<PAGE>


                        WARRANT TO PURCHASE COMMON STOCK
                              (CONVERSION WARRANTS)

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT FOR DISTRIBUTION,  AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD,  PLEDGED, OR
OTHERWISE  TRANSFERRED WITHOUT AN EFFECTIVE  REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY  SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH  REGISTRATION  IS NOT  REQUIRED.  THIS WARRANT
MUST  BE  SURRENDERED  TO THE  COMPANY  OR ITS  TRANSFER  AGENT  AS A  CONDITION
PRECEDENT TO THE SALE,  PLEDGE OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT
OR THE SHARES ISSUABLE HEREUNDER.

Issuer:  Integrated Performance Systems Inc.
Class of Stock: Common Stock
Issue Date: October ___, 2003
Expiration Date: October ___, 2006


         THIS WARRANT TO PURCHASE  COMMON STOCK is being issued pursuant to that
certain Securities Purchase Agreement dated as of the date hereof (the "Purchase
Agreement") between Integrated  Performance Systems Inc., a New York corporation
(the "Company") and La Jolla Cove Investors, Inc. ("Holder").

         1.1 Warrants. The Company hereby grants to Holder the right to purchase
1,666,666  shares of the  Company's  Common  Stock  (the  "Shares"  or  "Warrant
Shares").  For  avoidance of doubt,  this Warrant may be exercised  concurrently
with or subsequent to the issuance of a Conversion  Notice under the  Debenture.
The date that the Holder  issues a  Conversion  Notice  under the  Debenture  is
hereafter referred to as the "Conversion Date." Defined terms not defined herein
shall  have the  meanings  ascribed  to them in the  Debenture  or the  Purchase
Agreement.  Holder agrees that, beginning in the first full calendar month after
the Registration Statement is declared effective,

Holder will exercise at least 5%, but no more than 10% (such 10% maximum  amount
to be  cumulative  from the  Deadline),  of the  Warrants  per  calendar  month,
provided that the Common Shares are available,  registered and freely  tradable.
The 10% monthly  maximum  amount shall not be applicable  if the Current  Market
Price of the Common Stock at anytime during the applicable  month is higher than
the Current  Market Price of the Common Stock on the Closing  Date. In the event
Holder breaches this provision, Holder shall not be entitled to collect interest
on the Debenture for that month.

This Warrant shall expire and Holder shall no longer be able to purchase the
Warrant Shares on October ___, 2006.


                                       1
<PAGE>


                                    ARTICLE 2

                                    EXERCISE

         2.1 Method of Exercise.  Holder may exercise this Warrant by delivering
a duly executed Warrant Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company, along with a check payable to
the Company for the aggregate Exercise Price for the Shares being purchased.

         2.2 Delivery of Certificate and New Warrant. As promptly as practicable
after the receipt of the Warrant  Notice of Exercise,  but in any event not more
than three (3) Business Days after the Company's  receipt of the Warrant  Notice
of  Exercise,  the  Company  shall  issue the  Shares and cause to be mailed for
delivery by  overnight  courier,  or if a  Registration  Statement  covering the
Shares  has  been  declared  effective  by the SEC  cause  to be  electronically
transferred,  to Holder a certificate  representing  the Shares acquired and, if
this Warrant has not been fully  exercised  and has not  expired,  a new Warrant
substantially in the form of this Warrant  representing the right to acquire the
portion of the Shares not so acquired.

         2.3  Replacement  of  Warrants.   On  receipt  of  evidence  reasonably
satisfactory  to the Company of the loss,  theft,  destruction  or mutilation of
this Warrant and, in the case of loss,  theft or destruction,  on delivery of an
indemnity  agreement  reasonably  satisfactory in form and amount to the Company
or, in the case of mutilation,  or surrender and  cancellation  of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new  warrant of like tenor.  2.4  Exercise  Price.  The  Exercise  Price of this
Warrant shall be $1.50.

                                   ARTICLE 3

                            ADJUSTMENT TO THE SHARES

         The number of Shares  purchasable upon the exercise of this Warrant and
the  Exercise  Price shall be subject to  adjustment  form time to time upon the
occurrence of certain events, as follows:

         3.1  Reclassification.  In case of any  reclassification of outstanding
securities of the class  issuable upon exercise of this Warrant then, and in any
such  case,  the  Holder,  upon  the  exercise  hereof  at any  time  after  the
consummation of such reclassification or change, shall be entitled to receive in
lieu of each Share theretofore  issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities,  money and/or property received
upon such reclassification or change by a holder of one Share. The provisions of
this Section 2.1 shall similarly apply to successive reclassifications.

         3.2  Subdivision or  Combination of Shares.  If the Company at any time
while this Warrant remains  outstanding and unexpired shall subdivide or combine
its Shares, the Exercise Price shall be proportionately decreased in the case of
a subdivision or increased in the case of a combination.


                                       2
<PAGE>

         3.3 Stock Dividends.  If the Company, at any time while this Warrant is
outstanding  shall pay a dividend with respect to its Shares  payable in Shares,
or make any other  distribution  of Shares  with  respect to Shares  (except any
distribution  specifically  provided  for in Section 2.1 and Section 2.2 above),
then the Exercise Price shall be adjusted,  effective from and after the date of
determination   of   shareholders   entitled  to  received   such   dividend  or
distribution,  to that price  determined by  multiplying  the Exercise  Price in
effect  immediately  prior to such date of determination by a fraction,  (a) the
numerator of which shall be the total number of Shares  outstanding  immediately
prior to such dividend or  distribution,  and (b) the denominator of which shall
be the total number of Shares  outstanding  immediately  after such  dividend or
distribution.

         3.4 Non-Cash  Dividends.  If the Company at any time while this Warrant
is outstanding shall pay a dividend with respect to Shares payable in securities
other than Shares or other non-cash property,  or make any other distribution of
such  securities  or property  with respect to Shares  (except any  distribution
specifically  provided  for in Section 2.1 and  Section  2.2  above),  then this
Warrant shall  represent the right to acquire upon exercise of this Warrant such
securities  or  property  which a holder of Shares  would have been  entitled to
receive upon such dividend or distribution, without the payment by the Holder of
any additional consideration for such securities or property.

         3.5 Effect of Reorganization and Asset Sales. If any (i) reorganization
or  reclassification  of the Common  Stock (ii)  consolidation  or merger of the
Company with or into another corporation,  or (iii) sale or all or substantially
all of the  Company's  operating  assets to another  corporation  followed  by a
liquidation  of the  Company  (any  such  transaction  shall  be  followed  by a
liquidation of the Company (any such transaction  shall be referred to herein as
an "Event",  is effected in such a way that holders of Common Stock are entitled
to receive securities and/or assets as a result of their Common Stock ownership,
the Holder,  upon  exercise of this  Warrant,  shall be entitled to receive such
shares of stock securities or assets which the Holder would have received had it
fully  exercised  this  Warrant on or prior the record date for such Event.  The
Company shall not merge into or consolidate with another corporation or sell all
of its assets to another corporation for a consideration consisting primarily of
securities or such corporation,  unless the successor or acquiring  corporation,
as the case may be, shall expressly  assume the due and punctual  observance and
performance  of each and every  covenant  and  condition  of this  Warrant to be
performed or observed by the Company and all of the  obligations and liabilities
hereunder,  subject to such  modification  as shall be  necessary to provide for
adjustments   which  shall  be  as  nearly  equivalent  as  practicable  to  the
adjustments  provided  for in this  Section 2. The  foregoing  provisions  shall
similarly apply to successive  mergers,  consolidations or sales of assets.

         3.6  Adjustment  of  Number of  Shares.  Upon  each  adjustment  in the
Exercise  Price,  the number of Shares shall be adjusted,  to the nearest  whole
share, to the product obtained by multiplying the number of Shares,  purchasable
immediately  prior to such  adjustment and the denominator of which shall be the
Exercise Price immediately thereafter.


                                       3
<PAGE>

         3.7 No Impairment.  The Company shall not, by amendment of its articles
of incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the  observance or  performance of any of the terms to be
observed or performed under this Warrant by the Company,  but shall at all times
in good faith assist in carrying out all of the  provisions  of this Warrant and
in taking all such  action as may be  reasonably  necessary  or  appropriate  to
protect Holder's rights hereunder against  impairment.  If the Company takes any
action  affecting its Common Stock other than as described  above that adversely
affects Holder's rights under this Warrant, the Exercise Price shall be adjusted
downward and the number of Shares  issuable  upon exercise of this Warrant shall
be adjusted  upward in such a manner that the aggregate  Exercise  Price of this
Warrant is unchanged.

         3.8 Fractional  Shares. No fractional Shares shall be issuable upon the
exercise of this Warrant, and the number of Shares to be issued shall be rounded
down to the nearest whole Share.

         3.9 Certificate as to Adjustments.  Upon any adjustment of the Exercise
Price,  the Company,  at its expense,  shall compute such adjustment and furnish
Holder with a  certificate  of its Chief  Financial  Officer  setting forth such
adjustment and the facts upon which such adjustment is based. The Company shall,
upon written  request,  furnish Holder a certificate  setting forth the Exercise
Price in effect upon the date thereof and the series of  adjustments  leading to
such  Exercise  Price.

         3.10 No Rights of Shareholders. This Warrant does not entitle Holder to
any voting rights or any other rights as a  shareholder  of the Company prior to
the exercise of Holder's right to purchase Shares as provided herein.

                                   ARTICLE 4

                  REPRESENTATIONS AND COVENANTS OF THE COMPANY

         4.1 Representations  and Warranties.  The Company hereby represents and
warrants to Holder that all Shares  which may be issued upon the exercise of the
purchase  right  represented  by this Warrant,  shall,  upon  issuance,  be duly
authorized,  validly issued, fully paid and nonasessable,  and free of any liens
and encumbrances.

         4.2 Notice of Certain Events.  If the company  proposes at any time (a)
to declare any dividend or distribution upon its Common Stock,  whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for  subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other fights;
(c) to effect any  reclassification  or recapitalization of Common Stock; (d) to
merge  or  consolidate  with or into any  other  corporation,  or  sell,  lease,
license,  or convey all or  substantially  all of its assets,  or to  liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten  public  offering of the Company's  securities
for cash,  then,  in  connection  with each such event,  the Company  shall give
Holder (1) at least 20 days prior  written  notice of the date on which a record
will be taken for such  dividend,  distribution,  or  subscription  rights  (and
specifying  the date on which the  holders  of  Common  Stock  will be  entitled
thereto) or for  determining  rights to vote,  if any, in respect of the matters
referred to in (c) and (d) above;  (2) in the case of the matters referred to in
(c) and (d)  above at least 20 days  prior  written  notice of the date when the
same will take place  (and  specifying  the date on which the  holders of Common
Stock will be entitled to exchange  their Common Stock for  securities  or other
property  deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above,  the same notice as is given to the holders
of such  registration  rights.


                                       4
<PAGE>


         4.3 Information Rights. So long as Holder holds this Warrant and/or any
of the Shares,  the company shall deliver to Holder (a) promptly  after mailing,
copies of all notices or other written communications to the shareholders of the
Company,  (b) within ninety (90) days of their availability,  the annual audited
financial  statements of the Company certified by independent public accountants
of recognized  standing,  and (c) within  forty-five  (45) days after the end of
each fiscal  quarter or each fiscal year,  the  Company's  quarterly,  unaudited
financial statements.

         4.4  Reservation of Warrant  Shares.  The Company has reserved and will
keep available,  out of the authorized and unissued shares of Common Stock,  the
full number of shares  sufficient  to provide for the  exercise of the rights of
purchase represented by this Warrant.

         4.5 Registration Rights. If Holder exercises this Warrant and purchases
some or all of the Shares,  Holder shall have the Registration  Rights set forth
in that certain Registration Rights Agreement executed concurrently therewith.

                                   ARTICLE 5

                   REPRESENTATIONS AND COVENANTS OF THE HOLDER

         5.1 Private Issue. Holder understands (i) that the Shares issuable upon
exercise of Holder's  rights  contained in the Warrant are not registered  under
the Act or qualified under  applicable  state securities laws on the ground that
the issuance  contemplated  by the Warrant will be exempt from the  registration
and qualifications requirements thereof, and (ii) that the Company's reliance on
such  exemption  is  predicated  on Holder's  representations  set forth in this
Article 4.

         5.2  Financial  Risk.  Holder  has such  knowledge  and  experience  in
financial  and business  matters as to be capable of  evaluating  the merits and
risks of its  investment  and has the ability to bear the economic  risks of its
investment.

         5.3 Risk of No  Registration.  Holder  understands  that if the Company
does not  register  with the  Securities  and  Exchange  Commission  pursuant to
Section  12 of the Act,  or file  reports  pursuant  to  Section  15(d),  of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the  securities  under the Act is not in effect when it desires to sell
(i) the right to purchase  Shares  pursuant to the  Warrant,  or (ii) the Shares
issuable upon exercise of the right to purchase, it may be required to hold such
securities for an indefinite period.


                                       5
<PAGE>

         5.4 Accredited  Investor.  Holder is an "accredited  investor," as such
term is defined in Regulation D promulgated pursuant to the Act.

                                   ARTICLE 6

                                  MISCELLANEOUS

         6.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from  time to time on or after  the  Conversion  Date and on or  before  the
Expiration  Date  set  forth  above.

         6.2 Compliance with  Securities Laws on Transfer.  This Warrant may not
be  transferred  or  assigned  in  whole  or in  part  without  compliance  with
applicable  federal  and  state  securities  laws  by  the  transferor  and  the
transferee   (including,   without   limitation,   the  delivery  of  investment
representation  letters  and  legal  opinions  reasonably  satisfactory  to  the
Company, as reasonably requested by the Company).  The Company shall not require
Holder to provide an opinion of counsel if the  transfer is to an  affiliate  of
Holder.

         6.3 Transfer Procedure. Holder shall have the right without the consent
of the Company to  transfer  or assign in whole or in part this  Warrant and the
Shares  issuable upon exercise of this Warrant.  Holder agrees that unless there
is in effect a  registration  statement  under  the Act  covering  the  proposed
transfer of all or part of this Warrant, prior to any such proposed transfer the
Holder shall give written notice  thereof to the Company (a "Transfer  Notice").
Each Transfer Notice shall describe the manner and circumstances of the proposed
transfer  in  reasonable  detail  and,  if the  company  so  requests,  shall be
accompanied by an opinion of legal counsel, in a form reasonably satisfactory to
the Company,  to the effect that the proposed  transfer may be effected  without
registration  under the Act; provided that the Company will not require opinions
of counsel for  transactions  involving  transfers to  affiliates or pursuant to
Rule 144  promulgated by the Securities and Exchange  Commission  under the act,
except in unusual circumstances.

         6.4  Notices,  etc.  All notices and other  communications  required or
permitted  hereunder shall be in writing and shall be delivered  personally,  or
sent by  telecopier  machine or by a  nationally  recognized  overnight  courier
service,  and  shall  be  deemed  given  when  so  delivered  personally,  or by
telecopier machine or overnight courier service as follows:

         if  to the Company, to:

         Integrated Performance Systems Inc.
         17300 North Dallas Parkway, Suite 2040
         Dallas, Texas 75248
         Telephone:        972-381-1212
         Facsimile:        972-381-1211

         if to the Holder, to:

         La Jolla Cove Investors, Inc.
         7817 Herschel Avenue, Suite 200
         La Jolla, CA 92037
         Telephone:        858-551-8789
         Facsimile:        858-551-0987


                                       6
<PAGE>

or at such other address as the Company shall have furnished to the Holder. Each
such notice or other  communication  shall for all purposes of this agreement be
treated  as  effective  or  having  been  given  when   delivered  if  delivered
personally,  or, if sent by mail,  at the  earlier  of its  receipt or five days
after the same has been deposited in a regularly  maintained  receptacle for the
deposit of the United States mail, addressed and mailed as aforesaid.

         6.5  Counterparts.  This  agreement  may be  executed  in any number of
counterparts,  each of which shall be enforceable  against the parties  actually
executing such  counterparts,  and all of which  together  shall  constitute one
instrument. Facsimile execution shall be deemed originals.

         6.6 Waiver.  This  Warrant and any term hereof may be changed,  waived,
discharged  or terminated  only by an instrument in writing  signed by the party
against which  enforcement of such change,  waiver,  discharge or termination is
sought.

         6.7  Attorneys  Fees.  In the event of any dispute  between the parties
concerning  the terms and  provisions of this Warrant,  the party  prevailing in
such  dispute  shall be  entitled  to  collect  from the  other  party all costs
incurred in such dispute, including reasonable attorneys fees.

         6.8 Governing Law; Jurisdiction.  This Warrant shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to its principles  regarding conflicts of law. Each of the parties hereto
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of San  Diego or the state  courts  of the State of  California
sitting in the City of San Diego in  connection  with any dispute  arising under
this  Warrant and hereby  waives,  to the maximum  extent  permitted by law, any
objection including any objection based on forum non conveniens, to the bringing
of any such proceeding in such jurisdictions.

         IN WITNESS WHEREOF, the parties hereto have duly caused this Warrant to
Purchase  Common  Stock to be  executed  and  delivered  on the date first above
written.



Integrated Performance Systems Inc.         La Jolla Cove Investors, Inc.

By: ___________________________             By: __________________________


Title: __________________________           Title: _________________________




                                       7
<PAGE>





                                                             APPENDIX 1

                                                     WARRANT NOTICE OF EXERCISE

         1. The undersigned hereby elects to purchase _____ shares of the Common
Stock of  Integrated  Performance  Systems  Inc.  pursuant  to the  terms of the
Warrant to Purchase Common Stock issued by Integrated  Performance  Systems Inc.
on October ___, 2003 and tenders  herewith payment of the purchase price of such
shares in full.

         2. Please issue a certificate or certificates  representing said shares
in the name of the undersigned or in such other name as is specified below:



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

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

                              ---------------------
                               (Name and Address)

         3. The undersigned makes the representations and covenants set forth in
Article 4 of the Warrant to Purchase Common Stock.



--------------------------------
(Signature)


---------------------------
(Date)



                                       8