Document:

<PAGE>   1
                                                                    EXHIBIT 10.3

                              MUSI INVESTMENTS S.A.
                            231 VAL DES BONS MALADES
                           L-2121 LUXEMBOURG-KIRCHBERG

                                  May 14, 2001

Frisby Technologies, Inc.
3195 Centre Park Boulevard
Winston-Salem, N.C. 27107
Attention: Greg Frisby, Chairman

Dear Greg:

                  Reference is made to that certain letter agreement, dated
January 12, 2001 (the "L/C Letter Agreement"), between MUSI Investments S.A.
("MUSI") and Frisby Technologies, Inc. (the "Company"), relating to the
provision by MUSI of a $1,500,000 letter of credit to secure the Company's
obligations to Bank of America, N.A. ("BofA") under the terms of that certain
commercial loan agreement dated February 20, 2000 (as amended, the "BofA
Facility"). Reference is further made to that certain Loan Agreement, dated as
of the date hereof between MUSI and the Company (the "Loan Agreement"), relating
to the $1,500,000 term loan to be provided by MUSI to the Company, the proceeds
of which will be utilized to pay-off the outstanding principal balance of the
BofA Facility.

                  MUSI hereby (a) releases the Company from its obligations
under the L/C Letter Agreement to deliver to MUSI the convertible note in the
principal amount of $1,500,000 (the "L/C Loan Note") as provided for Paragraph 3
of the L/C Letter Agreement, and (b) releases Greg Frisby from his obligations
set forth in Paragraph 5 of the L/C Letter Agreement. The foregoing releases
shall not be deemed to release the Company and/or Mr. Frisby from any of their
respective obligations under the Loan Agreement and the other loan documents
entered into in connection with the transactions contemplated by the Loan
Agreement.

                  MUSI hereby authorizes the escrow agent named under the L/C
Letter Agreement to release from escrow and deliver to the Company the L/C Loan
Note.

<PAGE>   2

Frisby Technologies, Inc.
May 14, 2001
Page 2

                  Please indicate your agreement to the foregoing by signing the
enclosed copy of this letter agreement and returning the same to the
undersigned.

                  Very truly yours,

                  MUSI INVESTMENTS S.A.

                  By: /s/ Luca Bassani Antivari
                     ---------------------------
                  Name: Luca Bassani Antivari

                  Accepted and Agreed:

                  FRISBY TECHNOLOGIES, INC.

                  By:/s/ Gregory S. Frisby
                     -----------------------
                  Name: Gregory S. Frisby
                  Title:   Chairman and CEO

                  /s/ Greg Frisby
                  Greg Frisby, individually

                  RUSKIN, MOSCOU, EVANS & FALTISCHEK, PC, as escrow agent

                  By:______________________
                  Name:  Norman Friedland
                  Title: Partner

                                       2<PAGE>   1
                                                                    EXHIBIT 10.4

                            FRISBY TECHNOLOGIES, INC.
                           3195 CENTRE PARK BOULEVARD
                             WINSTON-SALEM, NC 27107

                                 April 26, 2001

--------------------------
--------------------------
--------------------------
--------------------------

                      Re: First Amendment Warrant Agreement

Gentlemen:

           Reference is made to the Warrant Agreement, dated as of May 30, 2000
(the "Warrant Agreement"), by and between Frisby Technologies, Inc. a Delaware
corporation (the "Company"), and ___________________ ("Investor"). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Warrant Agreement.

           In consideration of the mutual agreements provided herein, the
parties hereby amend the Warrant Agreement as follows:

     1. The reference to "800,000 warrants" in Recital A is hereby changed to
"1,000,000 warrants".

     2. The first sentence of Recital B is hereby amended to read in its
entirety as follows:

     "The Company desires to grant to Buyer the right to purchase ___________
[insert 125% of original number] shares of Company Common Stock on the terms and
conditions set forth in this Agreement and in the Warrant Certificate (as
defined in Section 1)."

     3. The definition of "Exercise Price" in Section 5(b) is hereby amended to
read in its entirety as follows:

     "The price at which each Warrant is exercisable (the "Exercise Price") will
be $6.00 per share of Company Common Stock, subject to adjustment pursuant to
the terms hereof."

           Upon receipt of a signed copy of this First Amendment and the Warrant
Certificate previously issued to Investor (the "Old Certificate"), the Company
shall promptly issue a new Warrant Certificate in replacement of the Old
Certificate and to evidence the additional warrants issued pursuant to this
First Amendment.
<PAGE>   2

           Except as specifically amended above, the Warrant Agreement shall
remain in full force and effect and is hereby ratified and confirmed.

           This Amendment shall be governed by and construed in accordance with
the laws of the State of New York as in effect from time to time, without regard
to any principles of choice of laws or conflicts of law.

           This Amendment may not be modified, amended, altered or supplemented
except by an agreement in writing executed by the parties hereto.

           This Amendment may be executed in counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute one and the same instrument.

           If the foregoing is acceptable to you, please sign this Amendment
below.

                                Very truly yours,

                                FRISBY TECHNOLOGIES, INC.

                                By:__________________________________
                                       Name:  Gregory S. Frisby
                                       Title:   Chairman and CEO

Agreed and Accepted as
of the date first
above written:

___________________________

By:________________________
Name:
Title:<PAGE>   1
                                                                    EXHIBIT 10.5

                                WARRANT AGREEMENT

     THE WARRANT AGREEMENT (this "Agreement"), executed and effective as of July
16, 2001, is and entered into by and between Frisby Technologies Inc., a
Delaware corporation (the "Company"), and the investor party hereto named on the
signature page hereof ("Buyer").

                                    Recitals:

     A. As of the effective date hereof, Buyer has purchased ____________ units
("Units"), with each Unit consisting of one share of the Company's common stock,
par value $.001 per share ("Company Common Stock"), and a warrant to purchase
one share of Company Common Stock.

     B. Accordingly, the Company desires to grant to Buyer the right to purchase
____________ shares of Company Common Stock on the terms and conditions set
forth in this Agreement and in the Warrant Certificate (as defined in Section
1). The right to purchase Company Common Stock granted pursuant to this
Agreement and the Warrant Certificate is referred to herein as the "Warrant" and
the shares of Company Common Stock and other securities issuable upon the
exercise of the Warrant are referred to herein as the "Warrant Shares."

     NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

     SECTION 1. Warrant Certificate. The Company will issue and deliver a
certificate evidencing the Warrant upon execution and delivery of this
Agreement, which certificate will be substantially in the form attached hereto
as Exhibit A (the "Warrant Certificate"). The Warrant Certificate will be dated
the date of issuance by the Company.

     SECTION 2. Execution of Warrant Certificate. Warrant Certificates will be
signed on behalf of the Company by an authorized officer.

     SECTION 3. Registration in Warrant Register. The Company will number and
register Warrant Certificates in its register (the "Warrant Register") when
issued. The Company may deem and treat the registered holder from time to time
of the Warrant Certificates (the "Holder") as the owner thereof (notwithstanding
any notation of ownership or other writing thereon made by anyone) for all
purposes and will not be affected by any notice to the contrary. The Warrant
Certificate initially issuable hereunder will be registered initially in the
name of Buyer.

     SECTION 4. Transfer. Except as expressly permitted by this Agreement,
neither this Agreement, the Warrant, the Warrant Certificate nor the Warrant
Shares may be transferred, assigned, sold or otherwise disposed of without the
prior written consent of the Company, except in conjunction with an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
and all applicable state securities laws, or an exemption from registration
under the Act and all applicable state securities laws. In the absence of an
effective registration under the Act, it shall be a condition to any such
transfer, assignment, sale or other disposition that the transferor first
deliver to the Company a legal opinion from counsel, in form and substance
reasonably satisfactory to the Company, providing that such transfer,
assignment, sale or other disposition may be made
<PAGE>   2

pursuant to a valid exemption under the Act and all applicable state securities
laws and is otherwise in compliance with the Act and all applicable state
securities laws. Until such time as the same have been registered under the Act,
each Warrant Certificate and each issued and outstanding Warrant Share will bear
a legend substantially to the effect set forth on the first page of the Warrant
Certificate.

     SECTION 5. Exercise of Warrant.

     (a) Subject to the terms of this Agreement, each Holder will have the
right, which may be exercised commencing on the date on which the form of
election to purchase annexed to the Warrant Certificate (the "Exercise Notice")
is delivered pursuant to Section 5(c), to receive from the Company the number of
fully paid and nonassessable Warrant Shares that the Holder may at the time be
entitled to receive upon exercise of the Warrant and payment of the Exercise
Price (as defined in Section 5(b)) then in effect for such Warrant Shares. The
right to exercise the Warrant will, notwithstanding anything to the contrary
contained herein, expire at 5:00 p.m., Winston-Salem time, on the fifth
anniversary of the effective date hereof (the "Expiration Date"). The
unexercised portion of the Warrant as of the Expiration Date will become void
and all rights hereunder and all rights in respect thereof under this Agreement
will cease as of such time.

     (b) The price at which the Warrant may be exercised (the "Exercise Price")
will be $6.00 per Warrant Share, subject to adjustment pursuant to the terms
hereof.

     (c) The Warrant may be exercised upon surrender to the Company at its
office designated for such purpose (as provided for in Section 11) of the
Warrant Certificate or Warrant Certificates to be exercised with the Exercise
Notice duly filled in and signed and payment to the Company of the Exercise
Price for the number of Warrant Shares in respect of which the Warrant is then
exercised. Payment of the aggregate Exercise Price will be made to the Company
in cash by wire transfer in immediately available funds to an account specified
by the Company to the Holder.

     (d) Subject to the provisions of Section 6, as promptly as reasonably
practicable (but in any event within 14 days) after the exercise of the Warrant
in accordance with the terms set forth in Section 5(c), the Company will issue
and cause to be delivered to the Holder (or, subject to Section 4, upon the
written order of the Holder, to such person or persons as the Holder may
designate with the prior written consent of the Company which will not be
unreasonably withheld or delayed), a certificate or certificates for the number
of full Warrant Shares issuable upon the exercise of the Warrant in accordance
with the terms of this Agreement. The certificate or certificates for such
Warrant Shares will be deemed to have been issued and the Person (as defined in
Section 16) so named therein will be deemed to have become a holder of record of
such Warrant Shares as of the date of the surrender of the Warrant and payment
of the Exercise Price, irrespective of the date of delivery of such certificate
or certificates for Warrant Shares.

     (e) Subject to the terms of this Agreement, the Warrant will be
exercisable, at the election of the Holder, either in full or from time to time
in part and, in the event that a Warrant Certificate is exercised in part at any
time prior to the Expiration Date, a new Warrant Certificate covering the
Warrant Shares for which the Warrant remains exercisable will be issued,
executed and delivered pursuant to the provisions of this Section 5(e) and
Section 2.

     (f) All Warrant Certificates surrendered upon exercise of the Warrant will
be cancelled and disposed of by the Company. The Company will keep copies of
this Agreement and

                                       2
<PAGE>   3

any notices given or received hereunder available for inspection by the Holder
during normal business hours at its principal offices.

     SECTION 6. Payment of Taxes. The Company will pay all documentary stamp
taxes and other similar governmental charges (excluding all foreign, federal,
state and local income, capital gain, franchise, property, estate, inheritance,
gift or similar taxes) in connection with the issuance or delivery of the
Warrant and in connection with the initial issuance or delivery of Warrant
Shares upon the exercise of the Warrant in accordance with the terms of this
Agreement. The Company will not, however, be required to pay any tax that may be
payable in respect of any subsequent transfer of the Warrant or the Warrant
Shares or any transfer involved in the issuance and delivery of Warrant Shares
in a name other than that in which the Warrant to which such issuance relates
were registered, and, if any such tax would otherwise be payable by the Company,
no such issuance or delivery will be made unless and until the Person requesting
such issuance has paid to the Company the amount of any such tax, or it is
established to the reasonable satisfaction of the Company that any such tax has
been paid.

     SECTION 7. Mutilated or Missing Warrant Certificates. If a mutilated
Warrant Certificate is surrendered to the Company, or if the Holder of a Warrant
Certificate claims and submits an affidavit or other evidence satisfactory to
the Company to the effect that the Warrant Certificate has been lost, destroyed
or wrongfully taken, the Company will issue a replacement Warrant Certificate.
Notwithstanding the foregoing, if required by the Company, such Holder shall
provide an indemnity bond, or other form of indemnity (which may, if accepted by
the Company, include an unsecured written agreement to indemnify the Company),
sufficient in the judgment of the Company to protect the Company from any loss
that it may suffer if a Warrant Certificate is replaced.

     SECTION 8. Reservation of Warrant Shares.

     (a) The Company will at all times reserve and keep available out of the
aggregate of its authorized but unissued Company Common Stock or its authorized
and issued Company Common Stock held in its treasury, for the purpose of
enabling it to satisfy any obligation to issue Warrant Shares upon exercise of
the Warrant, the maximum number of shares of Company Common Stock which may then
be deliverable upon the exercise in full of the Warrant.

     (b) The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of the Warrant will, upon payment of the Exercise Price
therefor and issue thereof, be validly authorized and issued, fully paid,
nonassessable and free, subject to Section 6, from all taxes, liens, charges and
security interests with respect to the issue thereof, except that such Warrant
Shares will be subject to the terms and conditions of this Agreement.

     SECTION 9. Adjustment of Exercise Price and Warrant Number.

     (a) Initial Number of Warrant Shares. The number of Warrant Shares issuable
upon the exercise of the Warrant shall be ____________ subject to adjustment
from time to time upon the occurrence of the events enumerated in, or as
otherwise provided in, this Section 9.

     (b) Adjustment for Changes in Capital Stock. If the Company:

                                       3
<PAGE>   4

          (i) makes a distribution on its Company Common Stock in shares of its
     Company Common Stock or in shares of its capital stock other than Company
     Common Stock;

          (ii) subdivides or reclassifies its outstanding shares of Company
     Common Stock into a greater number of shares;

          (iii) combines or reclassifies its outstanding shares of Company
     Common Stock into a smaller number of shares; or

          (iv) issues by reclassification of its Company Common Stock any shares
     of its capital stock (other than reclassifications arising solely as a
     result of a change in the par value of the Company Common Stock);

then the number of Warrant Shares issuable upon the exercise of the Warrant
immediately prior to such action will be proportionately adjusted so that the
Holder of any Warrant thereafter exercised may receive the aggregate number and
kind of shares of capital stock of the Company which such Holder would have
owned immediately following such action if such Warrant had been exercised
immediately prior to such action.

     (c) Effective Date of Adjustment for Changes in Capital Stock. The
adjustment will become effective immediately after the record date with respect
to any of the actions described in Section 9(b).

     (d) Successive Adjustments for Changes in Capital Stock; No Conflict With
Adjustments for Other Distributions. Adjustments for changes in capital stock
described in Section 9(b) will be made successively whenever any such event
occurs. If the occurrence of any event listed above results in an adjustment
under Section 9(f), no further adjustment will be made under Section 9(b).

     (e) Reserved.

     (f) Adjustment for Other Distributions. If the Company distributes to all
holders of Company Common Stock (i) any evidences of indebtedness of the Company
or any of its subsidiaries, (ii) any assets of the Company or any of its
subsidiaries (including distributions of cash on Company Common Stock), or (iii)
any rights, options or warrants to acquire any of the foregoing or to acquire
any other securities of the Company, the number of Warrant Shares issuable upon
the exercise of the Warrant will be adjusted in accordance with the formula:

                                   _       _
                        W' =  W x |   M     |
                                  |  ------ |
                                  |_ M - F _|
                  where:

                  W'  =  the adjusted number of Warrant Shares.
                  W   =  the number of Warrant Shares issuable upon the
                         exercise of the Warrant immediately prior to the record
                         date for such event.
                  M   =  the fair market value (as determined in the good
                         faith judgment of the Board of Directors of the
                         Company) of all issued and outstanding shares of the
                         Company capital stock (immediately prior to such
                         distribution).

                                       4
<PAGE>   5

                  F   =  the fair market value (as determined in the good
                         faith judgment of the Board of Directors of the
                         Company) on the record date for such event of all of
                         the shares, the indebtedness, assets, rights, options
                         or warrants so distributable.

     (g) Successive Adjustments for Other Distributions; Re-adjustment of Fair
Market Value under Certain Circumstances. The adjustment described in Section
9(f) will be made successively whenever any such distribution is made and will
become effective immediately after the record date for the determination of
stockholders entitled to receive the distribution. If an adjustment is made
pursuant to Section 9(f) as a result of the issuance of rights, options or
warrants and at the end of the period during which any such rights, options or
warrants are exercisable, not all such rights, options or warrants shall have
been exercised, the adjusted number of Warrant Shares will be immediately
readjusted as if "F" in the above formula was the fair market value on the
record date of the indebtedness or assets actually distributed upon exercise of
such rights, options or warrants.

     Section 9(f) does not apply to any transaction described in Section 9(b).

     (h) Adjustment to Exercise Price. Upon each adjustment to the number of
Warrant Shares issuable upon the exercise of the Warrant pursuant to this
Section 9, the Exercise Price will be adjusted so that it is equal to the
Exercise Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which is the number of Warrant Shares issuable upon
the exercise of the Warrant immediately prior to such adjustment, and the
denominator of which is the number of Warrant Shares issuable upon the exercise
of the Warrant immediately after such adjustment; provided, that in no event
shall the Exercise Price be less than the then current par value of the Common
Stock.

     (i) When No Adjustment Required. If an adjustment is made upon the
establishment of a record date for a distribution subject to Sections 9(b) or
9(f) and such distribution is subsequently cancelled, the number of Warrant
Shares issuable upon the exercise of the Warrant and Exercise Price then in
effect will be readjusted, effective as of the date when the Board of Directors
determines to cancel such distribution, to that which would have been in effect
if such record date had not been fixed.

     (j) Notice of Adjustment. Whenever the number of Warrant Shares or the
Exercise Price is adjusted, the Company will provide the notices required by
Section 10.

     (k) Other Dilutive Events. Notwithstanding anything to the contrary
contained in this Section 9, no adjustment to the Exercise Price and the number
of Warrant Shares will be made in connection with the issuance of additional
securities by the Company for incremental equity capital.

     SECTION 10. Notices to Warrant Holders.

     (a) Promptly (but in no event more than ten days) after any adjustment
pursuant to Section 9, the Company will (i) cause to be filed with the Company a
certificate of an officer of the Company setting forth the number of Warrant
Shares issuable upon the exercise of the Warrant and the Exercise Price after
such adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based, and (ii) cause to be given
to the Holder at its address appearing on the Warrant Register written notice of
such adjustments. Where

                                       5
<PAGE>   6

appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 10.

     (b) In the event (i) the Company authorizes the distribution to all holders
of shares of Company Common Stock of assets, including cash, evidences of its
indebtedness, or other securities; (ii) of any consolidation or merger to which
the Company is a party and for which approval of any stockholders of the Company
is required, or of the conveyance or transfer of all or substantially all of the
properties and assets of the Company, or of any reclassification or other change
of Company Common Stock issuable upon exercise of the Warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination); or (iii) the Company
proposes to take any other action that would require an adjustment to the
Warrant Shares or the Exercise Price pursuant to Section 9, then, in any such
case, the Company will cause to be given to each Holder at its address appearing
on the Warrant Register, at least ten days prior to the applicable record date
hereinafter specified, or the date of the event in the case of events for which
there is no record date, in accordance with the provisions of Section 11, a
written notice with respect to any such action or event. The failure to give the
notice required by this Section 10 or any defect therein shall not affect the
legality or validity of any such action or event.

     (c) Nothing contained in this Agreement or in any Warrant Certificate will
be construed as conferring upon the Holder (prior to the exercise of the Warrant
in accordance with the terms of this Agreement) the right to vote or to consent
or to receive notice as stockholder in respect of the meetings of stockholders
or the election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company; provided, however, that nothing in
the foregoing provision is intended to detract from any rights explicitly
granted to any Holder hereunder.

     SECTION 11. Notices to the Company and Warrant Holders. All notices and
other communications provided for or permitted hereunder will be made by hand
delivery, first-class mail, telex or telecopier (with telephone confirmation of
delivery thereof), or overnight air courier guaranteeing next day delivery as
provided in Schedule 1 hereto.

     All such notices and communications will be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered back if
telexed; when receipt acknowledged, if telecopied; and the next business day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery. The parties may change the addresses to which
notices are to be given by giving five days' prior written notice of such change
in accordance herewith.

     SECTION 12. Certain Supplements and Amendments. The Company may from time
to time supplement or amend this Agreement without the approval of the Holder in
order to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company may deem necessary or desirable; provided that any
such supplement or amendment will not adversely affect the interests of the
Holder.

     SECTION 13. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company will bind and inure to the benefit of its
respective successors and assigns hereunder.

                                       6
<PAGE>   7

     SECTION 14. Termination. This Agreement will terminate upon the earlier to
occur of the Expiration Date and the date on which the Warrant shall have been
exercised in full pursuant to this Agreement.

     SECTION 15. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the state of Delaware, without regard to the
principles of conflicts of law.

     SECTION 16. Benefits of this Agreement. Except as otherwise expressly set
forth in this Agreement, nothing in this Agreement will be construed to give to
any individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust or
association (each a "Person") other than the Company and the Holder any legal or
equitable right, remedy or claim under this Agreement; but this Agreement will
be for the sole and exclusive benefit of the Company and the Holder.

     SECTION 17. Certain Interpretive Matters. Unless the context otherwise
requires: (a) words in the singular include plural and in the plural include the
singular; (b) "or" is disjunctive but not exclusive; (c) "including" means
"including, without limitation"; (d) masculine pronouns include the feminine
pronouns and feminine pronouns include the masculine pronouns; (e) the term
"day' will mean calendar day; and (f) all references herein to Sections,
Exhibits or Schedules are references to Sections of or Exhibits or Schedules to
this Agreement, unless otherwise specified.

     SECTION 18. Counterparts. This Agreement may be executed in two
counterparts, each of which shall for all purposes be deemed to be an original
and all such counterparts will together constitute but one and the same
instrument.

     IN WITNESS WHEREOF, the parties hereto have caused the Warrant Agreement to
be duly executed as of the day and year first above written.

                                FRISBY TECHNOLOGIES, INC.

                                By:
                                   -----------------------------------------
                                         Gregory S. Frisby
                                         Chairman and Chief Executive Officer

                                       7
<PAGE>   8
Schedule

Schedule 1        Notices

Exhibits

Exhibit A         Form of Warrant Certificate
Exhibit B         Form of Election to Purchase
Exhibit C         Form of Assignment

<PAGE>   9

Schedule 1

Notices

                  (a)      if to Buyer, at:

                           ---------------------------
                           ---------------------------
                           ---------------------------

                           and

                  (b)      if to the Company, at:

                           Frisby Technologies, Inc.
                           3195 Centre Park Boulevard
                           Winston-Salem, North Carolina 27107
                           Facsimile No.: (336) 784-8682
                           Attention:  John Ruggiero, Chief Financial Officer

                           with a copy to:

                           Womble Carlyle Sandridge & Rice, PLLC
                           200 West Second Street
                           Winston-Salem, North Carolina 27101
                           Facsimile No.: (336) 733-8371
                           Attention: Jeffrey C. Howland and Peter A. Zorn

<PAGE>   10

EXHIBIT A

                           FORM OF WARRANT CERTIFICATE

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A WARRANT
AGREEMENT EXECUTED AND EFFECTIVE JULY 16, 2001 BETWEEN THE ISSUER OF SUCH
SECURITIES AND THE BUYER REFERRED TO THEREIN. A COPY OF THE WARRANT AGREEMENT
WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON
WRITTEN REQUEST.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS
THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL, OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.

No.  W-__                                           [___________ Shares]

                            FRISBY TECHNOLOGIES, INC.

     The Warrant Certificate certifies that ____________, or his or its
registered assigns, is the registered holder of a warrant (the "Warrant") to
purchase the number of shares of common stock, par value $.001 per share (the
"Company Common Stock"), of Frisby Technologies, Inc., a Delaware corporation
(the "Company"), set forth above ("Warrant Shares") at the initial exercise
price (the "Exercise Price") equal to $6.00 per Warrant Share, payable in lawful
money of the United States of America, upon surrender of the Warrant Certificate
and payment of the Exercise Price at the office of the Company designated for
such purpose, but only subject to the conditions set forth herein and in the
Warrant Agreement referred to hereinafter. The Exercise Price and number of
Warrant Shares issuable upon exercise of the Warrant are subject to adjustment
upon the occurrence of certain events, as set forth in the Warrant Agreement.
The Warrant is exercisable at any time prior to the Expiration Date (as defined
in the Warrant Agreement).
<PAGE>   11

     The Warrant evidenced by this Warrant Certificate is issued pursuant to a
Warrant Agreement executed and effective as of July 16, 2001 (the "Warrant
Agreement") duly executed and delivered by the Company, which Warrant Agreement
is hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrant. A copy of the Warrant Agreement may be obtained by the
holder hereof upon written request to the Company. Capitalized terms used and
not defined herein shall have the meaning ascribed thereto in the Warrant
Agreement. In the event of any conflict or inconsistency between the terms of
the Warrant Certificate and the Warrant Agreement, the Warrant Agreement will
govern.

     The holder of the Warrant evidenced by the Warrant Certificate may exercise
such Warrant under and pursuant to the terms and conditions of the Warrant
Agreement by surrendering the Warrant Certificate, with the form of election to
purchase set forth hereon (and by this reference made a part hereof) properly
completed and executed, together with payment of the Exercise Price in cash by
wire transfer in immediately available funds. In the event that the number of
Warrant Shares for which the Warrant is exercised is less than the maximum
number of Warrant Shares for which the Warrant is exercisable, the Company will
issue to the holder hereof (or, if permitted, its registered assignee) a new
Warrant Certificate evidencing the remaining Warrant Shares.

     The Warrant Agreement provides that upon the occurrence of certain events
the number of Warrant Shares issuable upon exercise of the Warrant and the
Exercise Price may, subject to certain conditions, be adjusted.

     Warrant Certificates, when surrendered at the office of the Company by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrant Shares.

     Subject to the terms and conditions of the Warrant Agreement, upon due
presentation for registration of transfer of the Warrant Certificate at the
office of the Company a new Warrant Certificate or Warrant Certificates of like
tenor and evidencing in the aggregate a like number of Warrant Shares will be
issued to the transferee(s) in exchange for the Warrant Certificate, subject to
the limitations provided in the Warrant Agreement, without charge except for any
tax or other governmental charge imposed in connection therewith.

     The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of the Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company will not be affected by any notice to the contrary.
Neither the Warrant nor the Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.

                  [remainder of page intentionally left blank]

<PAGE>   12

     IN WITNESS WHEREOF, Frisby Technologies, Inc. has caused the Warrant
Certificate to be signed by its Chairman of the Board, President or Vice
President and by its Secretary or Assistant Secretary and has caused its
corporate seal to be affixed hereunto or imprinted hereon.

Executed and Effective: July 16, 2001

                                       FRISBY TECHNOLOGIES, INC.

                                       By:
                                          -------------------------
                                           Gregory S. Frisby
                                           Chairman and Chief Executive Officer

                    [Signature Page for Warrant Certificate]

<PAGE>   13

EXHIBIT B

                          FORM OF ELECTION TO PURCHASE

                    (To Be Executed Upon Exercise of Warrant)

     The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate, to receive shares of Company Common
Stock and herewith tenders payment for such shares to the order of the Company
in the amount of $__________ in accordance with the terms hereof.

     The undersigned requests that a certificate for such shares be registered
in the name of ______________ whose address is _____________ and that such
shares be delivered to, whose address is _______________.

     If said number of shares is less than all of the shares of Company Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of ___________, whose address is _____________, and that such Warrant
Certificate be delivered to _______________, whose address is ________________.

     Capitalized terms used but not defined herein will have the respective
meanings ascribed to them in the Warrant Agreement to which this Form of
Election to Purchase is attached.

                                  Signature(s):
                                               -------------------------

                                   NOTE: The above signature(s) must correspond
                                         with the name written upon the face of
                                         the Warrant Certificate in every
                                         particular, without alteration or
                                         enlargement or any change whatever. If
                                         the Warrant is held of record by two or
                                         more joint owners, all such owners must
                                         sign.

Date:
      ---------------------

<PAGE>   14

EXHIBIT C

                               FORM OF ASSIGNMENT

           (To be signed only upon assignment of Warrant Certificate)

     FOR VALUE RECEIVED, hereby sells, assigns and transfers unto
___________________ whose address is and whose social security number or other
identifying number is , the within Warrant Certificate, together with all right,
title and interest therein and to the Warrant represented thereby, and does
hereby irrevocably constitute and appoint , attorney, to transfer said Warrant
Certificate on the books of the ______________________________
within-named Company, with full power of substitution in the premises.

                                  Signature(s):
                                               -------------------------

                                   NOTE: The above signature(s) must correspond
                                         with the name written upon the face of
                                         the Warrant Certificate in every
                                         particular, without alteration or
                                         enlargement or any change whatever. If
                                         the Warrant is held of record by two or
                                         more joint owners, all such owners must
                                         sign.

Date:
      ---------------------

Agreed:

FRISBY TECHNOLOGIES, INC.

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

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