LICENSE AGREEMENT DATED SEPTEMBER 24, 1998 BETWEEN
          THE COMPANY AND TRIANGLE RESEARCH AND DEVELOPMENT CORPORATION


                   [INFORMATION PLACED IN BRACKETS [] HAS BEEN
                    OMITTED IN ACCORDANCE WITH A CONFIDENTIAL
                     TREATMENT REQUEST PURSUANT TO RULE 406
                AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION

<PAGE>



                                    AGREEMENT


     AGREEMENT (this "Agreement"), dated September 24, 1998, by and among Frisby
Technologies,  Inc., a Delaware  corporation  ("Frisby"),  Triangle Research and
Development  Corporation,  a North Carolina corporation ("TRDC"),  Delta Thermal
Systems, Inc., a North Carolina corporation ("Delta"),  and Dr. David Colvin, an
individual ("Dr. Colvin").

     A.  Frisby  has  agreed to grant to TRDC an option to  acquire  up to [This
information has been omitted in accordance with a Confidential Treatment Request
and has been filed  separately with the  Commission.]  shares of common stock of
Frisby in accordance with the terms of the option  agreement  attached hereto as
Exhibit A (the "Option Agreement").

     B.  Frisby and TRDC have  agreed to amend that  certain  Exclusive  License
Agreement  between  TRDC  and  Frisby  dated  as of May 1,  1995  (the  "License
Agreement"),  in  accordance  with the  terms of the  amendment  to the  License
Agreement attached hereto as Exhibit B (the "License Agreement Amendment").

     C.  TRDC has  agreed to assign to Frisby  its  rights  under  that  certain
License Agreement between TRDC and Outlast Technologies, Inc., formerly known as
Gateway  Technologies,  Inc.  ("Outlast"),  dated January 21, 1991 (the "Outlast
Agreement"),  in accordance with the terms of the assignment  agreement attached
hereto as Exhibit C (the "Outlast Assignment Agreement").

     D. The  parties  wish to set  forth  their  understandings  and  agreements
relating to the foregoing and the other transactions relating thereto.

     NOW, THEREFORE, the parties hereby agree as follows:

     1.  Outlast.  (a)  Simultaneously  with the  execution and delivery of this
Agreement,  Frisby  and TRDC will enter into the  Outlast  Assignment  Agreement
which provides for TRDC's  assignment of its rights under the Outlast  Agreement
to Frisby.

     (b) From and after the date hereof,  Frisby shall pay to TRDC the following
percentages  of all "Outlast Fees" received by Frisby from Outlast in respect of
each of the following calendar years:

          Calendar Year                      Percentage of Outlast Fees

     [This  information  has been  omitted  in  accordance  with a  Confidential
Treatment Request and has been filed separately with the Commission.]




<PAGE>



     For  purpose of this  Paragraph  1(b),  "Outlast  Fees" mean (i) all annual
payments  made by  Outlast to Frisby  pursuant  to  Section  4.8 of the  Outlast
Agreement  and (ii) all other  payments  made by Outlast to Frisby  pursuant  to
Articles VI or XIII of the Outlast Agreement, in each case reduced by the amount
of any set-offs  against such payments  which  Outlast makes in accordance  with
Article XIII of the Outlast Agreement or otherwise thereunder.

     (c) In the event  Frisby  conducts an audit of Outlast  records for periods
prior to 1998 and, as a result of such audit, receives any payment of additional
Outlast  Fees which  relate to such  periods  Frisby  shall pay over to TRDC one
hundred  percent  (100%)  of such  Outlast  Fees  less the  cost of such  audit,
including  legal fees, if any,  incurred by Frisby in conducting  such audit for
such periods.

     (d) Frisby  shall pay to TRDC all  applicable  percentages  of the "Outlast
Fees" in respect of each  calendar  year noted above for which such Outlast Fees
are due not later than 30 days following receipt thereof from Outlast.

     (e) In the event that TRDC receives  directly from Outlast any Outlast Fees
TRDC shall promptly pay over such Outlast Fees to Frisby.

     (f)  Without  the prior  written  consent of Frisby,  which  consent may be
withheld  by  Frisby  in its  sole  discretion,  neither  TRDC nor  Delta  shall
transfer,  sell or assign its rights to the Licensed Technology (as such term is
defined in the Outlast Agreement) to any party other than a Permitted  Assignee.
For  purposes  of this  Agreement,  a  Permitted  Assignee  means (i) any of the
current  shareholders  of TRDC or Delta  and their  respective  heirs at law and
devisees  or (ii) any  corporation,  partnership  or limited  liability  company
controlled  by or  under  common  control  with  TRDC.  As a  condition  to  any
assignment to a Permitted  Assignee,  such Permitted  Assignee shall execute and
deliver to Frisby an instrument  reasonably  satisfactory  to Frisby pursuant to
which such  Permitted  Assignee  shall  agree to be bound by all of the terms of
this Agreement,  including the  restrictions  on transfer set forth herein.  Any
attempt to assign or transfer the Licensed  Technology (or any part thereof) not
in compliance with this Paragraph 1(e) will be null and void and of no effect.

     (g) TRDC and Delta  covenant  to Frisby that from and after the date hereof
they will execute,  deliver and acknowledge (or cause to be executed,  delivered
and  acknowledged),  from  time to time at the  request  of Frisby  and  without
further consideration (other than the reimbursement of any direct costs incurred
by TRDC or Delta), all such further instruments and take all such further action
as may be  reasonably  necessary or  appropriate  to enable Frisby to assert its
rights under the Outlast Agreement,  including without limitation, in connection
with (i) any legal  proceedings  commenced against any third party infringers of
the Licensed  Technology,  and (ii) any termination of the Outlast  Agreement by
Frisby.  Without  limiting the  foregoing,  TRDC and Delta hereby appoint Frisby
their attorney-in-fact,  with full power of substitution and resubstitution,  to
execute and deliver in TRDC's  and/or  Delta's name any  instrument  that Frisby
deems necessary or advisable in order to further effect the assignment of TRDC's
rights under the Outlast  Agreement to Frisby and to enforce such rights against
Outlast or any third party.  The power of attorney  granted under this Paragraph
1(f) is coupled with an interest and is irrevocable and will survive the merger,
consolidation, dissolution, liquidation or bankruptcy of TRDC or Delta.


<PAGE>


     (h)  TRDC   represents  and  warrants  to  Frisby  that  (i)  each  of  its
representations  and  warranties  of TRDC  contained  in the Outlast  Agreement,
including without limitation,  those set forth in Section 11.1 thereof, are true
and  correct on the date hereof with the same force and effect as if made on and
as of the date hereof,  (ii) the Outlast  Agreement is in full force and effect,
has not been amended or modified, that TRDC has performed all of its obligations
required to be performed by it thereunder,  and TRDC is not (with or without the
lapse of time or the giving of notice of both) in breach or default  thereunder,
(iii) it has no other agreements or understandings  with Outlast relating to the
subject matter of the Outlast Agreement other than the Outlast Agreement and the
Agreement for Research and Development of Microencapsulated  Phase Change Fibers
and Fabrics  dated  January 22,  1991  between  TRDC and Outlast and the related
letter dated May 3, 1995 between TRDC and Outlast,  and it has not assigned,  or
subjected  any of its rights or interests in the Outlast  Agreement to any lien,
encumbrance or security  interest,  and (iv) Outlast has not asserted or, to the
best of  TRDC's  knowledge,  threatened  to  assert  any  claims  against  TRDC,
including,  without  limitation,  any claims under the Outlast Agreement or with
respect to the subject matter thereof.

     (i) Frisby shall  indemnify  and hold TRDC and its  directors  and officers
harmless from and against (i) any claims  asserted by Outlast arising out of any
breach by Frisby of its assumed  obligations under the Outlast  Agreement,  (ii)
any claim  asserted by Outlast that the  assignment of the Outlast  Agreement to
Frisby constitutes a breach of the Outlast Agreement, and (iii) any other claims
asserted by Outlast against TRDC relating to events  occurring prior to the date
hereof.  Notwithstanding the foregoing, Frisby shall not indemnify and hold TRDC
harmless from and against any claims asserted by Outlast relating to obligations
which are personal to the shareholders of TRDC.

     (j) In the event of the termination of the Outlast  Agreement in accordance
with  its  terms,  each of TRDC  and  Frisby  hereby  agree  that  the  Licensed
Technology  will  automatically  be deemed to be included in the  definition  of
Technology  (as such term is defined in the  License  Agreement),  and that TRDC
will have no rights to use or exploit such Licensed  Technology  (including  any
further  licensing  thereof),  other  than as  provided  for under  the  License
Agreement,  including the right to conduct research and development  relating to
the Licensed Technology.

     (k) In  consideration  for the foregoing and the other  obligations of TRDC
contained in this Agreement,  Frisby shall pay to TRDC or its designee(s)  [This
information has been omitted in accordance with a Confidential Treatment Request
and has been filed  separately with the Commission.] The 1998 Cash Payment shall
be due and payable upon  execution and delivery of this Agreement and receipt by
Frisby of payment instructions from TRDC. The 1999 Cash Payment shall be due and
payable  on or after  January  1, 1999 and upon  receipt  by  Frisby of  payment
instructions  from TRDC. Not later than two business days  following  receipt of
such payment instructions, Frisby shall deliver to TRDC the 1998 Cash Payment or
the 1999 Cash Payment,  as the case may be, in  immediately  available  funds by
wire  transfer  to the  account or  accounts  designated  by TRDC in its payment
instructions.



<PAGE>


     2. Option Agreement. As additional  consideration for the assignment of the
Outlast  Agreement,  simultaneously  with the  execution  and  delivery  of this
Agreement,  Frisby and TRDC will enter into the Option  Agreement which provides
for the grant to TRDC of an option to acquire up to [This  information  has been
omitted in accordance with a Confidential  Treatment  Request and has been filed
separately with the Commission.] shares of common stock of Frisby.

     3.  License  Agreement  Amendment.  As  additional  consideration  for  the
assignment  of the Outlast  Agreement,  simultaneously  with the  execution  and
delivery  of this  Agreement,  Frisby  and TRDC  will  enter  into  the  License
Agreement  Amendment  which provides for the amendment of certain  provisions of
the License Agreement.

     4. Research and Development  Funding.  Commencing in January 1, 1999 and on
each  January 1  thereafter  through  and  including  January  1, 2001 (the "R&D
Funding  Years"),  Frisby shall  provide  TRDC with  funding to support  certain
research and  development  projects of TRDC solely related to  microencapsulated
phase change  materials  technology  and thermal  management  ("R&D  Projects"),
subject to the following conditions and limitations:

     (a) Frisby will  provide TRDC with funding for each R&D Project upon review
of the budget  (which will set forth in detail the terms and  conditions of such
R&D Project) and payment schedule submitted therewith,  which funding will be in
the  amount  of  [This  information  has  been  omitted  in  accordance  with  a
Confidential   Treatment   Request  and  has  been  filed  separately  with  the
Commission.] in respect of the calendar year 1999 and [This information has been
omitted in accordance with a Confidential  Treatment  Request and has been filed
separately  with the  Commission.]  per year in respect of each of the  calendar
years 2000 and 2001.

     (b)  TRDC  acknowledges  that  all  inventions,  developments,  proprietary
information,  patents,  improvements,  and  know  how  resulting  from  such R&D
Projects  will be subject to the terms of the  License  Agreement  to the extent
applicable thereto.

     5.  Appointment to Advisory Board.  Upon the execution and delivery of this
Agreement by TRDC,  Frisby shall appoint Dr. Colvin to be a member of the Frisby
Innovation Advisory Board (the "Advisory Board"), such appointment to be for not
less than a two year term. As a member of the Advisory Board, Dr. Colvin will be
entitled to receive  options to purchase [This  information  has been omitted in
accordance with a Confidential  Treatment  Request and has been filed separately
with the  Commission.]  shares of common stock of Frisby for each year he serves
on the Advisory  Board at a price equal to no less than the fair market value of
Frisby's  common stock on the date of the granting of such option.  The specific
terms and conditions of such option shall be set forth in the option  agreement,
the form of which is  attached  hereto as Exhibit D. In  addition,  Frisby  will
reimburse Dr. Colvin for expenses he incurs in connection with his attendance at
Advisory Board meetings in accordance with Frisby's  expenses and  reimbursement
practices and policies.

     6.  Representations.  (a) Frisby hereby  represents and warrants to TRDC as
follows: (i) it has all corporate power and authority,  and has taken all action
necessary, to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform its obligations hereunder; (ii) the execution
and  delivery  of  this  Agreement  does  not,  and  the   consummation  of  the
transactions  contemplated hereby and compliance with the terms hereof will not,
violate or conflict with any contract,  judgment, order, law, rule or regulation
applicable  to  Frisby;  and (iii) no  consent  of, or filing  with,  any court,
governmental  authority  or other  person is  required to be obtained or made by
Frisby in connection  with the  execution and delivery of this  Agreement or the
consummation by Frisby of the transactions contemplated hereby.



<PAGE>


     (b) TRDC  represents  and  warrants  to Frisby as  follows:  (i) it has all
corporate power and authority,  and has taken all action  necessary  (other than
any action which may be necessary under the Outlast  Agreement),  to execute and
deliver this Agreement,  to consummate the transactions  contemplated hereby and
to perform its  obligations  hereunder;  (ii) the execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
and  compliance  with the terms  hereof will not,  violate or conflict  with any
contract, judgment, order, law, rule or regulation applicable to TRDC; and (iii)
no consent of, or filing with, any court, governmental authority or other person
is required to be obtained or made by TRDC in connection  with the execution and
delivery  of this  Agreement  or the  consummation  by TRDC of the  transactions
contemplated hereby.

     7. Delta  Acknowledgment.  Delta hereby acknowledges and confirms to Frisby
that, to the extent that any of the transactions  contemplated by this Agreement
affect any of the rights and/or  obligations of Delta,  Delta hereby consents to
all such  transactions and agrees to be bound by all of the terms and conditions
set forth herein, including Exhibits A, B and C hereto.

     8. Miscellaneous.  (a) All notices and other communications hereunder shall
be in  writing  and  shall be  deemed  given  when  delivered  personally  or by
telecopier,  or three days after being mailed by  registered  or certified  mail
(return  receipt  requested),  to the parties at the following  addresses (or at
such other addresses for a party as shall be specified by like notice):

                  If to Frisby:

                  Frisby Technologies, Inc.
                  77 East Main Street, Suite 2000
                  Bay Shore, NY  11706
                  Telecopier: (516) 969-8579
                  Attention:  Chief Executive Officer

                  If to TRDC, Delta or Dr. Colvin:

                  Triangle Research and Development Corporation
                  P.O. Box 12696
                  Research Triangle Park, N.C.  27709
                  Telecopier: (919) 832-5988
                  Attention: President

     (b) This  Agreement  shall be governed by and construed in accordance  with
the laws of the State of North Carolina applicable to contracts entered into and
wholly to be performed therein.

     (c) This Agreement may not be modified,  amended,  altered or  supplemented
except by an  agreement  in writing  executed  by the  parties to be charged and
bound.



<PAGE>


     (d)  If  any  provisions  hereof  shall  be  determined  to be  invalid  or
unenforceable in any respect, such determination shall not affect such provision
in any other respect or any other provision of this Agreement which shall remain
in full force and effect, and this Agreement shall, if possible, be construed in
all respects which most closely  reflects the intent of the parties hereto as if
such invalid or unenforceable provision were not contained herein.

     (e) This  Agreement  shall inure to the benefit of and be binding  upon the
parties hereto and their respective heirs, personal representatives,  successors
and assigns. Except as otherwise specifically provided for in this Agreement, no
party shall assign this Agreement or any of its rights or obligations under this
Agreement  without the prior  written  consent of the other  parties;  provided,
however,  that Frisby  shall have the right to assign this  Agreement to (a) any
entity  controlling,  controlled by or in common  control with Frisby or (b) any
entity which acquires all or substantially all of the assets or stock of Frisby,
provided that Frisby shall remain liable for its obligations herein.

     (f) This agreement (together with the Exhibits hereto) shall constitute the
entire  agreement  among the parties  hereto with respect to the subject  matter
hereof and shall  supersede all prior verbal or written  agreements,  covenants,
communications,  understandings,  commitments,  representations  or  warranties,
whether  oral or  written,  by any party  hereto  or any of its  representatives
pertaining to such subject matter.

     (g) This  Agreement  may be executed in one or more  counterparts,  each of
which  shall  be  deemed  to be an  original,  but all of which  together  shall
constitute one and the same Agreement.

     (h) Captions and paragraph headings used herein are for convenience and are
not part of this Agreement and shall not be used in construing it.


<PAGE>


     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the day and year first written above.


                                       FRISBY TECHNOLOGIES, INC.



                                    By: /s/Gregory S. Frisby
                                        -------------------------
                                    Name:  Gregory S. Frisby
                                    Title:    Chairman of the Board 
                                              and Chief Executive Officer


                                    TRIANGLE RESEARCH AND
                                         DEVELOPMENT CORPORATION

                                     By: /s/David P. Colvin
                                        -------------------------
                                     Name:  David P. Colvin
                                     Title:    President


                                     DELTA THERMAL SYSTEMS, INC.


                                      By: /s/David P. Colvin
                                          ----------------------
                                      Name:  David P. Colvin
                                      Title:    President


                                      /s/Dr. David Colvin
                                      --------------------------
                                      Dr. David Colvin




<PAGE>


                                                               Exhibit A


                    OPTION AGREEMENT DATED SEPTEMBER 24, 1998
          BY AND BETWEEN TRIANGLE RESEARCH AND DEVELOPMENT CORPORATION,
                   DELTA THERMAL SYSTEMS, INC. AND THE COMPANY






                   [INFORMATION PLACED IN BRACKETS [] HAS BEEN
                    OMITTED IN ACCORDANCE WITH A CONFIDENTIAL
                   TREATMENT REQUEST PURSUANT TO RULE 406 AND
                 HAS BEEN FILED SEPARATELY WITH THE COMMISSION.

<PAGE>





                                OPTION AGREEMENT


     This Option  Agreement  (this  "Agreement")  is made and entered into as of
September 24, 1998 by and between Triangle Research and Development Corporation,
a North Carolina  corporation  ("TRDC"),  Delta Thermal  Systems,  Inc., a North
Carolina  corporation  ("Delta")  and  Frisby  Technologies,  Inc.,  a  Delaware
corporation ("Frisby").

                                    RECITALS:

     A. Contemporaneously with the execution and delivery of this Agreement, the
parties  hereto have entered into an agreement (the "Master  Agreement")  which,
inter alia,  sets forth the terms of the  assignment  to Frisby from TRDC of its
rights  under the  Outlast  Agreement  (as such term is  defined  in the  Master
Agreement).

     B. In  connection  with the  transactions  contemplated  under  the  Master
Agreement,  Frisby desires to grant to TRDC an option to acquire  certain shares
of common stock, par value $0.001, of Frisby (the "Common Stock").

     NOW, THEREFORE, the parties hereto hereby agree as follows:

     I. DEFINITIONS AND CERTAIN INTERPRETIVE MATTERS

     I.1.  Defined  Terms.  In addition to the terms defined  elsewhere  herein,
terms used herein which are not defined  herein will have the meanings  ascribed
to them in the Master Agreement.

     I.2. Certain  Interpretive  Matters.  This Agreement will be interpreted in
accordance with the provisions of the Master Agreement.

                                 II. THE OPTION

     II.1. Option Grant. On the terms and subject to the conditions set forth in
this  Agreement,  for  $10.00  and other good and  valuable  consideration,  the
receipt and sufficiency of which is hereby acknowledged, Frisby hereby grants to
TRDC an option  (the  "Option")  to purchase  up to [This  information  has been
omitted in accordance with a Confidential  Treatment  Request and has been filed
separately  with the  Commission.]  shares  of its  Common  Stock  (the  "Option
Shares") at a price per share  equal to [This  information  has been  omitted in
accordance with a Confidential  Treatment  Request and has been filed separately
with the Commission.] (the "Exercise Price").

     II.2.  Vesting and  Exercise of Option.  (a) The Option may be exercised in
whole or part (subject to the restrictions set forth in clause (b) below) at any
time and from time to time from and after  the  second  anniversary  of the date
hereof.  Notwithstanding  the  foregoing,  this  Agreement  and the Option shall
terminate  and expire on the  earlier of (i) the fifth  anniversary  of the date
hereof or (ii) the date on which all of the Option Shares are purchased pursuant
to exercise of the Option.



<PAGE>


     (b) TRDC may  exercise the Option by giving  Frisby a notice (an  "Exercise
Notice") which  specifies (i) the total number of Option Shares to be purchased,
which shall be not less than [This  information  has been omitted in  accordance
with a Confidential  Treatment  Request and has been filed  separately  with the
Commission.] (ii) the aggregate Exercise Price payable in respect of such Option
Shares,  and (iii) a date not  earlier  than 5  business  days nor later than 10
business days from the date of receipt of the Exercise Notice for the closing of
such  purchase  (the  "Option  Closing  Date").  The closing of any  complete or
partial  exercise of the Option (the  "Option  Closing")  will take place at the
principal executive offices of Frisby.

     (c) The Exercise  Price will be payable by delivery by TRDC of a promissory
note,  in the form of Annex A hereto (the "Note"),  in the  aggregate  principal
amount of the Exercise Price for the Option Shares being purchased.  As security
for repayment of the Note, TRDC will pledge all of its right, title and interest
in and to the Option Shares being purchased to Frisby.

     II.3. The Option Closing.  Subject to adjustment as contemplated by Section
2.4, at each Option  Closing,  (a) TRDC shall  deliver to Frisby the Note in the
aggregate  principal  amount of the Exercise  Price for the Option  Shares being
purchased  and (b) Frisby will  deliver to TRDC a  certificate  or  certificates
evidencing the Option Shares acquired in connection therewith.

     II.4.  Adjustments to Option Shares.  (a) In the event of any change in the
outstanding equity securities of Frisby by reason of any stock dividend or stock
split  that  would  alter  the  percentage  of equity  interest  in Frisby to be
acquired by TRDC  hereunder,  the number of Option Shares  subject to the Option
shall be  adjusted  appropriately  so as to provide  that upon  exercise  of the
Option,  TRDC will acquire the same  percentage of equity  interest in Frisby as
TRDC would have acquired prior to such stock dividend or stock split.

     (b) In the event of any  recapitalization,  combination,  consolidation  or
merger of Frisby  into  another  entity or other  similar  transaction  in which
Frisby is not the surviving entity (a "Disposition Event") while any unexercised
Option remains  outstanding then, in such a situation,  at Frisby's election and
upon notice to TRDC prior to the consummation of the Disposition  Event, (i) the
Option  may be  canceled  as of the  effective  date  of the  Disposition  Event
provided that notice of such cancellation  shall have been provided to TRDC, and
TRDC  shall  have the  right to  exercise  the  Option  in full  during a period
specified by Frisby preceding the effective date of such  Disposition  Event, or
(ii) Frisby and all other persons  participating in the Disposition  Event shall
have  executed and  delivered to TRDC an agreement  that provides that TRDC will
have the right from and after the  occurrence  of the  Disposition  Event,  upon
exercise of the Option and payment of the Exercise  Price in effect  immediately
prior to such Disposition  Event, to purchase,  on the same terms and conditions
that were available to the other  persons,  the kind and amount of shares of the
Common Stock and other securities, assets and property that TRDC would have been
entitled to receive upon or after the happening of any such transaction had TRDC
exercised the entire Option immediately prior to such Disposition Event.
<PAGE>

                       III. REPRESENTATIONS AND WARRANTIES

         III.1.  Representations and Warranties of Frisby. Frisby represents and
warrants  to TRDC that the  Option  Shares  which are  subject to the Option are
presently  authorized  but unissued and such Option Shares will remain  reserved
and available for issuance  upon the timely  exercise of the Option.  The Option
Shares to be purchased upon any complete or partial  exercise of the Option will
be validly  issued upon  payment of the Exercise  Price and such Option  Shares,
when so issued upon such exercise,  will be duly and validly issued,  fully paid
and free and clear of all  liens,  claims  and  encumbrances  other  than  those
imposed by applicable securities laws.

     3.2 Representations and Warranties of TRDC. TRDC represents and warrants to
Frisby, by acceptance of the Option, as follows:

     (a) This  Option  and the  right to  purchase  Common  Stock  hereunder  is
personal to TRDC and shall not be transferred to any other person, other than to
TRDC's and Delta's  existing  shareholders and their respective heirs at law and
devisees,  the immediate  family members of Dr. Colvin (spouse and children) and
the following persons: Yvonne Bryant, Barbara McKinney,  Richard McKinney, David
Moody and Jim Mulligan,  Benjamin T. Gravely (each, a "TRDC Holder" and together
with TRDC and Delta, the "TRDC Holders"); provided, however, that as a condition
to any such  transfer each such TRDC Holder shall have executed and delivered to
Frisby an instrument  reasonably  satisfactory  to Frisby pursuant to which such
TRDC  Holder  shall  have  agreed  to be  bound by the  terms of this  Agreement
applicable to TRDC.

     (b) TRDC acknowledges that (i) this Option has been issued in reliance upon
an exemption from registration under the Securities and Exchange Act of 1933, as
amended (the "Securities Act") and applicable state statutes,  (ii) the exercise
of the  Option  and the  Option  Shares  have  not  been  registered  under  the
Securities  Act or  applicable  state  statutes  and must be held and may not be
sold,   transferred  or  otherwise   disposed  of  for  value  unless  they  are
subsequently  registered  under the  Securities  Act or an  exemption  from such
registration  is available,  (iii) Frisby is under no obligation to register the
Option or the Option Shares under the  Securities  Act or the  applicable  state
securities,  and (iv) that any  certificate  issued upon  exercise of the Option
representing  the Option Shares will bear on its face a legend in  substantially
the following form restricting the sale of the Option Shares:

     THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN  REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR ANY STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION THEREFROM.

                               IV. TRDC PUT RIGHT

     IV.1. Put Right.  (a) At any time from and after the exercise of the Option
and  purchase  by  TRDC of all of the  Option  Shares  and  prior  to the  fifth
anniversary  of the date  hereof,  TRDC shall have the right to cause  Frisby to
purchase  all of its Option  Shares  (the "Put  Right") at a price  equal to the
Exercise  Price plus [This  information  has been omitted in  accordance  with a
Confidential   Treatment   Request  and  has  been  filed  separately  with  the
Commission.]  (the "Put  Price");  provided,  however,  that the Put Right shall
terminate  automatically  upon the  registration  of the Option Shares under the
Securities Act.



<PAGE>


     (b) TRDC may  exercise  the Put  Right by  giving  Frisby a notice  (a "Put
Exercise  Notice") which specifies (i) TRDC's election to exercise its Put Right
with respect to all of the Option Shares then owned by TRDC, and (ii) a date not
earlier  than 10  business  days from the date of  receipt  of the Put  Exercise
Notice for the closing of such  purchase  (the "Put  Closing  Date");  provided,
however,  that if,  prior to the date of such Put Exercise  Notice,  the closing
price of Frisby's Common Stock on NASDAQ, or any other recognized stock exchange
on which it is then publicly traded,  is equal to or greater than the Put Price,
then the Put  Price  shall be a price  equal to the  closing  price of  Frisby's
Common Stock on NASDAQ,  or any other  recognized  stock exchange on which it is
then publicly traded,  on the last trading date immediately prior to the date of
the Put Exercise Notice.  The closing of any exercise of the Put Right (the "Put
Closing") will take place at the principal executive offices of Frisby.

     IV.2. The Put Closing. At the Put Closing,  (a) the Note(s) previously made
by TRDC in favor of Frisby shall be canceled and (b) Frisby shall pay to TRDC an
amount equal to the  aggregate  Put Price less an amount equal to the  principal
amount and all accrued interest on the Note(s),  (c) TRDC will deliver to Frisby
the certificate or certificates evidencing the Option Shares owned by TRDC, duly
endorsed  in  blank  or  accompanied  by a stock  power  in form  and  substance
reasonably  satisfactory  to  Frisby,  (d) TRDC will be deemed to  represent  to
Frisby that,  upon the Put Closing,  TRDC will  transfer and Frisby will acquire
the entire  record and  beneficial  ownership  of, and good title to, the Option
Shares,  free  and  clear  of any  and  all  liens,  encumbrances  and  security
interests,  and (e) each of the parties will take such additional actions as may
be  reasonably  requested  by the other to carry  out the  intent  and  purposes
hereof.

     IV.3.  Assignment of Obligation.  Frisby shall have the right to assign all
of its rights and  obligations  with  respect to the Put Right to a third party,
including any shareholder or affiliate of Frisby;  provided,  however, that such
assignment  shall not relieve Frisby of any of its obligations in respect of the
Put Right.

     4.4.  TRDC  Holders'  Rights.  Any right or action that may be taken at the
election  of the TRDC  Holders  shall be taken by a  representative  of the TRDC
Holders (the "TRDC Holder  Representative")  on behalf of all the TRDC  Holders.
The initial TRDC Holder  Representative  shall be Dr. Colvin.  Upon the death or
permanent  disability  (or  during any period of  temporary  disability)  of Dr.
Colvin,  the  successor  TRDC Holder  Representative  shall be designated by the
estate  of Dr.  Colvin;  provided,  however,  that  if no such  successor  is so
designated within 30 calendar days from such death or permanent disability, such
successor  will be the TRDC Holder  holding a majority of the Option  Shares (or
Option to  acquire  a  majority  of such  Option  Shares)  then held by the TRDC
Holders.  Any change in the TRDC Holder  Representative  shall become  effective
upon notice in accordance with Section 5.1 of this Agreement.
<PAGE>

                                V. MISCELLANEOUS

     V.1. Notices.  All notices and other  communications  hereunder shall be in
writing and shall be deemed given when delivered personally or by telecopier, or
three days after being mailed by  registered or certified  mail (return  receipt
requested), to the parties at the following address (or such other address for a
party as shall be specified by like notice):

         (a)  if to Frisby, to:

                  Frisby Technologies, Inc.
                  77 East Main Street

                  Bay Shore, NY  11706
                  Telecopier: (516) 969-8579
                  Attention:  Chief Financial Officer

         (a)  if to TRDC, to:

                  Triangle Research and Development Corporation
                  P.O. Box 12696
                  Research Triangle Park, N.C.  27709
                  Telecopier: (919) 832-5988
                  Attention: President

     V.2.  Governing  Law. This  Agreement  will be governed by and construed in
accordance  with the law of the State of North Carolina  applicable to contracts
entered into and wholly to be performed therein.

     V.3. Amendments.  This Agreement may not be modified,  amended,  altered or
supplemented  except by an  agreement  in writing  executed by the parties to be
charged and bound.

     V.4.  Severability.  If any  provision  hereof  shall be  determined  to be
invalid or unenforceable  in any respect,  such  determination  shall not affect
such  provision in any other  respect or any other  provision of this  Agreement
which  shall  remain in full force and  effect,  and this  Agreement  shall,  if
possible, be construed in all respects which most closely reflects the intent of
the  parties  hereto as if such  invalid  or  unenforceable  provision  were not
contained herein.

     V.5.  Successors  and Assigns.  The  provisions of this  Agreement  will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that, except as otherwise provided in
Section 3.2(a), no party may assign,  delegate or otherwise  transfer any of its
rights or  obligations  under this  Agreement  without  the consent of the other
parties hereto.

     V.6. Entire Agreement. This Agreement shall constitute the entire agreement
between the parties with  respect to the subject  matter of this  Agreement  and
shall   supersede   all  prior   verbal  and  written   agreements,   covenants,
communications,  understandings,  commitments,  representations  or  warranties,
whether  oral or  written,  by any party  hereto  or any of its  representatives
pertaining to such subject.

     V.7.  Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same Agreement.

     V.8.  Headings.  Captions  and  paragraph  headings  used  herein  are  for
convenience  and  are  not  part  of this  Agreement  and  shall  not be used in
construing it.


<PAGE>



     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the day and year first written above.

                                            FRISBY TECHNOLOGIES, INC.


                                            By: /s/Gregory s. Frisby
                                                --------------------------
                                            Name:  Gregory S. Frisby
                                            Title:    Chairman of the Board and
                                                     Chief Executive Officer


                                            TRIANGLE RESEARCH AND 
                                               DEVELOPMENT CORPORATION


                                            By: /s/David P. Colvin
                                                -------------------------
                                            Name: David P. Colvin
                                            Title:    President


                                            DELTA THERMAL SYSTEMS, INC.


                                            By: /s/David P. Colvin
                                                -------------------------
                                            Name: David P. Colvin
                                            Title:    President





<PAGE>



                                                                  EXHIBIT B

                  AMENDMENT AGREEMENT DATED SEPTEMBER 24, 1998
          BY AND BETWEEN TRIANGLE RESEARCH AND DEVELOPMENT CORPORATION
                   DELTA THERMAL SYSTEMS, INC. AND THE COMPANY









                   [INFORMATION PLACED IN BRACKETS [] HAS BEEN
                    OMITTED IN ACCORDANCE WITH A CONFIDENTIAL
                   TREATMENT REQUEST PURSUANT TO RULE 406 AND
                 HAS BEEN FILED SEPARATELY WITH THE COMMISSION.



<PAGE>




                               AMENDMENT AGREEMENT

     Amendment No.1 (this "Amendment  Agreement"),  dated September 24, 1998, to
the  Exclusive  License  Agreement,  dated  as of  May  1,  1995  (the  "License
Agreement") by and between  Triangle  Research and  Development  Corporation,  a
North  Carolina  corporation  ("TRDC"),  Delta  Thermal  Systems,  Inc., a North
Carolina  corporation  ("Delta")  and  Frisby  Technologies,  Inc.,  a  Delaware
corporation  and  successor-in-interest  to Frisby  Technologies,  Inc., a North
Carolina corporation ("Frisby").

     A.  Contemporaneously  with the  execution  and delivery of this  Amendment
Agreement,  the parties have entered into an agreement (the "Master Agreement"),
which,  inter alia,  sets forth the terms of the assignment to Frisby by TRDC of
its rights  under the Outlast  Agreement  (as such term is defined in the Master
Agreement);  each of the parties  hereby  acknowledges  that TRDC has previously
transferred  ownership of the Technology (as such term is defined in the License
Agreement) to Delta.

     B.  In  connection  with  the  transactions   contemplated  by  the  Master
Agreement,  TRDC,  Delta and Frisby  desire to amend the  License  Agreement  as
hereinafter set forth.

     NOW THEREFORE, the parties hereby agree as follows:

     1.  Article I of the License  Agreement  is hereby  amended by adding a new
section 1.11 which shall read in its entirety as follows:

     "1.11   Selected   Agricultural   Applications.    "Selected   Agricultural
Applications"  means any  application  of phase  change  material to  agronomic,
ornamental,  horticultural  (with  emphasis  on fruit  crops of all  types)  and
turfgrass  crops from crop  cultivation  through  harvest and up to the point of
transport  and  animal  husbandry  applications  (limited  solely to  biological
processes  control)  wherein the  purpose of the PCM is to provide,  among other
benefits,  (a) enhanced pesticide  efficacy,  (b) enhanced control of biological
organisms,  (c)  microenvironmental  regulation,  (d)  crop  sterilization,  (e)
improved  germinations and/or (f) improved crop productivity  through (i) freeze
protection, (ii) heat protection, (iii) protection from pathogen organism and/or
(iv) improvements of pesticides  efficacy.  Selected  Agricultural  Applications
specifically  exclude  those  applications  wherein the purpose of the PCM is to
enhance the  survivability  or shelf-life  of the  agricultural  product  during
transport, as exemplified by the case of transporting perishable citrus products
in a temperature  controlled  container or by the case of transporting  seeds or
seedlings within temperature regulating foam media."



<PAGE>


     2.  Article I of the License  Agreement  is hereby  amended by adding a new
section 1.12 which shall read in its entirety as follows:


     "1.12 Passive  MacroPCM  Garments.  "Passive  MacroPCM  Garments" means any
article of clothing,  excluding  footwear,  handwear and accessories and, during
the first 36 months  following the date of this  Amendment  Agreement,  headwear
(other than  headwear  designed  exclusively  for  military  use and/or for fire
safety  personnel),   containing   compartmentalized  packets  of  MacroPCMs  (1
millimeter  diameter and above),  wherein said  MacroPCMs  are the only means by
which phase change materials are incorporated into the garments."

     3. Article II of the License  Agreement  is hereby  amended by adding a new
Section 2.05 which shall read in its entirety as follows:

     "2.05  Frisby  grants  to TRDC (a) an  exclusive  worldwide  sublicense  to
develop and  commercialize  (including the right to further  sublicense to third
parties)  (i) Selected  Agricultural  Applications  and (ii) Cutting  Fluids and
systems to circulate same (to the extent covered by U.S. Patent No.  5,141,079),
and (b) a  non-exclusive  worldwide  sublicense  to  develop  and  commercialize
(including  the right to further  sublicense  to third  parties)  Macro size PCM
capsule  (having a diameter of one (1) millimeter or greater)  applications  for
Passive MacroPCM Garments  (collectively,  the "Frisby Licensed  Applications");
provided, however, that should TRDC (i) during the 24 month period following the
date hereof (or any successive 24 month period  thereafter)  (A) fail to fund or
secure  funding for research and  development in excess of $100,000 per annum or
(B) fail to secure one or more new grants or  contracts  from third  parties for
research and development, or (ii) commercialize the Frisby Licensed Applications
within five (5) years of the date of this  Amendment,  all license rights to the
Frisby Licensed Applications shall revert to Frisby."

     4. Section 3.031 of the License Agreement is hereby amended by amending the
royalty fee provisions to read as follows:

     ". . . Frisby  agrees to pay TRDC a royalty or fee in  accordance  with the
following schedule . . . . [This information has been omitted in accordance with
a  Confidential  Treatment  Request  and has  been  filed  separately  with  the
Commission.]

     The foregoing new royalty fee rate will be effective as of June 30, 1998."

     Section  3.031 of the  License  Agreement  is  hereby  further  amended  by
amending the "Exclusion" provision thereof by deleting the phrase "in accordance
with Par. 3.032 below" at the end of the first full sentence thereof.



<PAGE>


     5.  Section  3.032  of the  License  Agreement  is  hereby  deleted  in its
entirety.

     6. Section 3.033 of the License Agreement is hereby amended by amending the
sublicense fee provisions to read as follows:

     ". . . Frisby agrees to pay TRDC in accordance with the following  schedule
 . . . .

     [This  information  has been  omitted  in  accordance  with a  Confidential
Treatment Request and has been filed separately with the Commission.]

     The  foregoing  new  sublicense  fee rate will be  effective as of June 30,
1998."

     7. Article III of the License  Agreement  is further  amended by adding the
following new sections 3.037,  3.038,  3.039 and 3.040 which shall read in their
entirety as follows:

     "3.037  Purchase of PCMs. In connection  with the research and  development
and  commercialization  of the  Frisby  Licensed  Applications,  TRDC  agrees to
purchase all of its MicroPCM requirements from Frisby, subject to:

     1.  Frisby   satisfying  TRDC's   specification  and  reasonable   delivery
requirements for such PCMs, which specification and delivery  requirements shall
be in writing and of sufficient detail to enable Frisby to comply therewith.  If
Frisby does not accept a TRDC  purchase  order  within 10 days of receipt,  said
purchase  order  will be deemed to have been  rejected  by Frisby and TRDC shall
then be free to purchase the therein specified PCMs from a third party; and

     2. In the event that  Frisby is able to satisfy  TRDC's  specification  and
elects to supply such  MicroPCMs to TRDC,  Frisby will provide such MicroPCMs to
TRDC at the lowest  price it then  offered to its other  customers  for MicroPCM
orders of similar  quantity,  quality  and  technical  specification;  provided,
however,  that if TRDC is quoted a lower  bona  fide  price  from a third  party
supplier  for such  MicroPCMs,  TRDC  shall  have the  right  to  purchase  such
MicroPCMs  from such third  party  supplier  if Frisby  elects not to match such
price within 10 days after written receipt of such third parties proposal.

     3.038 TRDC Product Sales. On all sales by TRDC of bulk PCMs,  MicroPCMs and
End-Use Products incorporating MicroPCMs, which are based on the Frisby Licensed
Applications,   but  excluding  therefrom  all  direct  government   development
contracts  related to the Frisby  Licensed  Applications,  TRDC agrees to pay to
Frisby a royalty fee of [This  information has been omitted in accordance with a
Confidential   Treatment   Request  and  has  been  filed  separately  with  the
Commission.] of TRDC's gross sales revenues.



<PAGE>


     3.039  Sublicense  Payments.  On all  monies  received  by  TRDC  from  any
sublicensee of the Frisby Licensed Applications,  TRDC agrees to pay to Frisby a
sublicense  fee of [This  information  has been  omitted  in  accordance  with a
Confidential   Treatment   Request  and  has  been  filed  separately  with  the
Commission.]


     3.040 Payments to Frisby.  All amounts owed by TRDC to Frisby in accordance
with this Article III shall be paid to Frisby  within  thirty days after the end
of the calendar  quarter  during which payments were received by TRDC from sales
or  revenues  described  in  Sections  3.038 and 3.039.  Each  payment  shall be
accompanied  by a  statement  consisting  of  records  sufficient  to enable the
verification of amounts payable hereunder."

     8. Section 5.04 of the License Agreement is hereby amended by inserting the
following language after the first sentence:

     "Notwithstanding  the  foregoing,  without  the prior  written  consent  of
Frisby,  which  consent may be withheld by Frisby in its sole  discretion,  TRDC
shall not  transfer,  sell or assign its rights to the  Technology  to any party
other than a Permitted  Assignee.  For purposes of this  Agreement,  a Permitted
Assignee  means (i) any of the current  shareholders  of TRDC or Delta and their
respective  heirs at law and devisees or (ii) any  corporation,  partnership  or
limited liability company  controlled by or under common control with TRDC. As a
condition to any assignment to a Permitted  Assignee,  such  Permitted  Assignee
shall execute and deliver to Frisby an  instrument  reasonably  satisfactory  to
Frisby pursuant to which such Permitted  Assignee shall agree to be bound by all
of the terms of this Agreement, including the restrictions on transfer set forth
herein.  Any attempt to assign or transfer the  Technology (or any part thereof)
not in  compliance  with  this  Section  5.04  will be null  and  void and of no
effect."

     9.  Except as  otherwise  set forth  herein,  all other  provisions  of the
License Agreement shall continue in full force and effect.


<PAGE>


     IN WITNESS  WHEREOF,  the  undersigned  have  executed and  delivered  this
Amendment as of the date first above written.


                                 TRIANGLE RESEARCH AND DEVELOPMENT CORPORATION


                                 By:/s/
                                 Name:
                                 Title:


                                 DELTA THERMAL SYSTEMS, INC.


                                 By:/s/____________________________
                                 Name:
                                 Title:

                                 FRISBY TECHNOLOGIES, INC.



                                 By: /s/___________________________       
                                 Name:
                                 Title:




<PAGE>


                                                                  EXHIBIT C


                  ASSIGNMENT AGREEMENT DATED SEPTEMBER 24, 1998
                BY AND BETWEEN TRIANGLE RESEARCH AND DEVELOPMENT
                           CORPORATION AND THE COMPANY







                   [INFORMATION PLACED IN BRACKETS [] HAS BEEN
                    OMITTED IN ACCORDANCE WITH A CONFIDENTIAL
                   TREATMENT REQUEST PURSUANT TO RULE 406 AND
                 HAS BEEN FILED SEPARATELY WITH THE COMMISSION.


<PAGE>



                              ASSIGNMENT AGREEMENT

     ASSIGNMENT  AGREEMENT (this  "Agreement")  dated September 24, 1998, by and
between  Triangle  Research  and  Development  Corporation,   a  North  Carolina
corporation ("TRDC" or "Assignor"),  and Frisby  Technologies,  Inc., a Delaware
corporation ("Frisby" or "Assignee").

     A. Assignor is the licensor of certain "Licensed Technology",  as such term
is defined in Section 1.1 of that certain license  agreement,  dated January 22,
1991  (the   "License   Agreement"),   by  and  between   Assignor  and  Outlast
Technologies,  Inc. (formerly known as Gateway  Technologies,  Inc.), a Colorado
corporation ("Outlast").

     B.  Assignor  desires to assign its rights  under the License  Agreement to
Assignee  and  Assignee  desires to acquire  the  rights of  Assignor  under the
License Agreement.

     NOW, THEREFORE, the parties hereby agree as follows:

     1.  Assignment.  In  consideration  for $10.00 and other good and  valuable
consideration,  the receipt  and  sufficiency  of which is hereby  acknowledged,
Assignor hereby assigns,  transfers and conveys to Assignee, and Assignee hereby
accepts  all  right(s)  Assignor  has in,  and  with  respect  to,  the  License
Agreement.

     2. Assignee's  Obligations.  To the extent that it is practical but only to
that extent, Assignee agrees to perform obligations under the License Agreement,
as follows:

     (a) Assignee  shall pay patent  annuities  under Section 7.2 of the License
Agreement  only if advised in advance by Assignor  that such are due;  otherwise
Assignor  shall retain this  obligation,  subject to  reimbursement  by Assignee
(which may in turn seek reimbursement from Outlast, as provided in Section 7.2);
and

     (b) Assignee shall assume litigation duties and expenses under Section 13.1
and Section 13.3, but Assignor shall, at Assignee's  request,  join as party and
cooperate in prosecution or defense at Assignee's expense using counsel selected
by Assignee.

     Assignee  does not assume,  and  Assignor  hereby  expressly  retains,  any
obligations  under the License  Agreement  that are  personal to Assignor or its
shareholders. Assignor shall retain whatever ongoing obligations it may have, if
any, under the License  Agreement or any other agreement or  understanding  with
Outlast, express or implied, to develop Licensed Technology.

     3.  Further  Assurances.  From and after the date  hereof,  Assignor  shall
execute and deliver such other  documents or  instruments  and take such further
action  as may be  reasonably  requested  by  Assignee  in order to  effect  the
assignment of the License Agreement as contemplated by this Assignment.



<PAGE>



     4. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the successors and assigns of the parties hereto.

     5.  Controlling  Law. This Agreement  shall be governed by and construed in
accordance with the laws of the State of North Carolina  applicable to contracts
entered into and wholly to be performed therein.


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


                                TRIANGLE RESEARCH AND DEVELOPMENT CORPORATION



                                By: /s/____________________________
                                Name:
                                Title:


                                FRISBY TECHNOLOGIES, INC.



                                 By: /s/___________________________
                                 Name:
                                 Title:





<PAGE>


                                                                   EXHIBIT D



          NON-QUALIFIED STOCK OPTION AGREEMENT DATED SEPTEMBER 24, 1998
               BY AND BETWEEN DR. DAVID P. COLVIN AND THE COMPANY








                   [INFORMATION PLACED IN BRACKETS [] HAS BEEN
                    OMITTED IN ACCORDANCE WITH A CONFIDENTIAL
                     TREATMENT REQUEST PURSUANT TO RULE 406
                AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION


<PAGE>


                                                       Exhibit D


                            FRISBY TECHNOLOGIES, INC.
                      NON-QUALIFIED STOCK OPTION AGREEMENT


         THIS  OPTION  AGREEMENT  is  made  and  entered  as of  the  __  day of
September,   1998,  by  and  between  Frisby  Technologies,   Inc.,  a  Delaware
corporation (the "Corporation") and Dr. David P. Colvin (the "Optionee").

     WHEREAS,  the Optionee is a member of the Innovation  Advisory Board of the
Corporation; and

     WHEREAS,  the Corporation  considers it desirable and in its best interests
that Optionee be given an opportunity  to acquire a proprietary  interest in the
Corporation  by  possessing  a  non-qualified  option  to  purchase  up to [This
information has been omitted in accordance with a Confidential Treatment Request
and has been  filed  separately  with the  Commission.]  of Common  Stock of the
Corporation,  par value $.001 per share (the "Common Stock").

     NOW,  THEREFORE,  in consideration of the mutual covenants  hereinafter set
forth and for other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged,  the parties agree as follows: 1. Grant of Option.
The Corporation hereby grants to the Optionee the right and option  (hereinafter
the  "Option") to purchase all or any part of an aggregate of [This  information
has been omitted in accordance  with a  Confidential  Treatment  Request and has
been filed  separately with the  Commission.] of Common Stock (such number being
subject to  adjustment as  hereinafter  provided),  on the terms and  conditions
herein set forth and in the Plan, which is incorporated herein by reference. The
Optionee acknowledges receipt of a copy of the Plan.

     The  Optionee  acknowledges  that the Option is not an  "incentive  option"
within the meaning of an  "incentive  stock  option plan" and Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").


<PAGE>


         2. Purchase  Price.  The purchase  price of the Common Stock covered by
the Option  shall be [This  information  has been omitted in  accordance  with a
Confidential   Treatment   Request  and  has  been  filed  separately  with  the
Commission.] per share (the "Purchase Price").

         3. Term of the Option.  Unless terminated earlier pursuant to Paragraph
9 hereof,  the Option shall vest in its entirety on the  anniversary of the date
hereof.  Accordingly,  the Option shall be  exercisable as to the full amount of
the Option  commencing one year from the date hereof.  The Option granted hereby
shall terminate  September 23, 2003 unless earlier terminated as provided herein
or in the Plan.

         4. Method of Exercising Option. The Option may be exercised in whole or
in part at any time (to the extent that it is exercisable in accordance with its
terms) by giving written notice to the Corporation,  together with the tender of
the  Purchase  Price of the Common Stock  covered by the Option.  Payment of the
Purchase Price may be made in any of the following ways:

     (a)  in  United  States  dollars  in  cash  or  by  check  payable  to  the
Corporation; or

     (b) by delivery of shares of Common Stock of the Corporation  already owned
by the Optionee, valued at fair market value; or

     (c) by a  combination  of cash or check and Common Stock as provided in (a)
and (b) above; or

     (d) in the discretion of the  Corporation,  by the issuance by the Optionee
of a promissory  note, which shall be payable in thirty (30) days and shall bear
interest at such rate as shall be  determined  by the  Corporation,  which in no
event shall be less than the minimum rate required by the  provisions of Section
483 of the Code to avoid the imputation of income to such Optionee.



<PAGE>


     As soon as practicable  after receipt by the Corporation of such notice and
of payment in full of the Option  price of all the Common  Stock with respect to
which the Option has been  exercised  (including  interest if payment is made in
installments),  a certificate  or  certificates  representing  such Common Stock
shall be  issued in the name of the  Optionee,  and  shall be  delivered  to the
Optionee.  All Common Stock shall be issued only upon receipt by the Corporation
of the Optionee's  representation  that the shares of Common Stock are purchased
for investment and not with a view toward distribution  thereof.

     5. Availability of Shares. The Corporation, during the term of this Option,
at all times shall keep  available the number of shares of Common Stock required
to satisfy the Option.  Notwithstanding the foregoing, the Corporation shall not
be obligated to deliver any Common Stock unless and until, in the opinion of the
Corporation's  counsel,  all applicable  federal and state laws and  regulations
have been complied  with,  nor, if the  outstanding  Common Stock is at the time
listed on any  securities  exchange,  unless  and until the  Common  Stock to be
delivered  has been listed (or  authorized to be added to the list upon official
notice of  issuance)  upon such  exchange,  nor unless or until all other  legal
matters in  connection  with the  issuance and delivery of the Common Stock have
been approved by the Corporation's counsel.

     6.  Adjustments.  (a) If  prior  to the  exercise  of  the  Option  granted
hereunder the Corporation shall have effected one or more stock split-ups, stock
dividends,  or other  increases  or  reductions  of the  number of shares of its
Common  Stock  outstanding  without  receiving  compensation  therefor in money,
services or property, the number of shares of Common Stock subject to the option
hereby  granted  shall (i) if a net  increase  shall have been  effected  in the
number  of   outstanding   shares  of  the   Corporation's   Common  Stock,   be
proportionately increased and the Purchase Price per share of Common Stock shall
be proportionately reduced; and (ii) if a net reduction shall have been effected
in the  number of  outstanding  shares of the  Corporation's  Common  Stock,  be
proportionately  reduced  and the  Purchase  Price per share of Common  Share be
proportionately increased.


<PAGE>


     (b) In the  event  the  Corporation  is merged  into or  consolidated  with
another  corporation  under  circumstances  where  the  Corporation  is not  the
surviving corporation, or if the Corporation is liquidated or sells or otherwise
disposes of all or substantially all of its assets to another  corporation while
any  unexercised  Options remain  outstanding: 

     (i) subject to the provisions of clauses (iii),  (iv) and (v) below,  after
the effective  date of such merger,  consolidation  or sale, as the case may be,
the Optionee shall be entitled,  upon exercise of the Option, to receive in lieu
of shares of Common  Stock,  shares  of such  stock or other  securities  as the
holders  of the shares of Common  Stock  received  pursuant  to the terms of the
merger, consolidation or sale; or

     (ii) the Corporation may waive any discretionary  limitations  imposed with
respect to the  exercise  of the Option so that the Option from and after a date
prior to the effective date of such merger, consolidation,  liquidation or sale,
as the case may be, specified by the Corporation,  shall be exercisable in full;
or

     (iii) the Option may be canceled  by the  Corporation  as of the  effective
date of any such  merger,  consolidation,  liquidation  or sale,  provided  that
notice of such  cancellation  shall be given to the  Optionee,  and the Optionee
shall have the right to  exercise  such  option in full  (without  regard to any
discretionary  limitations  imposed with respect to the option)  during a 30-day
period preceding the effective date of such merger,  consolidation,  liquidation
or sale; or

     (iv) the Option may be  canceled by the  Corporation  as of the date of any
such merger,  consolidation,  liquidation or sale,  provided that notice of such
cancellation  shall be given to the  Optionee  and the  Optionee  shall have the
right to exercise the Option but only to the extent  exercisable  in  accordance
with any discretionary  limitations  imposed with respect to the Option prior to
the effective date of such merger, consolidation, liquidation or sale; or

     (v) the  Corporation in its discretion may provide for the  cancellation of
the Option and for the payment to the Optionee of some part or all of the amount
by which the value thereof exceeds the payment, if any, which the Optionee would
have been required to make to exercise such option.

     (c) Except as expressly  provided herein, no issuance by the Corporation of
shares of stock of any class, or securities  convertible into shares of stock of
any class,  shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or Purchase  Price of shares of Common  Stock  subject to
the Option.

     7.  Restrictions.   The  holder  of  this  Option,  by  acceptance  hereof,
represents and warrants as follows:

     (a) This  Option  and the  right to  purchase  Common  Stock  hereunder  is
personal to the holder and shall not be transferred  to any other person,  other
than by will or the laws of descent and  distribution or pursuant to a qualified
domestic  relations  order as  defined by the Code,  or Title I of the  Employee
Retirement  Income Security Act of 1974, as amended  ("ERISA"),  or by the rules
thereunder. The Option shall not be assigned, pledged or hypothecated in any way
(whether  by  operation  of law or  otherwise)  and  shall  not  be  subject  to
execution,  attachment or similar process.  Any attempted transfer,  assignment,
pledge,  hypothecation  or other  disposition  of the  Option  or of any  rights
granted  hereunder  contrary to the provisions of this Section 7, or the levy of
any attachment or similar  process upon the Option or such right,  shall be null
and void.


<PAGE>


     (b) The holder hereof has been advised and understands  that the Option has
been issued in reliance upon exemptions from  registration  under the Securities
Act and applicable state statutes;  the exercise of the Option and resale of the
Option and the Common Stock have not been registered under the Securities Act or
applicable state statutes and must be held and may not be sold, transferred,  or
otherwise  disposed of for value unless they are  subsequently  registered under
the Securities Act or an exemption from such  registration is available;  except
as set forth  herein,  the  Corporation  is under no  obligation to register the
Option or the Common  Stock under the  Securities  Act or the  applicable  state
statutes;  in the  absence of such  registration,  the sale of the Option or the
Common Stock may be  practicably  impossible;  the  Corporation's  registrar and
transfer agent will maintain stop-transfer  instructions against registration or
transfer  of the Option and the Common  Stock and any  certificate  issued  upon
exercise  of the Option  representing  the Common  Stock will bear on its face a
legend in  substantially  the following form  restricting the sale of the Common
Stock:

     THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN  REGISTERED
UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED (THE  "SECURITIES  ACT") AND ARE
"RESTRICTED  SECURITIES"  WITHIN THE MEANING OF RULE 144  PROMULGATED  UNDER THE
SECURITIES  ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR TRANSFERRED  WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT.

     (c) Prior to one year from the date the Option has been  exercised  and the
Common Stock fully paid for, the  Corporation  may refuse to transfer the Common
Stock unless the holder thereof provides an opinion of legal counsel  reasonably
satisfactory to the Corporation or a "no action" letter or interpretive response
from the staff of the Securities and Exchange  Commission to the effect that the
transfer is proper;  further, unless such opinion letter or response states that
the Common  Stock are free of any  restrictions  under the  Securities  Act, the
Corporation  may refuse to transfer the Common Stock to any  transferee who does
not furnish in writing to the Corporation the same  representations and agree to
the same  conditions  with respect to such Common Stock as are set forth herein.
Notwithstanding any of the foregoing, the Corporation may refuse to transfer the
Common Stock if any  circumstances  are present  reasonably  indicating that the
transferee's representations are not accurate.

     (d)  After  one year but  prior to two  years  from the date the  incentive
Option has been  exercised and the Common Stock fully paid for, the  Corporation
may refuse to transfer the Common  Stock unless the holder  either (i) meets the
requirements  of  Subparagraph  (b) above;  or (ii) sells such  Common  Stock in
accordance with Rule 144 and furnishes to the Corporation  written assurances of
compliance  therewith  in the  form of a copy  of the  Notice  of  Form  144 and
appropriate  letters of compliance  from the holder of such Common Stock and the
securities  broker-dealer  to or through which such Common Stock are being sold.
No opinion of counsel  for the  holder of the  Common  Stock  shall be  required
respecting  sales  in  reliance  on Rule 144  pursuant  to  Clause  (ii) of this
Subparagraph (d).

     (e) After two years from the date that the Option  has been  exercised  and
the Common Stock fully paid for, the Corporation shall, upon the written request
of any  persons  who have  held the  Common  Stock for one year  (excluding  any
tolling period provided for by Rule 144) and who is not, and has not been during
the preceding three months,  an affiliate of the  Corporation,  re-issue to such
holder in such names and denominations as the holder shall request,  one or more
certificates  for the Common Stock without any  restriction  whatsoever on their
further  transfer and cancel any and all stop  transfer  instructions  regarding
such Common Stock on the books and records of the Corporation.

<PAGE>
     8. Shareholder's Rights. The Optionee shall have no rights as a shareholder
with respect to the Common  Stock  issuable  upon  exercise of this Option until
payment of the  Purchase  Price and delivery to the Optionee of the Common Stock
has been made as provided herein.

     9. Termination of Option.  Except as otherwise stated herein, the Option to
the  extent  not  heretofore  exercised  shall  terminate  upon the first of the
following dates to occur:

     (a) In the  event  the  Optionee  ceases  to be a  member  of the  Board of
Directors  of the  Corporation  for any reason  other  than  death or  permanent
disability,  any then unexercised  portion of the Option granted to the Optionee
shall, to the extent not then vested, immediately terminate and become void; any
portion of the Option  which is then  vested but has not been  exercised  at the
time the  Optionee  so ceases to be a member  of the Board of  Directors  may be
exercised,  to the extent it is then vested,  by the Optionee within 180 days of
the date the Optionee ceased to be a member of the Board;  and all options shall
terminate after such 180 days have expired.

     (b) In the event  that the  Optionee  ceases to be a member of the Board by
reason of his or her death or permanent  disability,  any option granted to such
optionee shall be immediately  and  automatically  accelerated  and become fully
vested and all  unexercised  options shall be exercisable by the Optionee (or by
the Optionee's personal representative,  heir or legatee, in the event of death)
until the scheduled expiration date of the Option.

     (c)  September  23, 2003,  the fifth  anniversary  of this  Agreement.

     10. Validity and Construction. The validity and construction of this Option
shall be governed by the laws of the State of North Carolina.  Such construction
is vested  in the Board of  Directors  and its  construction  shall be final and
conclusive.

     IN WITNESS WHEREOF,  the Corporation has caused this Option Agreement to be
executed by its proper corporate officers thereunto duly authorized.

                                                FRISBY TECHNOLOGIES, INC.



                                           By:  /s/Gregory S. Frisby
                                                -----------------------------
                                                Gregory S. Frisby, President



                                               /s/David P. Colvin
                                               ------------------------------
                                               Dr. David P. Colvin