Document:

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

                            FRISBY TECHNOLOGIES, INC.
                             STOCK PURCHASE WARRANT

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

         1.       Issuance of Warrant; Term; Price.

                  1.1      Issuance. The Company hereby grants to Holder the
right to purchase 347,222 shares of the Company's common stock, par value $.001
("Common Stock"). The shares of Common Stock issuable upon exercise of this
Warrant are hereinafter referred to as the "Shares."

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

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

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

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

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

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

                  When any adjustment is required to be made in the Purchase
Price, the number of Shares purchasable upon the exercise of this Warrant
(inclusive of any Shares theretofore purchased upon exercise of this Warrant)
shall be changed to the number determined by dividing $500,000 by the Purchase
Price in effect immediately after such adjustment as determined pursuant to this
Section 2.1; provided that in no event shall the number of Shares purchasable
upon the exercise of this Warrant exceed 19.9% of the outstanding shares of
Common Stock on the effective date of such Warrant, as adjusted, if at all
pursuant to Section 2.4.

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

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

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

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

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

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

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

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

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

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

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

         7.       Net Issue Election.

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

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

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

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

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

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

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

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

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

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

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

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

         15.      Investment Representations.

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

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

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

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

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

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

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

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

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

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

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

Accepted and Agreed:

BLUWAT AG
Bundesstrasse 7
CH - 6304 Zug
SWITZERLAND

By: /s/ Margreth Schuler
   ------------------------------
        Margreth Schuler
        Director

                                       8<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                  This REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as
of January 23, 2002 is made by and between FRISBY TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), and BLUWAT AG, a corporation organized under the
laws of Switzerland (the "Lender").

                                 R E C I T A L S

                  A.       The Company and the Lender have entered into that
certain Loan Agreement, with an effective date of January 10, 2002 (the "Loan
Agreement") for the loan by the Lender to the Company of $500,000, evidenced by
the Promissory Note with an effective date of January 10, 2002 (the "Note").

                  B.       In addition to the Note, the Company issued a Stock
Purchase Warrant with an effective date of January 10, 2002 to Lender
("Warrant") for the right to acquire an aggregate of 347,222 of the shares of
the Company's Common Stock.

                  C.       In connection with the Loan Agreement and the
Warrant, the Company has agreed to grant certain registration rights to the
Lender.

                  THE PARTIES AGREE AS FOLLOWS:

1.       Certain Definitions.

                  As used in this Agreement, the following terms shall have the
following respective meanings:

                  (a)      "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.

                  (b)      "Common Stock" shall mean the common stock, $0.001
par value per share, of the Company.

                  (c)      "Form" shall mean any Form issued by the Commission
for the Registration of Securities.

                  (d)      "Holder" shall mean any holder of outstanding
Registrable Securities which have not been sold to the public.

                  (e)      "Register," "Registered" and "Registration" shall
refer to a registration effected by preparing and filing a registration
statement ("Registration Statement") in compliance with the Securities Act and
the declaration or ordering of the effectiveness of such Registration Statement.

                  (f)      "Registrable Securities" shall mean (i) Common Stock
not previously sold to the public, or been subject to an effective Registration
which is issued,
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or issuable, upon exercise of the Warrant issued to the Lender, and (ii) any
securities of the Company granted registration rights pursuant to Section 7
hereof.

                  (g)      "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Section 2 of this Agreement,
including, without limitation, all federal and state registration, qualification
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration but shall not include Selling
Expenses or fees and disbursements of counsel for the Holders.

                  (h)      "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.

                  (i)      "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities pursuant to this Agreement.

                  (j)      "Underwriter's Representative" shall mean the
representative of the underwriter or underwriters selected by the Company for
the underwriting of its Common Stock.

2.       Piggyback Registration.

         2.1.     Notice of Piggyback Registration and Inclusion of Registrable
                  Securities.

                  Subject to the terms of this Agreement, in the event the
Company decides to Register any of its Common Stock (either for its own account
or the account of a security holder or holders), on a form that would be
suitable for a registration involving Registrable Securities (but not in
connection with a registration affected solely to implement an employee stock
option or other employee benefit plan or a transaction to which Rule 145 or any
other similar rule of the Commission under the Securities Act is applicable),
the Company will: (i) promptly give each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable Blue Sky or other state
securities laws), and (ii) include in such Registration (and any related
qualification under Blue Sky laws or other compliance) and in any underwriting
involved therein, all the Registrable Securities specified in a written request
delivered to the Company by any Holder within twenty days after such written
notice is sent by the Company.

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<PAGE>

         2.2.     Underwriting in Piggyback Registration.

                  2.2.1.   Notice of Underwriting in Piggyback Registration.

                  If the Registration of which the Company gives notice is for a
Registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
2.1. In such event the right of any Holder to Registration shall be conditioned
upon the Holder's acceptance of the terms and restrictions imposed by the lead
underwriter such underwriting and the inclusion of such Holder's Registrable
Securities in such underwriting to the extent provided in this Section 2. All
Holders proposing to distribute their securities through such underwriting,
together with the Company and the other holders distributing their securities
through such underwriting, shall enter into an underwriting agreement with the
Underwriter's Representative for such offering. The Holders shall have no right
to participate in the selection of the underwriters for an offering pursuant to
this Section 2.

                  2.2.2.   Marketing Limitation in Piggyback Registration.

                  In the event the Underwriter's Representative advises the
Holders seeking registration of Registrable Securities pursuant to Section 2 in
writing that market factors (including, without limitation, the aggregate number
of shares of Common Stock requested to be Registered, the general condition of
the market and the status of the persons proposing to sell securities pursuant
to the Registration) require a limitation of the number of shares to be
underwritten, the Underwriter's Representative (subject to the allocation
priority set forth in Section 2.2.3) may exclude some or all Registrable
Securities from such registration and underwriting.

                  2.2.3.   Allocation of Shares in Piggyback Registration.

                  In the event that the Underwriter's Representative limits the
number of shares to be included in a Registration pursuant to Section 2.2.2, the
number of shares to be included in such Registration shall be allocated (subject
to Section 2.2.2) in the following manner: The shares (other than Registrable
Securities) held by officers or directors of the Company shall be excluded from
such Registration and underwriting to the extent required by such limitation. If
a limitation of the number of shares is still required after such exclusion, the
number of shares that may be included in the Registration and underwriting by
selling shareholders shall be allocated among all other Holders thereof and
other holders of securities other than Registrable Securities requesting and
legally entitled to include shares in such Registration, in proportion, as
nearly as practicable, to the respective amounts of securities (including
Registrable Securities) which such Holders and such other holders have otherwise
requested be included in such Registration. No Registrable Securities or other
securities excluded from the underwriting by reason of this Section 2.2.3 shall
be included in the Registration Statement.

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<PAGE>

                  2.2.4.   Withdrawal in Piggyback Registration.

                  If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter delivered at least seven (7) days prior to the
effective date of the Registration Statement. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such Registration.

         2.3.     Blue Sky in Piggyback Registration.

                  In the event of any Registration of Registrable Securities
pursuant to Section 2, the Company will exercise its best efforts to Register
and qualify the securities covered by the Registration Statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
appropriate for the distribution of such securities; provided, however, that (i)
the Company shall not be required to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions and (ii)
notwithstanding anything in this Agreement to the contrary, in the event any
jurisdiction in which the securities shall be qualified imposes a non-waivable
requirement that expenses incurred in connection with the qualification of the
securities be borne by selling shareholders, such expenses shall be payable pro
rata by selling shareholders.

3.       Expenses of Registration.

                  All Registration Expenses incurred in connection with up to
two (2) Registrations pursuant to Section 2 shall be borne by the Company. All
Selling Expenses shall be borne by the Holders of the securities registered pro
rata on the basis of the number of shares registered.

4.       Registration Procedures.

                  The Company will keep each Holder whose Registrable Securities
are included in any Registration pursuant to this Agreement advised as to the
initiation and completion of such Registration. At its expense the Company will:
(a) use its best efforts to keep such Registration effective for a period of one
hundred twenty (120) days or until the Holder or Holders have completed the
distribution described in the Registration Statement relating thereto, whichever
first occurs and (b) furnish such number of prospectuses (including preliminary
prospectuses) and other documents as a Holder from time to time may reasonably
request.

5.      Indemnification.

         5.1.     Company's Indemnification of Holders.

                  To the extent permitted by law, the Company will indemnify
each Holder, each of its officers, directors and constituent partners, legal
counsel for the Holders, and

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<PAGE>

each person controlling such Holder, with respect to which Registration,
qualification or compliance of Registrable Securities has been effected pursuant
to this Agreement, and each underwriter, if any, and each person who controls
any underwriter against all claims, losses, damages or liabilities (or actions
in respect thereof) to the extent such claims, losses, damages or liabilities
arise out of or are based upon any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus or other document
(including any related Registration Statement) incident to any such
Registration, qualification or compliance, or are based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such Registration, qualification or compliance;
and the Company will reimburse each such Holder, each such underwriter and each
person who controls any such Holder or underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; provided, however, that the
indemnity contained in this Section 5.1 shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if settlement is
effected without the consent of the Company (which consent shall not
unreasonably be withheld); and provided, further, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based upon any untrue statement or
omission based upon written information furnished to the Company by such Holder,
underwriter, or controlling person and stated to be for use in connection with
the offering of securities of the Company.

         5.2.     Holder's Indemnification of Company.

                  To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such Registration, qualification or compliance is being effected pursuant
to this Agreement, indemnify the Company, each of its directors and officers,
each legal counsel and independent accountant of the Company, each underwriter,
if any, of the Company's securities covered by the Registration Statement, each
person who controls the Company or such underwriter within the meaning of the
Securities Act, and each other such Holder, each of its officers, directors and
constituent partners and each person controlling such other Holder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any such Registration Statement, prospectus or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by such Holder of any rule or regulation
promulgated under the Securities Act applicable to such Holder and relating to
action or inaction required of such Holder in connection with any such
Registration, qualification or compliance; and will reimburse the Company, such
Holders, such directors, officers, partners, persons, law and accounting firms,

                                       5
<PAGE>

underwriters or control persons for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement, prospectus or other document
in reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use in connection with
the offering of securities of the Company; provided, however, that each Holder's
liability under this Section 5.2 shall not exceed such Holder's proceeds from
the offering of securities made in connection with such Registration.

         5.3.     Indemnification Procedure.

                  Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 5, notify the indemnifying party in writing of the
commencement thereof and generally summarize such action. The indemnifying party
shall have the right to participate in and to assume the defense of such claim;
provided, however, that the indemnifying party shall be entitled to select
counsel for the defense of such claim with the approval of any parties entitled
to indemnification, which approval shall not be unreasonably withheld; provided
further, however, that if either party reasonably determines that there may be a
conflict between the position of the Company and the Investors in conducting the
defense of such action, suit or proceeding by reason of recognized claims for
indemnity under this Section 5, then counsel for such party shall be entitled to
conduct the defense to the extent reasonably determined by such counsel to be
necessary to protect the interest of such party. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability of the indemnifying party to defend such action,
shall relieve such indemnifying party, to the extent so prejudiced, of any
liability to the indemnified party under this Section 5, but the omission so to
notify the indemnifying party will not relieve such party of any liability that
such party may have to any indemnified party otherwise other than under this
Section 5.

6.       Market Stand-off.

                  Each Holder hereby agrees that, if so requested by the Company
and the Underwriter's Representative (if any), such Holder shall not sell or
otherwise transfer any Registrable Securities or other securities of the Company
during the one hundred eighty (180) day period following the effective date of a
Registration Statement of the Company filed under the Securities Act in
connection with a subsequent underwritten public offering in which such Holder
is a selling shareholder.

7.       Limitations on Registration Rights Granted to Other Securities.

                  Additional holders may be added as parties to this Agreement
with regard to any or all securities of the Company held by them. Any such
additional parties shall

                                       6
<PAGE>

execute a counterpart of this Agreement, and upon execution by such additional
parties and by the Company, shall be considered a Holder for all purposes of
this Agreement.

8.       Transfer of Rights.

                  The right to cause the Company to register securities granted
by the Company to the Holders under this Agreement may be assigned by any Holder
to a transferee or assignee of any Registrable Securities of a Holder not sold
to the public.

9.       Miscellaneous.

         9.1.     Entire Agreement; Successors and Assigns.

                  This Agreement constitutes the entire contract between the
Company and the Holders relative to the subject matters hereof. Any previous
agreement between the Company and the Holders insofar as any such agreement
concerns Registration rights is superseded by this Agreement. Subject to the
exceptions specifically set forth in this Agreement, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors and assigns of the parties.

         9.2.     Governing Law.

                  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of North Carolina applicable to
contracts made and to be performed in such State without giving effect to the
conflicts of laws rules of such state.

         9.3.     Counterparts.

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

         9.4.     Headings.

                  The headings of the Sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.

         9.5.     Notices.

                  Any notice required or permitted hereunder shall be given in
writing and shall be conclusively deemed effectively given upon personal
delivery, or three days after deposit in the United States mail, by registered
or certified mail, postage prepaid, addressed (i) if to the Company, at 3195
Centre Park Boulevard, Winston-Salem, North Carolina 27107, (ii) if to the
Lender at Bundesstrasse 7, CH - 6304 Zug, SWITZERLAND, or at such other address
as the Company or the Lender may designate by ten (10) days' advance written
notice to the Company and the Lender, respectively.

                                       7
<PAGE>

         9.6.     Amendment of Agreement.

                  Any provision of this Agreement may be amended only by a
written instrument signed by the parties hereto.

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

                                       8
<PAGE>

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

                                    FRISBY TECHNOLOGIES, INC.

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

                                    BLUWAT AG

                                    By: /s/ Margreth Schuler
                                        ----------------------------
                                    Name:  Margreth Schuler
                                           -------------------------
                                    Title: Director
                                           -------------------------

                                       9

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