR ANY  SUBSTANTIALLY  EQUIVALENT STATE LAW; OR (III)
     LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE  SELF HELP REMEDIES SUCH
     AS (BUT NOT  LIMITED TO) SETOFF,  OR (B) TO  FORECLOSE  AGAINST ANY REAL OR
     PERSONAL PROPERTY COLLATERAL,  OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
     ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF,  WRIT OF
     POSSESSION  OR THE  APPOINTMENT  OF A RECEIVER.  THE BANK MAY EXERCISE SUCH
     SELF HELP RIGHTS,  FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL
     OR  ANCILLARY  REMEDIES  BEFORE,  DURING  OR  AFTER  THE  PENDENCY  OF  ANY
     ARBITRATION  PROCEEDING  BROUGHT  PURSUANT TO THIS  AGREEMENT.  NEITHER THE
     EXERCISE OF SELF HELP REMEDIES NOR THE  INSTITUTION  OR  MAINTENANCE  OF AN
     ACTION  FOR   FORECLOSURE  OR  PROVISIONAL  OR  ANCILLARY   REMEDIES  SHALL
     CONSTITUTE  A WAIVER OF THE RIGHT OF ANY PARTY,  INCLUDING  THE CLAIMANT IN
     ANY SUCH  ACTION,  TO  ARBITRATE  THE  MERITS OF THE  CONTROVERSY  OR CLAIM
     OCCASIONING RESORT TO SUCH REMEDIES.

     14. NO ORAL  AGREEMENT.  THIS  WRITTEN  LOAN  AGREEMENT  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 caused this  Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.


                                    BORROWER:

                                    FRISBY TECHNOLOGIES, INC.

ATTEST:
                                    By:/s/ Stephen Villa
                                       -------------------
/s/ Douglas McCrosson               Title: Chief Financial Officer
---------------------                      -----------------------

     Secretary
  [Corporate Seal]


                                    BANK:

                                    BANK OF AMERICA, N.A.

                                    By:/s/
                                       -------------------------------
                                    Title: Commercial Banking Officer
                                           ---------------------------
<PAGE>


                                    EXHIBIT A
                            BORROWING BASE AGREEMENT

  [ THIS BORROWING BASE AGREEMENT CONTAINS SOME PROVISIONS PRECEDED BY BOXES. IF
MARKED, THE PROVISION APPLIES TO THIS TRANSACTION. IF NOT MARKED, THE PROVISION
                       DOES NOT APPLY TO THIS TRANSACTION.]

     1. Borrowing Base. The aggregate  principal amount of all amounts from time
to  time  advanced   pursuant  to  the  terms  of  that  promissory  note  dated
February___,  2000 in the principal  amount of $2,000,000 (the "Note") shall not
exceed the Maximum Amount.

     "Maximum Amount" shall mean the lesser of $2,000,000 or the Borrowing Base.
The  "Borrowing  Base" at any time,  shall be equal to 80% of Eligible  Accounts
Receivable,  plus 50% of Eligible  Inventory,  plus 50% of the net book value of
Equipment, as follows:

     As used  herein,  "Eligible  Accounts  Receivable"  shall mean all Accounts
Receivable  of  Borrower  which  have been  created  in the  ordinary  course of
Borrower's  business  and for  which  Borrower's  right to  receive  payment  is
absolute and not contingent  upon the  fulfillment of any condition  whatsoever,
and shall not include:

          [x] any account which  remains  unpaid more than ninety (90) days past
     the invoice date;

          [x] any account for which there exists a right of set off,  defense or
     discount  (except  regular  discounts  allowed  in the  ordinary  course of
     business  to  promote   prompt   payment)  and  for  which  no  defense  or
     counterclaim has been asserted;

          [_] any account which represents an obligation of any local,  state or
     federal governmental agency or entity;

          [x] Any account which arises out of a contract or order which,  by its
     terms, forbids or makes void or unenforceable any assignment by Borrower to
     Bank of the account receivable arising with respect thereto;

          [x] Any account  arising from a "sale on approval,"  "sale or return,"
     "consignment," or subject to any other repurchase or return agreement;

          [_] any account which  represents an obligation of a customer  which
     is not a resident of the United States,  unless such account is supported
     by a letter of credit in form and substance acceptable to Bank;

          [x] Any account which arises from the sale or lease to or  performance
     of services for, or represents  an obligation  of, an employee,  affiliate,
     partner, parent or subsidiary of Borrower;

          [x] Any  account  which  represents  an  obligation  of a Customer  of
     Borrower when 80% or more of Borrower's accounts from such Customer are not
     eligible pursuant to the foregoing formula;

          [x] Any unapplied credits over 90 days old;

          and any  account on which the Bank is not or does not  continue to be,
     in the Bank's sole  discretion,  satisfied with the credit  standing of the
     Customer of Borrower in relation to the amount of credit extended.

     "Accounts   Receivable"   shall  mean  all  of  the  Borrower's   accounts,
instruments,  contract rights, chattel paper, documents, and general intangibles
arising from the sale of goods and/or the  rendition of services by the Borrower
in the ordinary  course of business,  and the proceeds  thereof and all security
and  guaranties  therefor,  whether now existing or hereafter  created,  and all
returned,  reclaimed or repossessed  goods, and all books and records pertaining
to the foregoing.

     "Eligible  Inventory"  shall mean the Borrower's  finished goods inventory,
which is currently salable.

     "Equipment"  means  all  non-obsolete   machinery  and  equipment  that  is
currently useable in the normal course of business of the Borrower.

     2. Advances.  The amounts of advances under the Note shall be determined in
the sole  discretion  of the Bank  consistent  with  the  value of the  Eligible
Accounts  Receivable,  the Eligible  Inventory,  and the Equipment,  taking into
account all fluctuations of the value thereof in light of the Bank's  experience
and sound business principles. The Bank shall be under no obligation to make any
advance to Borrower in excess of the limitations stated above.

     3. Reporting.  In addition to any reporting requirements required under the
Loan Agreement to which this Borrowing Base Agreement is attached,  the Borrower
will submit the following in form and substance satisfactory to Bank:

          [x] Accounts  Receivable Aging. Not later than fifteen (15) days after
     and as of the end of each month, a listing of accounts receivable aged from
     date of invoice.

          [x] Borrowing Base Certificate.  Not later than thirty (30) days after
     the end of each  fiscal  month,  Borrower  will  submit  a  Borrowing  Base
     Certificate in the form attached hereto as Exhibit A-1. Borrower shall also
     submit a Borrowing Base  Certificate  with any request for an advance under
     the Note, if the most recent Borrowing Base Certificate was provided to the
     Bank more than ten days prior to such request.

     4. [ ] Lock Box Arrangement. Bank and Borrower shall, upon request of Bank,
establish and maintain one or more special lock box or blocked  accounts for the
collection of the Accounts Receivables.  Each such special account shall be with
a bank  satisfactory  to the Bank  (which may be an  affiliate  of the Bank) and
shall be subject  to the Bank's  standard  form  agreement.  Any checks or other
remittances  against  Accounts  Receivables  which are  received by the Borrower
shall be held in trust for the Bank and turned over by the  Borrower to the Bank
or to a person designated by the Bank in the identical form received (except for
any necessary endorsement) as speedily as possible.

     5.  Mandatory  Payment.  In the event the aggregate  principal  outstanding
balance of advances  under the  Revolver  exceeds the Maximum  Amount,  Borrower
shall  immediately  and without notice or demand of any kind, make such payments
as shall be necessary to reduce the principal  balance of the Revolver below the
Maximum Amount.


Borrower:                                   Bank:

FRISBY TECHNOLOGIES, INC.                   BANK OF AMERICA, N.A.

By:   /s/Stephen Villa (Seal)               By: /s/________________(Seal)
Name: STEPHEN VILLA                        Name: /s/________________
Title: Chief Financial Officer             Title: Commercial Banking Officer


<PAGE>



                                   EXHIBIT A-1
                           BORROWING BASE CERTIFICATE

Status as of _______________, 19___.

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

<S>      <C>                                                           <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                                           $2,000,000.00

11.      Outstanding balance as of report date                         $____________

12.      Available for further advances (lesser of line 9 or line 10
         minus line 11)                                                $____________

13.      If line 12 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>

                                   SCHEDULE A
                              (Pending Litigation)


<PAGE>

                                   SCHEDULE B
                        (Liens, encumbrances and leases)


<PAGE>


                                    EXHIBIT B
                        (Form of Compliance Certificate)

                             COMPLIANCE CERTIFICATE

     This Compliance  Certificate is delivered  pursuant to Section 6(B)(iii) of
the Loan Agreement  dated as of  February__,  2000 (together with all amendments
and  modifications,   if  any,  from  time  to  time  made  thereto,  the  "Loan
Agreement"),  between Frisby  Technologies,  Inc. (the  "Borrower")  and Bank of
America,  N.A.  Unless  otherwise  defined,  terms used herein have the meanings
provided in the Loan Agreement.

     The  undersigned,  being  the duly  elected,  qualified  and  acting  Chief
Financial  Officer of the Borrower,  on behalf of the Borrower and solely in his
or her capacity as an officer of the  Borrower,  hereby  certifies  and warrants
that:

     1. He/she is the Chief Financial Officer of the Borrower and that, as such,
he/she is authorized to execute this certificate on behalf of the Borrower.

     2. As of ________________, 20____:

              (a)     The Borrower  was not in default of any of the  provisions
                      of the Loan  Agreement  during the period as to which this
                      Compliance Certificate relates;

              (b)     The Borrower's Tangible Net Worth was $__________________;


     IN WITNESS  WHEREOF,  the  undersigned  has  executed  and  delivered  this
certificate, this ______ day of ______________, 20____.


                              FRISBY TECHNOLOGIES, INC.

                              By: _____________________________________
                              Title: Chief Financial Officer