Document:

Exhibit 10.2 

CAPITAL BANK
SUPPLEMENTAL RETIREMENT PLAN FOR DIRECTORS 

	Capital Bank 
Supplemental Retirement Plan for Directors

	TABLE OF CONTENTS

	Section 		Page 
	 
	PURPOSE	 	1 
	 
	ARTICLE I	DEFINITIONS
	 
	             1.01.	Accrued Benefit	2 
	 
	             1.02.	Adoption Agreement	2 
	 
	             1.03.	Affiliate	2 
	 
	             1.04.	Board	2 
	 
	             1.05.	Cause	2 
	 
	             1.06.	Change in Control	2 
	 
	             1.07.	Code	3 
	 
	             1.08.	Control Change Date	3 
	 
	             1.09.	Designated Beneficiary	3 
	 
	             1.10.	Eligible Board Member	4 
	 
	             1.11.	Employer	4 
	 
	             1.12.	Participant	4 
	 
	             1.13.	Plan	4 
	 
	             1.14.	Year of Service	4 
	 
	ARTICLE II	PARTICIPATION
	 
	ARTICLE III	BENEFITS
	 
	             3.01.	Retirement Benefit	6 
	 
	             3.02.	Death Benefits	6 
	 
	             3.03.	Forms of Distribution	7 
	 
	             3.04.	Disability	8 
	 
	ARTICLE IV	VESTING
	 
	ARTICLE V	TERMINATION, AMENDMENT OR MODIFICATION OF PLAN
	 
	             5.01.	Right to Terminate or Amend	10 
	 
	             5.02.	Notice	10 
	 
	             5.03.	Manner of Giving Notice	10 
	 
	             5.04.	Discharge of Obligation	10 
	 
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	Capital Bank 
Supplemental Retirement Plan for Directors

	 	 	 
	ARTICLE VI	OTHER BENEFITS AND AGREEMENTS
	 
	ARTICLE VII	EFFECT OF IRC SECTION 4999
	 
	ARTICLE VIII	RESTRICTIONS ON TRANSFER OF BENEFITS
	 
	ARTICLE IX	ADMINISTRATION OF THE PLAN
	 
	             9.01.	Plan Administration	14 
	 
	             9.02.	Reports and Records	14 
	 
	             9.03.	Claims	14 
	 
	             9.04.	Indemnification	14 
	 
	ARTICLE X	GENERAL
	 
	            10.01.	Funding	16 
	 
	           10.02.	Plan Binding	16 
	 
	           10.03.	Interpretation of Plan	16 
	 
	           10.04.	Construction	17 
	 
	           10.05.	Actuarial Equivalence	17 
	 
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Capital Bank
Supplemental Retirement Plan for Directors 

PURPOSE 

        The purpose of the Plan is to provide valuable retirement and other benefits to board members who are selected to participate in the Plan and who satisfy the requirements prescribed by the Plan and Adoption Agreement for the receipt of those benefits. 

        This Plan will only be for those Directors shown in Section 3 of the Adoption Agreement and no additional Directors may be added to this Plan. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE I
DEFINITIONS 

1.01.  Accrued Benefit 

        Accrued Benefit is defined in the Adoption Agreement. 

1.02.  Adoption Agreement 

        Adoption Agreement means the agreement entered into by the Employer evidencing adoption of the Plan and selection of key Plan terms and conditions and is incorporated by reference herein. 

1.03.  Affiliate 

        Affiliate means any entity that is a member of a controlled group of Employers, as defined in Code section 414(b) or a group of trades or businesses under common control, as defined in Code section 414(c), of which the Employer is a member according to Code section 414(b) or Code section 414(c), and which has, with the approval of the Board, adopted the Plan by action of its board. 

1.04.  Board 

        Board means the Board of Directors of Capital Bank Corporation or any successor corporation or bank. Service on an advisory board of any Employer or Affiliate shall not constitute Board service for purpose of this Plan. 

1.05.  Cause 

        Unless otherwise defined in the Adoption Agreement, Cause means fraud or dishonesty involving the assets of the Employer or an Affiliate or the conviction of, or pleading guilty or nolo contendre to, a felony or embezzlement from the Employer or an Affiliate. 

1.06.  Change in Control 

        For purposes of this Plan, the term “Change in Control” shall mean any of the following: 

(i)     Any “person” (as such term is used in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Act”)) acquiring “beneficial ownership” (as such term is used in Rule 13d-3 under the Act), directly or indirectly, of securities of the Capital Bank Corporation (“the Corporation”), the parent holding company of Capital Bank (the “Bank”), representing more than fifty percent (50%) of the total fair market value or total voting power of the Corporation’s then outstanding voting securities (the “Voting Power”), but excluding for this purpose an acquisition by the Corporation or by an employee benefit plan (or related trust) of the Corporation. 

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Supplemental Retirement Plan for Directors 

(ii)     The shareholders of the Corporation approve a reorganization, share exchange, merger or consolidation related to the Corporation following which the owners of the Voting Power of the Corporation immediately prior to the closing of such transaction do not beneficially own, directly or indirectly, more than forty percent (40%) of the Voting Power of the Corporation. 

(iii)     A majority of the Corporation’s Board is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Corporation’s Board prior to the date of such appointment or election. 

(iv)     The shareholders of the Corporation approve a complete liquidation or dissolution of the Corporation, or a sale or other disposition of all or greater than 60% of the assets of the Corporation. 

In no event, however, will a “Change in Control” include a transaction, or series of transactions, whereby the Corporation or the Bank becomes a subsidiary of a holding company if the shareholders of the holding company are substantially the same as the shareholders of the Corporation prior to such transaction or series of transactions. 

1.07.  Code 

        Code means the Internal Revenue Code of 1986, as amended. 

1.08.  Control Change Date 

        Control Change Date means the date on which a Change in Control occurs. If a Change in Control occurs as a result of a series of transactions, the Control Change Date is the date of the last of such transactions. 

1.09.  Designated Beneficiary 

        Designated Beneficiary means the person, persons, entity, entities or the estate of a Participant which is designated by the Participant or beneficiary to receive any benefits that may become payable under the Plan as a result of a Participant’s death. If there is no Designated Beneficiary for any reason then the Participant’s Designated Beneficiary shall be the Participant’s surviving spouse, (i.e., the person to whom the Participant was legally married on the date of the Participant’s death) and if there is no surviving spouse then the Designated Beneficiary shall be the Participant’s children, per stirpes, and, if none, the Designated Beneficiary shall be the Participant’s estate. 

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Capital Bank
Supplemental Retirement Plan for Directors 

1.10.  Eligible Board Member 

        Eligible Board Member means an individual who is a member of The Board as of the date of the adoption of the Plan and not an active employee of the Employer, except for William Gilliam who has been expressly designated as an Eligible Board Member despite being an active employee. Only individuals listed in Item 3 of the Adoption Agreement are eligible to participate in the Plan. 

1.11.  Employer 

        Employer means Capital Bank, Capital Bank Corporation and any successor employer that sponsors this Plan. 

1.12.  Participant 

        Participant means an Eligible Board Member who is designated to participate in the Plan in accordance with Article II or a former Eligible Board Member who has accrued a vested benefit under the Plan. Names of all Participants shall be listed in item 3 of the Adoption Agreement and no additional Participants will be eligible to participate in this Plan. 

1.13.  Plan 

        Plan means this Supplemental Retirement Plan for Directors, together with the Adoption Agreement as completed by the Employer. 

1.14.  Year of Service 

        Year of Service is defined in the Adoption Agreement. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE II
PARTICIPATION 

        An Eligible Board Member shall become a Participant in the Plan effective as of the date he is designated a Participant by the Board. Whether a benefit is payable under the Plan to or on behalf of a Participant whose board service with the Employer and its Affiliates has terminated shall be determined under the remaining provisions of the Plan. An individual who is entitled to receive a benefit under the Plan following termination of board service shall continue to be a Participant until that benefit has been paid in full, either to the Participant or the Designated Beneficiary. An individual who is not entitled to receive a benefit under the Plan following termination of board service shall cease to be a Participant on the date that board service with the Employer and its Affiliates terminates or is terminated. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE III
BENEFITS 

        Subject to the limitations set forth in Articles IV and V, the benefits of a Participant and his Designated Beneficiary shall be as follows: 

3.01.  Retirement Benefit 

        A Participant shall be entitled to the benefit described in this Section 3.01 if the Participant’s Board service with the Employer and its Affiliates ends for a reason other than the Participant’s death or Disability. A Participant described in the preceding sentence shall be entitled to receive his or her Accrued Benefit as defined in the Adoption Agreement. The payment of the benefit described in this Section 3.01 shall commence on the first day of the year after the Participant’s termination of board service with the Employer and its Affiliates after attaining the age of 72 unless there has been a Change in Control. In such cases, payments shall be made in one annual payment within the first 31 days of each calendar year for which the Participant is entitled to a Benefit. 

        In the event of a Change of Control, all benefits will be payable in a lump sum and present valued to the payment date as soon as administratively possible after the Control Change Date. The present value will be calculated assuming a stream of ten annual payments equal to the Participant’s Accrued Benefit commencing on the Control Change Date and utilize a discount rate equal to a ten year constant maturity treasury security. 

3.02.  Death Benefits 

        In the event a Participant’s Board service terminates due to a Participant’s death or in the event a Participant dies before all of the Retirement Benefits to be provided to the Participant under Section 3.01 are paid out, the Participant’s Accrued Benefit shall be paid out to the Participant’s Designated Beneficiary as Death Benefits in accordance with this Section 3.02: 

    (a)            If
a Participant dies while a Director of the Employer or an Affiliate, the Designated
Beneficiary of a Participant shall be entitled to receive the Participant’s Accrued
Benefit. The benefit payable under this Section 3.02(a) shall commence on the first day
of the year coincident with or next following the Participant’s death. The
Designated Beneficiary shall have the right to designate in writing a beneficiary to
receive any benefits remaining to be paid under this Section 3.02(a) upon the death of
the Designated Beneficiary. If no such designation has been made (or any such successor
designated beneficiary fails to survive the Designated Beneficiary or is not in existence
on the date of the death of the Designated Beneficiary), any remaining benefits payable
under this Section 3.02(a) shall be paid to the Designated Beneficiary’s estate.  

    (b)            In
the event a Participant dies (i) after termination of Board service with the Employer and
its Affiliates, and (ii) after the commencement of payment of Accrued Benefits to 

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Supplemental Retirement Plan for Directors 

 the
Participant in accordance with Section 3.01 but (iii) before the payment of all Accrued
Benefits due the Participant under the Plan, such payments shall continue to the
Designated Beneficiary until fully distributed. The Designated Beneficiary shall have the
right to designate in writing a successor beneficiary to receive any benefits remaining
to be paid under this Section 3.02(b) upon the death of the Designated Beneficiary. If no
such designation has been made (or any such designated beneficiary fails to survive the
Designated Beneficiary or is not in existence on the date of the death of the Designated
Beneficiary), any remaining Accrued Benefits payable under this Section 3.02(b) shall be
paid to the Designated Beneficiary’s estate.  

    (c)            This
Section 3.02(c) applies if a Participant dies (i) after termination of board service with
the Employer and its Affiliates, and (ii) before the payment of benefits due the
Participant has commenced. The Designated Beneficiary of a Participant described in the
preceding sentence shall be entitled to receive the Participant’s Accrued Benefit.
The benefit payable under this Section 3.02(c) shall be paid in a lump sum during the
first month of the year following the date of the Participant’s death. The
Designated Beneficiary shall have the right to designate in writing a successor
beneficiary to receive any benefits remaining to be paid under this Section 3.02(c) upon
the death of the Designated Beneficiary. If no such designation has been made (or any
such designated beneficiary fails to survive the Designated Beneficiary or is not in
existence on the date of the death of the Designated Beneficiary), any remaining benefits
payable under this Section 3.02(c) shall be paid to the Designated Beneficiary’s
estate.  

3.03.  Forms of Distribution 

        A Participant who is entitled to a benefit under Section 3.01 and a Designated Beneficiary who is entitled to a benefit under Section 3.02(a) or Section 3.02 (b) shall receive an annual cash payment within the first 31 days of each calendar year for which the Participant or Designated Beneficiary is entitled to a Benefit, unless otherwise specified in the Plan. 

        Lump sum payments made pursuant to Section 3.02(c) shall be present valued to the payment date assuming a stream of annual payments equal to the Annual Benefits and a discount rate equal to a ten year constant maturity treasury security. 

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Capital Bank
Supplemental Retirement Plan for Directors 

3.04.  Disability 

        A Participant that suffers a Disability while serving as a Director of the Employer and its Affiliates or after leaving service as a Director but prior to commencement of distribution of Accrued Benefits under the Plan pursuant to Section 3.01 shall be entitled to all vested Accrued Benefits vested under the Plan as of the time of Disability. Distribution of such Accrued Benefits shall begin the first calendar year following the date the Director becomes permanently disabled and be paid in annual installments equal to the number of Years of Service accrued by the Participant under the Plan prior to becoming disabled. Any Participant who suffers a Disability after commencement of Accrued Benefits under the Plan shall continue to receive such Accrued Benefits on the same schedule as before the Disability. For purposes of this Plan, the term “Disability” shall mean any physical or mental
impairment which, in the opinion of the Board, constitutes a “disability” as such term is defined
in Section 409A of the Code and the regulations thereunder. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE IV 
VESTING  

4.01.  Vesting 

        A Participant’s right to a Year of Service credit for benefit purposes under the Plan shall fully vest upon completion of each Year of Service, except subject to the Forfeiture provisions below. 

4.02.  Forfeiture 

        Notwithstanding the above, the Participant and his or her Beneficiary shall forfeit all then-unpaid Benefits under the Plan upon the occurrence of any of the following events: (i) without the Employer’s prior written consent, the Participant becomes within one (1) year following termination of service as a director with Employer or its Affiliates, a senior officer, director, or ten percent (10%) or more shareholder, directly or indirectly, of a for-profit enterprise engaged in the business of banking within thirty (30) miles of the Participant’s principal business office or primary residence any time within the three years prior to the termination of Participant’s service as a director with Employer; (ii) the Participant makes any materially disparaging public disclosures about the Employer following the termination of his or her service with the Employer; (iii) if the Board determines
that the Participant’s separation from service as a director by Employer and its Affiliates is based on Cause; or (iv) without the Employer’s prior written consent, the Participant uses any of the Employer’s proprietary information for business gain following his or her termination of service as a Director with the Employer. The provisions of this Section shall not be applicable in the event of a Change in Control. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE V 
TERMINATION, AMENDMENT OR MODIFICATION OF PLAN  

5.01.  Right to Terminate or Amend 

        Except as otherwise specifically provided, the Employer reserves prior to a Change in Control the right to terminate, amend or modify this Plan, wholly or partially, at any time and from time to time to the extent allowed under Code Section 409A. Without the written consent of a Participant or, following the Participant’s death, his Designated Beneficiary, any such termination, amendment or change may not adversely affect the benefits paid or obligations to any Participant who died or otherwise terminated Board service before the termination, amendment, or change. Such right to terminate, amend or modify the Plan shall be exercised by the Board. 

        In the event of termination of the Plan all vested service credit and Accrued Benefits under the Plan shall remain payable to the Participants in accordance with Article III. Participants will not be entitled to any future accrual of additional Benefits or Years of Service credit after the date the Plan is terminated or to accelerate distributions as a result of the Plan termination. 

5.02.  Notice 

        Section 5.01 notwithstanding, no action to terminate the Plan shall be taken except upon thirty (30) days’ written notice to each Participant affected thereby. 

5.03.  Manner of Giving Notice 

        Notices and elections under this Plan must be in writing. A notice or election is deemed delivered if it is delivered personally or if it is mailed by registered or certified mail to the person or business at his or its last known address. 

5.04.  Discharge of Obligation 

        Except as provided in Section 5.01 above, upon the termination of this Plan by the Board, the Plan shall no longer be of any further force or effect and neither the Employer nor any Participant shall have any further obligation or right under this Plan. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE VI
OTHER BENEFITS AND AGREEMENTS  

        The benefits provided for a Participant and his Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program of the Employer or a participating Affiliate for its employees, and, except as may otherwise be expressly provided for, the Plan shall supplement and shall not supersede, modify or amend any other plan or program of the Employer or a participating Affiliate in which a Participant is participating. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE VII
 EFFECT OF IRC SECTION 4999  

        If an amount payable under this Plan, alone or together with any other compensation or benefit a Participant has received or may receive, would result in the Participant’s being subject to an excise tax under Section 4999 of the Code, the amount payable hereunder may be reduced if so provided in the Adoption Agreement. Such reduction, if any, shall be made only on those terms (and in those circumstances) set forth in the Adoption Agreement. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE VIII
 RESTRICTIONS ON TRANSFER OF BENEFITS  

        No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefit. If any Participant or Designated Beneficiary under the Plan should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right to a benefit hereunder, then such right or benefit, in the discretion of the Board, shall cease and terminate, and, in such event, the Board may hold or apply the same or any part thereof for the benefit of such Participant or Designated Beneficiary, his or her spouse, children, or other dependents, or any of them, in such manner and in such portion as the Board may deem proper. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE IX 
ADMINISTRATION OF THE PLAN  

9.01.   Plan Administration 

    (a)            The
Plan shall be administered by the Board or the Compensation Committee of the Board (“Committee”)
if the Board so designates. In the event the Board does not designate the Committee to
administer the Plan, all remaining references in this Article IX pertaining to Committee
will refer instead to the Board. Subject to the provisions of the Plan, the Committee may
adopt such rules and regulations as may be necessary to carry out the purposes hereof.
The Committee’s interpretation and construction of any provision of the Plan shall
be final and conclusive.  

    (b)            In
addition to the powers hereinabove specified, the Committee shall have the power to
compute and certify the amount and kind of benefits from time to time payable to
Participants and Beneficiaries under the Plan, and to authorize all disbursements for
such purposes.  

    (c)            Except
as otherwise expressly provided in the Plan, the Board (or the Committee, as appropriate)
shall have complete control of the administration of the Plan, with all powers necessary
to enable it to carry out its duties in that respect. Not in limitation, but in
amplification of the foregoing, the Board or Committee, as appropriate, shall have the
power in its sole discretion, to interpret or construe the Plan and to determine all
questions that may arise hereunder as to the status and rights of Participants and others
hereunder. Further, any review of discretionary actions and determinations of such Board
or Committee shall be limited to an arbitrary and capricious standard of review.  

9.02.  Reports and Records 

        To enable the Committee to perform its functions, the Employer and any participating Affiliate shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their retirement, death or other cause for termination of board service, and such other pertinent facts as the Committee may require. 

9.03.  Claims 

        The benefit claims review procedure set forth in the Capital Bank Corporation 401(k) Plan, as amended from time to time, is incorporated herein by reference and made applicable to the Plan. 

9.04.  Indemnification 

        The Employer shall indemnify
and save harmless each member of the Board against any and all expenses and liabilities arising out of membership
on the Board and relating to 

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Supplemental Retirement Plan for Directors 

administration of the Plan, excepting only expenses and liabilities arising out of a member’s own
 willful misconduct. Expenses against which a member of the Board shall be indemnified hereunder shall include, without limitation,
the amount of any settlement or judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim
asserted, or a proceeding brought or settlement thereof. The foregoing right of indemnification shall be in addition to any other
rights to which any such member may be entitled. 

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Capital Bank
Supplemental Retirement Plan for Directors 

ARTICLE X
GENERAL  

10.01.  Funding 

    (a)            All
Plan Participants and Designated Beneficiaries are general unsecured creditors of the
Employer with respect to the benefits due hereunder and the Plan constitutes a mere
promise by the Employer to make benefit payments in the future. It is the intention of
the Employer that the Plan be considered unfunded for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended.  

    (b)            The
Employer may purchase life insurance in amounts sufficient to secure the benefits
provided under this Plan. Participants agree to use their best efforts to qualify for
life insurance coverage if the Employer so elects to obtain life insurance coverage on a
Participant as a means of funding Accrued Benefits.  

    (c)            The
Employer may, but is not required to, establish a grantor trust which may be used to hold
assets of the Employer which are maintained as reserves against the Employer’s
unfunded, unsecured obligations hereunder. Such reserves shall at all times be subject to
the claims of the Employer’s creditors and the creditors of any Affiliate that is an
employer of a Participant. To the extent such trust or other vehicle is established, the
Employer’s obligations hereunder shall be reduced to the extent such assets are
utilized to meet its obligations hereunder. Any such trust and the assets held thereunder
are intended to conform in substance to the terms of the model trust described in Revenue
Procedure 92-64, 1992-33 IRB 11 (8-17-92). Any trust that satisfies the foregoing
requirements must be in effect as of a Control Change Date and the Employer, no later
than thirty (30) days after a Control Change Date, shall transfer to the trust assets
(either money, insurance policies or other property) in an amount that is not less than
the actuarially equivalent value of all obligations that are owed or projected to be owed
to all Participants and Designated Beneficiaries on and after the Control Change Date.
For purposes of the preceding sentence, the value on any given date of insurance policies
held in or transferred to the trust shall be equal to the unencumbered cash surrender
value of the policies.  

10.02.  Plan Binding 

        The Plan shall be binding upon the Employer, any participating Affiliate and successors and assigns, and, subject to the powers set forth in Article V, upon a Participant’s, his Designated Beneficiary’s, or any of their assigns, heirs, executors and administrators. 

10.03.  Interpretation of Plan 

        To the extent not preempted by federal law, the Plan shall be governed and construed under the laws of State indicated in the Adoption Agreement (other than its choice of law rules) as in effect from time to time. 

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Capital Bank
Supplemental Retirement Plan for Directors 

10.04.  Construction 

        Masculine pronouns wherever used shall include feminine pronouns and the use of the singular shall include the plural. 

10.05.  Actuarial Equivalence 

        For purposes of the Plan, the terms “actuarial equivalence,” “actuarially equivalent” and variations thereof mean that on the date of calculation two forms of payment have equal values as determined by an independent actuarial consulting firm selected by the Employer. Such actuarial consulting firm shall determine actuarial equivalence using the interest rate for an immediate annuity published by the Pension Benefit Guaranty Corporation and in effect on the date of calculation. 

17EXHIBIT 10.1

                     COMPROMISE AND SETTLEMENT AGREEMENT

      This Compromise and Settlement  Agreement (the "Settlement  Agreement")
 is entered  into this  26th day  of  May, 2005,  by and  between  Integrated
 Performance Systems, Inc., a  New York corporation  (the "Company"), and  La
 Jolla Cove Investors, Inc., a California corporation  ("La Jolla").  Each of
 the Company and La Jolla are sometimes  referred to herein as a "Party",  or
 collectively as the "Parties".

                                   RECITALS

      WHEREAS, the  Company  and  La Jolla  entered  into  (i)  that  certain
 Securities Purchase  Agreement, dated  on or  about  October 24,  2003  (the
 "Purchase Agreement"), and (ii) that certain Registration Rights  Agreement,
 dated on or  about October 24,  2003 (the "Rights  Agreement," and  together
 with the Purchase Agreement, the "Agreements");

      WHEREAS, the Company,  upon the terms  and conditions  of the  Purchase
 Agreement, issued  and sold  to La  Jolla (i)  that certain  8%  Convertible
 Debenture, dated on or  about October 24, 2003  (the "Debenture"), and  (ii)
 that certain Warrant to Purchase Common Stock, dated on or about October 24,
 2003 (the "Warrant");

      WHEREAS,  bona  fide  disputes   and  controversies  relating  to   the
 Agreements, the Debenture and the Warrant exist between the Parties;

      WHEREAS,  the  Company  and  La  Jolla  desire  to  (i)  terminate  the
 Agreements, (ii) provide for the conversion, satisfaction and accord of  the
 Debenture, and (iii) cancel the Warrant; and

      WHEREAS, La Jolla desires to release and forever discharge any and  all
 claims or causes of action  that it may have  against the Company and  other
 parties, as provided herein; and

      WHEREAS, the Company desires to release  and forever discharge any  and
 all claims or causes of action that it  may have against La Jolla and  other
 parties, as provided herein.

                                  AGREEMENT

      NOW THEREFORE, in consideration  of the foregoing,  and other good  and
 valuable consideration,  the  receipt and  legal  sufficiency of  which  are
 hereby expressly acknowledged, the Parties hereby agree as follows:

      1.   Settlement.    Subject  to  the  terms  and  conditions  of   this
 Agreement, in full and  final settlement of the  Claims (defined below),  if
 any, that either Party and its  Related Persons (defined below) had,  has or
 hereafter can, shall  or may have  against the other Party  and  its Related
 Persons, (i) the Parties have entered  into the mutual release set forth  in
 Section 2 below and  (ii) the Company  has herewith paid  and granted  to La
 Jolla and  La  Jolla  has  accepted the  following  from  the  Company:  (A)
 US$200,000.00 (the  "Cash"), (B)  2,400,000  unregistered shares  of  common
 stock of the Company, par value $0.01 (the "Shares") which are being  issued
 to La Jolla in full conversion and satisfaction of the Debenture and (C) the
 Registration Rights (defined below, and collectively  with the Cash and  the
 Shares,  the "Settlement  Payment").  Simultaneously with  the  execution of
 this Settlement Agreement,  La Jolla will  (i)  deliver to  the Company  its
 election to convert  the Debenture into  the Shares and  (ii)  surrender the
 original Warrant and Debenture to the Company for cancellation.

      2.   Mutual  Release.  La Jolla,  on  behalf  of  itself  and  each  of
 its  Related  Persons,  hereby unconditionally,  irrevocably and completely,
 fully  and  forever, releases  and  discharges the Company  and  its Related
 Persons from  any  and  all claims, rights, demands, contracts, obligations,
 liabilities, suits, actions,  and  causes of action,  at law  or at  equity,
 known or unknown, liquidated or unliquidated, asserted or unasserted, direct
 or derivative, or of any other nature, related to, based on or arising  from
 any fact existing at any time from the beginning of the world  (collectively
 "Claims"), which La Jolla or any of its Related Persons may now or hereafter
 have against the Company or any of its Related Persons that are related  to,
 based on or arise from the Agreements, the Debenture, the Warrant, any other
 securities of the Company, any disclosures made by the Company prior  to the
 date hereof that are subject to the Securities Act of 1933, as amended  (the
 "Securities  Act")  or  the  Securities  Exchange  Act  of 1934, as amended,
 or  any  other  dealings with the Company prior to the date hereof.  Without
 limiting the generality of the foregoing,  La Jolla hereby waives, releases,
 discharges and terminates the Agreements, the Debenture and the Warrant.

      The Company,  on behalf  of itself  and each  of its  Related  Persons,
 hereby unconditionally,  irrevocably  and  completely,  fully  and  forever,
 releases and discharges La  Jolla and its Related  Persons from any and  all
 Claims which the Company or any of its Related Persons may now or  hereafter
 have against La Jolla  or any of  its Related Persons  that are related  to,
 based on or  arise from the  Agreements, the Debenture,  the Warrant or  any
 other dealings with La Jolla prior to the date hereof.  Without limiting the
 generality of the foregoing, the Company hereby waives, releases, discharges
 and terminates the Agreements, the Debenture and the Warrant.

      Notwithstanding the foregoing,  the two previous  paragraphs shall  not
 affect the  rights of  the Parties  expressly  provided in  this  Settlement
 Agreement.

      As  used  herein,  "Related  Persons"  means  a  person's  or  entity's
 past, present or future successors,  assigns,  agents,  attorneys, trustees,
 representatives, employees,  officers, directors,  affiliates or  associates
 (as such  terms  are  defined  in  Rule  405  promulgated  pursuant  to  the
 Securities Act) and in  the case of any  natural person, shall also  include
 his or her spouse, heirs, executors and administrators.

      3.   Representations, Warranties and Covenants  of  La Jolla.  La Jolla
 hereby represents, warrants and covenants to the Company as follows:

           3.1  Authority.  La Jolla has all requisite power and authority to
 enter into this Settlement  Agreement.  This  Settlement Agreement has  been
 duly and  validly  authorized,  executed  and  delivered  by  La  Jolla  and
 constitutes a legal, valid and binding  obligation of La Jolla,  enforceable
 against La Jolla in accordance with its terms.  La Jolla owns all beneficial
 and record title and  interest in and to  the Agreements, the Debenture  and
 the  Warrant.  La Jolla has  made no sale,  assignment, conveyance,  pledge,
 grant of a security  interest in, encumbrance or  other transfer of (i)  the
 Agreements, the Debenture or the Warrant or any of its rights or obligations
 thereunder or (ii) any Claims that relate to, are based on or arise from the
 Agreements, the Debenture or the Warrant.

           3.2  No Conflict.  Neither the execution, delivery, or performance
 of this  Settlement  Agreement, nor  the  consummation of  the  transactions
 contemplated  hereby,  will  result  in  any  violation  of  the  terms  of,
 contravene or  conflict  with  or constitute  a  default  under  La  Jolla's
 articles of incorporation or bylaws (or similar organizational documents) or
 any instrument, judgment, order, writ, decree, agreement, statute, law, rule
 or regulation applicable to La Jolla, or to which it is a party or by  which
 it or its property or assets are bound.

           3.3  Shares  Acquired  Entirely  for  Own  Account.  La  Jolla  is
 acquiring the Shares for investment purposes  for its own account, not  as a
 nominee or agent, and not with a view  to the resale or distribution of  any
 part thereof, and La Jolla has no present intention of selling, granting any
 participation in, or  otherwise distributing the  same.  La  Jolla 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  party
 with respect to any of the Shares.

           3.4  Reliance  upon   La   Jolla's  Representations.    La   Jolla
 understands that the Shares are not  registered under the Securities Act  on
 the ground  that  the  issuance  of the  Shares  hereunder  is  exempt  from
 registration under the Securities Act pursuant to Section 4(2) thereof,  and
 that the Company's reliance  on such exemption is  predicated on La  Jolla's
 representations set forth herein.

           3.5    Disclosure of Information.   La Jolla  has received all the
 information  it  considers  necessary  or  appropriate for deciding  whether
 to receive the Shares.  La Jolla has had an opportunity to ask questions and
 receive answers from the Company regarding  the terms and conditions of  the
 issuance of the Shares and the Company's condition (financial or otherwise),
 assets, liabilities,  results  of  operations, cash  flows,  properties,  or
 business as presently conducted  or proposed to be  conducted 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 La Jolla or to which  La
 Jolla had  access.   Furthermore, La  Jolla acknowledges  that on  or  about
 November  24,  2004  the  Company's  wholly  owned  subsidiary,  LSC  Merger
 Corporation, a Texas corporation, merged with and into Best Circuit  Boards,
 Inc., d/b/a Lone Star Circuits Inc., a Texas corporation ("LSC") in a change
 of control transaction (the "Merger") and  that, in the Merger, the  Company
 was treated  as  having  been  acquired by  LSC.    Consequently,  La  Jolla
 acknowledges that it has  not relied on any  information in its decision  to
 acquire the  Shares, with  the exception  of the  information expressly  set
 forth in  (i)  the Company's  Form  8-K as  filed  with  the  Securities and
 Exchange Commission  (the "SEC")  on  or  about December 1, 2004,  (ii)  the
 Company's Form 8-K/A as filed with the SEC on or about February 7, 2005, and
 (iii) the Company's Form 10-QSB as filed with the SEC on or about April  27,
 2005, but excluding the exhibits to any  of the foregoing.  La Jolla  agrees
 and  acknowledges  that  any other information  relating  to the Company  or
 its condition (financial  or  otherwise),  assets,  liabilities,  results of
 operations, cash flows, properties or business  is not relevant or  material
 and has not  been taken into  consideration or relied  upon by  La Jolla  in
 connection with its  decision to enter  into this  Settlement Agreement,  to
 acquire the Shares or to otherwise consummate the transactions  contemplated
 hereby.

           3.6   Investment Experience;  Economic Risk.  La Jolla understands
 that  an  investment   in  the  Company   involves   substantial  risks.  La
 Jolla  is  experienced  in evaluating  and  investing  in private  placement
 transactions of securities  of companies similarly  situated to the  Company
 and acknowledges that La  Jolla is able to  fend  for itself.  La Jolla  has
 such knowledge and experience in financial  and business matters that it  is
 capable of evaluating the merits and risks of the investment in the  Shares.
 La Jolla can bear the economic risk  of its investment and is able,  without
 impairing its  financial condition,  to hold  the Shares  for an  indefinite
 period of time and to suffer a complete loss of its investment.

           3.7   Accredited Investor.  La Jolla is an  "accredited  investor"
 as defined in  Rule 501(a)  of Regulation D promulgated under the Securities
 Act.

           3.8   Residence.   The  state of La  Jolla's  principal  place  of
 business California.

           3.9   Restricted  Securities.    La  Jolla  understands  that  the
 Shares are  characterized  as  "restricted  securities"  under  the  federal
 securities laws inasmuch as  they are being acquired  from the Company in  a
 transaction not  involving a  public offering  and that  under such  federal
 securities laws and applicable regulations such Shares may be resold without
 registration under the Securities Act only in certain limited circumstances.
 In this connection, La Jolla represents  that it is aware of the  provisions
 of Rule 144 promulgated under the Securities Act ("Rule 144") which  permits
 limited resale of securities purchased in a private placement subject to the
 satisfaction of  certain  conditions,  including, among  other  things,  the
 existence of a  public market for  the shares, the  availability of  certain
 current public information about the Company, the resale occurring not  less
 than one year after a party  has purchased and paid  for the security to  be
 sold, the  sale  being  effected through  a  "broker's  transaction"  or  in
 transactions directly with a "market maker"  and  the number of shares being
 sold  during  any  three-month period  not exceeding specified  limitations.
 La  Jolla   acknowledges  that  the  certificates  representing  the  Shares
 will  contain  legends  in  substantially  the form  set forth  below,  such
 legends containing  certain restrictions, including without  limitation  the
 requirement that the holder of the Shares provide to the Company an  opinion
 of counsel in connection with certain transfers of the Shares.

           3.10 No Pending or Future Lawsuits.  Neither  La Jolla nor any  of
 its Related Persons has any lawsuits, claims, or actions pending against the
 Company or any  of its Related  Persons.  La  Jolla does not  intend to  and
 covenants that it will not sue or bring any  claims on its own behalf or  on
 behalf of any  of its  Related Persons against  the Company  or its  Related
 Persons, except  for claims,  if necessary,  to enforce  the terms  of  this
 Settlement Agreement  or  any other  claims  arising from  events  occurring
 subsequent to execution of this Settlement Agreement.

           3.11  No   Other   Securities.   Except  for  the  Agreement,  the
 Debenture, the Warrant and this  Settlement Agreement, and rights  hereunder
 and thereunder, La Jolla has not owned and does not own any other securities
 of the  Company or  any options,  warrants or  other rights  to purchase  or
 acquire securities of the Company,  and has not held  and does not hold  any
 rights, derivatives,  positions  or  other  similar  rights  or  obligations
 relating to securities of the Company.

      4.   Representations and Warranties of the Company.  The Company hereby
 represents and warrants to La Jolla as follows:

           4.1  Authority.  The Company has all requisite power and authority
 to  enter  into  this  Settlement  Agreement.  This Settlement Agreement has
 been  duly and  validly authorized,  executed and delivered  by the  Company
 and constitutes  a  legal,  valid  and  binding  obligation of the  Company,
 enforceable against the Company in accordance with its terms.

           4.2  No Conflict.  Neither the execution, delivery, or performance
 of this  Settlement  Agreement, nor  the  consummation of  the  transactions
 contemplated  hereby,  will  result  in  any  violation  of  the  terms  of,
 contravene or  conflict with  or constitute  a default  under the  Company's
 certificate of incorporation or bylaws or any judgment, order, writ, decree,
 statute, law, rule or regulation applicable  to the Company, or to which  it
 is a party or by which it or its property or assets are bound, or under  any
 instrument or agreement listed as an exhibit to the Company's Form 10-QSB as
 filed with the SEC on or about April 27, 2005.

      5.   Registration  Rights.   In  accordance  with  Section  1  of  this
 Settlement Agreement, the Company  hereby grants to  La Jolla the  following
 registration rights (the "Registration Rights"):

           5.1  "Piggy  Back"  Registrations.  If  the  Company  proposes  to
 register for resale under the Securities Act shares of the Company's  common
 stock for  the account  of  a stockholder  (other  than (i)  a  registration
 relating solely to employee benefit or similar plans or (ii)  a registration
 that is part  of a  transaction subject to  Rule 145  promulgated under  the
 Securities Act), the  Company shall, at  such time, promptly  give  La Jolla
 written notice of such registration.  Upon the written request  of  La Jolla
 given within twenty (20) calendar days of the date such notice is given, the
 Company  shall,  subject  to  this  Settlement  Agreement,  include  in  the
 registration that the portion of the  Shares that La Jolla has requested  to
 be registered (the "Requested Shares").  The Company shall not be  obligated
 to effect, or  to take any  action to effect,  any registration pursuant  to
 this Section 5:

                (a)  for Shares that (i) have been previously registered  for
 resale under  the  Securities  Act,  whether  pursuant  to  this  Settlement
 Agreement or otherwise  or (ii) have  been sold or  transferred pursuant  to
 Rule 144;

                (b)  as a part  of any registration statement  pertaining  to
 a public offering of securities solely for the Company's account; or

                (c)  in any  particular  jurisdiction in  which  the  Company
 would be required to qualify to do business or to execute a general  consent
 to service  of  process in  effecting  such registration,  qualification  or
 compliance unless  the  Company  is  already  subject  to  service  in  such
 jurisdiction and except as may be required by the Securities Act.

           5.2  Underwritten  Offering.   If  the  registration  involves  an
 underwritten offering, the Company will so advise La Jolla.  In such  event,
 La Jolla  shall,  together with  the  Company, enter  into  an  underwriting
 agreement in customary form with the underwriter or underwriters selected by
 the Company  for such  underwriting.   If the  total amount  of  securities,
 including shares requested by La Jolla or other stockholders, to be included
 in such offering exceeds the amount of  securities to be sold other than  by
 the Company  that the  underwriters determine  in their  sole discretion  is
 compatible with the success of the  offering, then the Company shall not  be
 required to register securities in excess  of the amount that the  principal
 underwriter reasonably and in good faith recommends may be included in  such
 offering (a "Cutback").  If such  Cutback occurs, the number of shares  that
 are entitled to be  included in the registration  and underwriting shall  be
 allocated in  the  following manner:  (i)  first,  to the  Company  for  any
 securities it proposes to sell for its  own account, and (ii) second, to  La
 Jolla and the other  holders requesting inclusion  in the registration,  pro
 rata among La Jolla and the respective  holders thereof on the basis  of the
 number of shares  for which  La Jolla and  each such  requesting holder  has
 requested registration.

           5.3  Delay  of  Registration.  La Jolla  shall  have no  right  to
 obtain  or  seek  an  injunction  restraining  or  otherwise  delaying   any
 registration of Company securities as a result of any controversy that might
 arise with respect to such registration.

           5.4  Obligations of La Jolla.

                (a)  It shall  be  a  condition precedent  to  the  Company's
 obligations to take any  action pursuant to this  Section 5 with respect  to
 the Requested  Shares  that La  Jolla  shall  furnish to  the  Company  such
 information regarding  La  Jolla, the  Requested  Shares, and  the  intended
 method of disposition of such securities as shall be reasonably required  by
 the Company or the managing underwriters, if any, to effect the registration
 of such Requested Shares.  Without limiting the generality of the foregoing,
 La Jolla agrees to cooperate with the Company as reasonably requested by the
 Company in connection with  the preparation and  filing of any  registration
 statement covering the Shares.

                (b)  If, after  a registration  statement becomes  effective,
 the Company advises La Jolla that the registration statement is required  to
 be amended under applicable federal securities laws, La Jolla shall  suspend
 any further sales  of Shares  until the Company  advises La  Jolla that  the
 registration statements has been amended.

                (c)  The Company may delay the disclosure in any registration
 statement covering the Shares of material non-public information  concerning
 the Company (as well as prospectus  or registration statement updating)  the
 disclosure of which at  the time is not,  in the good  faith opinion  of the
 Company, in the  best interests of  the Company (an  "Allowed  Delay").  The
 Company shall promptly (i) notify  La Jolla in writing  of the existence  of
 (but in no event shall the Company be  required to disclose to La Jolla  any
 of the  facts or  circumstances regarding)  material non-public  information
 giving rise to an Allowed Delay and (ii) advise La Jolla in writing to cease
 all sales under  a registration  statement covering  the Shares.   La  Jolla
 agrees that, upon receipt of any notice from the Company of the existence of
 (i) material non-public information giving rise to an Allowed Delay or  (ii)
 any stop  order or  other suspension  of effectiveness  of any  registration
 statement  covering  the  Shares,  La  Jolla  will  immediately  discontinue
 disposition of Shares pursuant to  the registration statement covering  such
 Shares until La  Jolla's receipt of  copies of the  supplemented or  amended
 prospectus disclosing such material non-public information or the withdrawal
 of the stop order or other suspension, as the case may be.

           5.5  Transfer  or  Assignment   of  Registration   Rights.     The
 Registration Rights  may  be transferred  or  assigned, but  only  with  all
 related obligations, by La  Jolla to a transferee  or assignee who  acquires
 the Shares from La Jolla as restricted securities (as defined in Rule  144);
 provided, that (a) the Company is furnished with written notice stating  the
 name and  address  of  such  transferee  or  assignee  and  identifying  the
 securities  with  respect  to  which  such  registration  rights  are  being
 transferred or assigned, (b) such transferee  or assignee agrees in  writing
 to be  bound by  and subject  to all  of the  terms and  conditions of  this
 Settlement Agreement, and (c) such transfer or assignment shall be effective
 only if  immediately  following such  transfer  or assignment,  the  further
 disposition of such securities by the  transferee or assignee is  restricted
 under the Securities Act.

           5.6  "Market Stand-Off" Agreement.  La Jolla hereby  agrees  that,
 if requested by  the managing underwriter,  it will not,  without the  prior
 written consent of the Company, during the period commencing on the date  of
 the final prospectus relating to any registration of the Shares, and  ending
 on the date  specified by  the Company  and the  managing underwriter  (such
 period not  to exceed  one hundred  eighty  (180) calendar  days)  (i) lend,
 offer, pledge,  sell, contract  to  sell, sell  any  option or  contract  to
 purchase, purchase any option or contract  to sell, grant any option,  right
 or warrant to  purchase, or otherwise  transfer or dispose  of, directly  or
 indirectly, any  of  the  Shares  or  (ii) enter  into  any  swap  or  other
 arrangement that  transfers to  another, in  whole or  in part,  any of  the
 economic consequences of  ownership of  any of  the  Shares.  The  foregoing
 covenants shall not apply to the sale of any of the Shares by La Jolla to an
 underwriter pursuant  to  an  underwriting  agreement.  La Jolla  agrees  to
 execute an agreement(s) reflecting (i) and (ii) above as may be requested by
 the managing  underwriters at  the  time of  any  offering relating  to  the
 registration of the Shares, and further  agrees that the Company may  impose
 stop transfer instructions with its transfer  agent in order to enforce  the
 covenants in (i) and (ii) above.  Any discretionary waiver or termination of
 the restrictions of any or all such agreements by the Company shall apply to
 La Jolla pro  rata based  on the number  of shares  of stock  or options  to
 purchase shares of  stock held  by those subject  to  such  agreements.  The
 restrictions in this Section 5.6 shall not apply to transfers to  affiliates
 of La Jolla or purchases made in the open market following the completion of
 any offering  covered by  this  Section 5.6,  or,  to any  secondary  public
 offerings in which La Jolla  is not selling shares  of common stock for  its
 own account.

           5.7      Expenses  of  Registration.   All  expenses  (other  than
 underwriting  discounts  and  commissions)   incurred  in  connection   with
 registrations,  filings  or  qualifications  pursuant  to  this   Section 5,
 including without  limitation  all registration,  filing  and  qualification
 fees, printer's fees, accounting fees and fees and disbursements of  counsel
 for the Company and one counsel  for all selling stockholders (including  La
 Jolla) shall be borne by the Company.

      6.   Voluntary and Knowing Execution.  Each of the Parties acknowledges
 that (i) this Settlement Agreement  is made and executed  by and of its  own
 free will, (ii) it knows all of the relevant facts and rights in  connection
 therewith, (iii) it has  not been improperly influenced  or induced to  make
 this compromise and settlement as a result of any act or action on the  part
 of any Party or its Related Persons, and (iv) it has had the opportunity  to
 consult with counsel prior to entering into this Settlement Agreement.

      7.   Amendment.    This  Settlement  Agreement  represents  the  entire
 agreement between the Parties with respect to the subject matter hereof  and
 may be amended, or any provision  herein waived, only by a written  document
 signed by all the Parties.

      8.   Assignment;  Beneficiaries.  This  Settlement Agreement  shall  be
 binding upon  and  shall inure  to  the benefit  of  the Parties  and  their
 respective heirs (if applicable), successors and permitted  assigns.  Except
 as provided  in  Section 5.5  of  this Settlement  Agreement,  neither  this
 Settlement Agreement nor any  right hereunder may be  assigned by any  Party
 without the consent of the other Parties hereto.  Except as provided  herein
 with respect to Related Persons, no person other than the Parties hereto and
 their permitted  assigns  is  intended  to  be  a  third  party  beneficiary
 hereunder or have any right hereunder or with respect hereto.

      9.   Counterparts.   This  Settlement  Agreement  may  be  executed  in
 multiple counterparts, each of which shall  constitute an original, but  all
 of which together shall constitute one instrument.  A facsimile, telecopy or
 other reproduction of this  Settlement Agreement may be  executed by one  or
 more Parties hereto, and an executed  copy of this Settlement Agreement  may
 be delivered  by  one  or  more  Parties  hereto  by  facsimile  or  similar
 electronic transmission  device pursuant  to which  the signature  of or  on
 behalf  of such Party can be seen,  and  such execution  and  delivery shall
 be  considered  valid,  binding  and  effective  for  all  purposes.  At the
 request of any Party,  all Parties  hereto  agree  to  execute  an  original
 of  this Settlement  Agreement  as well  as any facsimile, telecopy or other
 reproduction hereof.

      10.  Legends.  The  share certificates evidencing  the Shares shall  be
 endorsed with legends in substantially the following form:

      THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED  AND
      SHALL BE HELD SUBJECT TO ALL THE PROVISIONS OF THE CERTIFICATE  OF
      INCORPORATION AND THE BYLAWS OF THE CORPORATION AND ANY AMENDMENTS
      THERETO, TO  ALL  OF  WHICH THE  HOLDER  OF  THIS  CERTIFICATE  BY
      ACCEPTANCE HEREOF,  ASSENTS.  A STATEMENT  OF ALL  OF THE  RIGHTS,
      PREFERENCES, PRIVILEGES  AND RESTRICTIONS  GRANTED TO  OR  IMPOSED
      UPON THE RESPECTIVE CLASSES  AND/OR SERIES OF  SHARES OF STOCK  OF
      THE CORPORATION AND UPON  THE HOLDERS THEREOF  MAY  BE OBTAINED BY
      ANY STOCKHOLDER UPON REQUEST AND WITHOUT CHARGE FROM THE SECRETARY
      OF THE CORPORATION AT THE PRINCIPAL OFFICE OF THE CORPORATION.

      THE SECURITIES REPRESENTED HEREBY  HAVE NOT BEEN REGISTERED  UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY  NOT BE
      OFFERED, SOLD  OR  OTHERWISE  TRANSFERRED,  ASSIGNED,  PLEDGED  OR
      HYPOTHECATED UNLESS AND UNTIL REGISTERED  UNDER THE ACT OR  UNLESS
      THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
      THE CORPORATION  AND ITS  COUNSEL THAT  SUCH REGISTRATION  IS  NOT
      REQUIRED.

      THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY
      BE TRANSFERRED  ONLY  IN ACCORDANCE  WITH  THE TERMS  OF,  CERTAIN
      RESTRICTIONS ON TRANSFER, INCLUDING  A 180-DAY LOCK-UP  AGREEMENT,
      AS SET FORTH  IN A COMPROMISE  AND RELEASE  AGREEMENT BETWEEN  THE
      CORPORATION AND THE HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
      OBTAINED AT THE CORPORATION'S PRINCIPAL EXECUTIVE OFFICES.

      11.  Severability.  If  any  provision  of  this  Settlement  Agreement
 becomes or is declared by  a court of competent jurisdiction to be  illegal,
 invalid,  unenforceable  or  void,  portions  of  such  provision,  or  such
 provision in its entirety,  to the extent necessary,  shall be severed  from
 this Settlement Agreement, and the validity, legality, and enforceability of
 the remaining provisions contained herein shall  not in any way be  affected
 thereby and such illegal, invalid, unenforceable or void provisions shall be
 reformed to achieve, to the extent possible, the intent of the Parties in  a
 manner that is legal, valid and enforceable.  The balance of this Settlement
 Agreement shall be enforceable in accordance with its terms.

      12.    Notices.  Any  notices required  or  permitted to be given under
 the terms  hereof shall  be sent  by certified  or registered  mail  (return
 receipt requested)  or  delivered  personally or  by  courier  (including  a
 recognized  overnight  delivery  service)  or  by  facsimile  and  shall  be
 effective five days  after being placed  in the mail,  if mailed by  regular
 United States mail, or upon receipt,  if delivered personally or by  courier
 (including a recognized overnight delivery service) or by facsimile, in each
 case addressed to a party.  The addresses for such communications shall be:

                If to the Company:

                Integrated Performance Systems, Inc.
                901 Hensley Lane
                Wylie, Texas  75098
                Attention: Chief Financial Officer
                Telephone: (214) 291-1452
                Facsimile: (214) 291-1474

                With a copy to:

                Haynes and Boone, LLP
                2505 N. Plano Road, Suite 4000
                Richardson, Texas  75082
                Attention: Bill Kleinman
                Telephone: (972) 680-7565
                Facsimile: (972) 692-9065

                If to La Jolla:

                La Jolla Cove Investors, Inc.
                7817 Herschel Avenue, Suite 200
                La Jolla, California  92037
                Attention: Alan L. Atlas, Corporate Counsel
                Telephone: (858) 551-8789
                Facsimile: (858) 551-8779

      13.  Governing Law;  Venue;  Waiver of  Jury  Trial.   This  Settlement
 Agreement shall be  governed in all  respects by the  laws of  the State  of
 California as  such  laws  are  applied  to  agreements  between  California
 residents entered  into  and  to be  performed  entirely  within  California
 without regard to conflict of laws rules.  Any proceeding arising out of  or
 relating to this Settlement Agreement or any transaction contemplated hereby
 (a "Proceeding")  shall be  brought in  the  state courts  of the  State  of
 California, County of San Diego, and  each Party irrevocably (i) submits  to
 the exclusive  jurisdiction of  such courts  in  any such  Proceeding,  (ii)
 waives any objection it may now or hereafter have to venue or to convenience
 of forum, (iii) agrees that all claims in respect of any Proceeding shall be
 heard and determined only in  such courts and (iv)  agrees not to bring  any
 Proceeding in any other court.  The Parties hereby waive any right to  trial
 by jury  in  any  Proceeding  and hereby  agree  and  acknowledge  that  any
 Proceeding shall  instead be  tried in  the courts  named above  by a  judge
 sitting without a  jury.  Process  in any Proceeding  may be  served on  any
 party anywhere in the world.

                                 * * * * * *

      EXECUTED on the date first written above.

                               INTEGRATED PERFORMANCE SYSTEMS, INC.

                               By: /s/ Brad Jacoby
                                   -------------------------------------
                                   Brad Jacoby
                                   President and Chief Executive Officer

                               LA JOLLA COVE INVESTORS, INC.

                               By: /s/ Alan Atlas
                                   -------------------------------------
                                   Alan Atlas
                                   Corporate Counsel

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