Exhibit 10.78

 

[GRAPHIC APPEARS HERE]

 

ENGLOBAL CORPORATION

 

EMPLOYEE STOCK PURCHASE PLAN

 

2,500,000 Shares

Common Stock

 

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Exhibit 10.78

 

ENGLOBAL CORPORATION

 

EMPLOYEE STOCK PURCHASE PLAN

 

2,500,000 Shares

Common Stock

 

Participation in the ENGlobal Corporation 2004 Employee Stock Purchase Plan (the
“Plan”) is offered, as described in this prospectus, to eligible employees of
ENGlobal Corporation (the “Company”) or its “Participating Affiliates” (as
defined in Section 5.1(p) of the Plan). References in this prospectus to
“employees” refer to employees of the Company or one of its Participating
Affiliates.

 

The Plan was adopted by the board of directors of the Company on December 18,
2003 and will be submitted to the stockholders for approval at the next annual
meeting of stockholders. The Plan will begin operation in April 2004.

 

The information contained in this prospectus may be updated from time to time by
the Company by preparing a supplement to the prospectus, by preparing a new
prospectus or by including updating information in the Company’s Annual Report
on Form 10-K, the Company’s definitive proxy statement or the Company’s annual
report to stockholders.

 

Neither the Securities and Exchange Commission (the “SEC”) nor any state
securities commission has approved these securities or determined this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

 

This document is part of a prospectus covering securities that have been
registered under the Securities Act of 1933.

 

The date of this prospectus is March 2, 2004.

 

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Exhibit 10.78

 

TABLE OF CONTENTS

 

WHERE YOU CAN GET INFORMATION

   4

IMPORTANT CONTACT INFORMATION

   4

EMPLOYEE RETIREMENT INCOME SECURITY ACT

   5

PART I - QUESTIONS AND ANSWERS ABOUT THE PLAN

   5

WHAT THE PLAN MEANS TO YOU

   5

1. What is the Plan?

   5

2. Who is eligible to participate?

   5

3. How do I become a participant?

   5

4. How much can I invest in the Plan?

   5

5. How is my contribution calculated?

   5

6. What if I quit working for the Company?

   5

7. What if I become ineligible after enrolling in the Plan?

   6

HOW THE PLAN WORKS

   6

8. What is the purchase price of the stock?

   6

9. When will I be able to access my shares?

   6

10. In whose name will my stock be held?

   6

11. Can I change my payroll deduction?

   6

12. What if my deductions are not accurate?

   6

13. Can I withdraw from the Plan?

   6

14. If I withdraw, may I participate in the Plan again?

   7

15. May I assign or transfer my rights to buy stock under the Plan?

   7

16. Who administers the Plan?

   7

17. Are there limitations on the sale of my stock purchased under the Plan?

   7

18. What are the tax considerations for Plan participants?

   7

19. What kind of account statement do I receive?

   7

20. What about dividends?

   7

21. Will I receive information provided to stockholders?

   7

22. After becoming a stockholder, do I vote my own stock?

   7

23. How do I sell my stock and how much does it cost?

   8

24. Can my account be used for any other transactions?

   8

25. Where do I find additional details of the Plan?

   8

BASIC FEDERAL INCOME TAX CONSEQUENCES

   8

PART III - TEXT OF THE PLAN

   10

PART IV - INFORMATION ABOUT THE COMPANY

   22

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

   22

 

3

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Exhibit 10.78

 

WHERE YOU CAN GET INFORMATION

 

The SEC allows the Company to “incorporate by reference” the information the
Company files with them, which means that the Company can disclose important
information to you by referring you to documents that it has filed with the SEC.
The information incorporated by reference is considered to be part of this
prospectus, and later information that the Company files with the SEC will
automatically update and supersede this information. The Company incorporates by
reference the documents listed below under Incorporation of Certain Documents By
Reference in Part IV.

 

This document is part of a registration statement the Company filed with the SEC
on Form S-8, which is incorporated by reference in this prospectus.

 

No person has been authorized to give any information or to make any
representations other than those contained in this prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Company. Neither the delivery of this prospectus
nor any sale made under this prospectus shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date of this prospectus. This prospectus does not constitute an offer
or solicitation by anyone in any jurisdiction in which such offer or
solicitation is prohibited.

 

The Company is subject to the informational requirements of the Securities
Exchange Act and therefore, files reports, proxy statements and other
information with the SEC. You may read and copy reports, proxy statements and
other information filed by the Company at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the SEC located at 233 Broadway, New York,
New York 10279, and 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois
60604. Copies of these materials can also be obtained from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549 at prescribed rates. In addition, electronic copies of the materials may
be accessed on the worldwide web via the SEC’s website (http://www.sec.gov) or
the Company’s website under “investor relations” (http://www.englobal.com). The
shares of the Company’s common stock are listed on the American Stock Exchange,
and, as a result, the periodic reports, proxy statements and other information
filed by the Company with the SEC can also be inspected at the American Stock
Exchange headquarters at 86 Trinity Place, New York, NY 10006.

 

Copies of documents incorporated in this prospectus by reference will be
furnished free of charge to ENGlobal employees upon request to Natalie Hairston,
the Company’s Investor Relations Officer.

 

This prospectus relates to 2,500,000 shares of common stock, par value $.001 per
share, of the Company offered under the Company’s 2004 Employee Stock Purchase
Plan. The prospectus describes the Plan in a question and answer format and
gives a description of the Plan and the administration of the Plan. In addition,
information about the Company, the text of the Plan and the basic federal income
tax consequences of the Plan are also contained in this prospectus. Additional
information about the Plan and the Company may be obtained free of charge upon
request to Natalie Hairston.

 

IMPORTANT CONTACT INFORMATION

 

Natalie Hairston

Investor Relations Officer

ENGlobal Corporation

600 Century Plaza Drive, Suite 140

Houston, Texas 77073-6033

Phone: (281) 821-3200

 

Karla Quinn

Human Resources Manager

ENGlobal Corporation

3155 Executive Blvd., Suite 216

Beaumont, Texas 77705

Phone: (409) 840-2483

 

Computershare Investor Services

2 North LaSalle Street

Chicago, Illinois 60602

Phone: (312) 588-4990

 

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Exhibit 10.78

 

EMPLOYEE RETIREMENT INCOME SECURITY ACT

 

The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974, and the Plan is not qualified or intended to be qualified
under its applicable provisions.

 

PART I - QUESTIONS AND ANSWERS ABOUT THE PLAN

 

WHAT THE PLAN MEANS TO YOU

 

1. What is the Plan?

 

The Plan is a payroll deduction plan that permits you to purchase shares of
common stock of the Company and, as a result, share in the Company’s future. As
a stockholder, you become part owner in the Company and will be entitled to vote
your shares for the election of directors and on other matters submitted to the
stockholders. In addition, you have the potential for financial gain through
dividends and growth in the value of the stock. However, there can be no
guarantee that stock you purchase through the Plan will gain in value, or even
retain its current value.

 

2. Who is eligible to participate?

 

You are eligible to participate in the Plan if (i) you have been on the payroll
records of the Company or a Participating Affiliate for at least the three-month
period preceding your enrollment date and (ii) you work more than 20 hours per
week for more than five months per calendar year for the Company or one of its
Participating Affiliates. Notwithstanding the foregoing, officers, non-employee
directors, or persons who hold 5% or more of the issued and outstanding shares
of the common stock of the Company are not eligible to participate. As of March
1, 2004, there were approximately 880 employees eligible to participate in the
Plan.

 

3. How do I become a participant?

 

You may elect to participate in the Plan after you have become eligible, by
completing an Enrollment Agreement that authorizes payroll deductions from your
“Eligible Compensation,” as defined below and in the Plan, and returning it to
the Company’s Human Resources Department. Enrollment Agreements are available
from the Company’s Human Resources Department. The payroll deductions will start
at the beginning of the next Offering Period as set out in the Plan. The three
months from January 1 to March 31; from April 1 to June 30; from July 1 to March
31; and October 1 to December 31 are “Offering Periods.” The Enrollment
Agreement form must be received by the Company’s Human Resources Department at
least 10 business days before the first day of a Offering Period for
participation during that Offering Period.

 

4. How much can I invest in the Plan?

 

Your authorized payroll deduction must be in whole percentages within the
following range:

 

The minimum deduction is 1% of your Eligible Compensation.

 

The maximum deduction is the lesser of 15% of your Eligible Compensation or
$25,000 per calendar year.

 

5. How is my contribution calculated?

 

The contribution percentage you elect is applied to your Eligible Compensation.
Eligible Compensation means compensation paid to you during an Offering Period,
including wages, salary, bonuses and commissions, but excluding all other
extraordinary pay. In addition, the Company can make a discretionary matching
contribution on each pay date, but it is not required to do so.

 

Note that your payroll deductions will be made on an after-tax basis.

 

6. What if I quit working for the Company?

 

You will no longer be eligible to participate in the Plan if you quit working
for the Company or one of its Participating Affiliates. If your employment is
terminated during the Offering Period, all amounts withheld from your Eligible
Compensation that have not been used to purchase Company stock will be returned
to you as soon as administratively possible. In addition, after you leave the
Company, any shares of ENGlobal stock held by the Company or Computershare
Investor Services, the Plan custodian, on your behalf will be distributed to
you.

 

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Exhibit 10.78

 

7. What if I become ineligible after enrolling in the Plan?

 

If your employment status changes such that you are not eligible to participate
in the Plan (see question #2) but you continue to be an employee of the Company,
you may continue to participate for the remainder of the Offering Period and
stock will be purchased for you. However, you will not be permitted to enroll
for any subsequent Offering Periods, unless your eligibility status changes.

 

HOW THE PLAN WORKS

 

8. What is the purchase price of the stock?

 

On the first business day of each Offering Period you, as a participant in the
Plan, are granted an option by the Company to buy stock on the last business day
of the Offering Period. The purchase price per share is 100% of the Fair Market
Value (as defined below) on the first day of the Offering Period or 90% of the
Fair Market Value on the last day of the Offering Period, whichever is less.
After the last business day of the Offering Period, the number of full or
fractional shares that can be paid for by your accumulated payroll deductions
through the last month of the Offering Period will be purchased for you subject
to the maximums described in Question 4 of this prospectus.

 

Generally, “Fair Market Value” of the Company’s stock on a particular date is
defined as the stock’s closing selling price per share on the American Stock
Exchange for that date as reported by the Dow Jones News/Retrieval Service of
Dow Jones and Company, Inc. If no sales of the Company’s stock occurred on a
particular date, the Fair Market Value is the closing price reported on the
American Stock Exchange as of the last business day on which the stock was sold.

 

9. When will I be able to access my shares?

 

The total shares purchased on your behalf will be credited to your account
approximately four weeks after the close of the Offering Period. You will
receive quarterly statements setting forth the share purchases made on your
behalf. You will be able to access your shares once they have been credited to
your account.

 

10. In whose name will my stock be held?

 

The stock you purchase under the Plan will be held in an account in your name.
Your stock is held for you without payment of a custody charge. You will not
receive an actual stock certificate for the shares you own unless you request
it, for which a fee, currently $30, will be charged. No certificates will be
issued for fractional interests in shares. You may be paid cash for fractional
interests in shares if you so request or the fractional interests may be
accumulated in your account until they equal one whole share for which you may
elect to receive a stock certificate.

 

11. Can I change my payroll deduction?

 

Yes. Your percentage deduction may be increased or decreased only at the
beginning of an Offering Period. However, a new Enrollment Agreement form
indicating the increase or decrease must be received by the Company’s Human
Resources Department at least 10 business days before the first day of the
Offering Period in order to be effective for that Offering Period.

 

12. What if my deductions are not accurate?

 

It is your responsibility to verify that your deductions are accurate. Once the
Offering Period begins, this is easy to do by reviewing your pay stub(s).

 

13. Can I withdraw from the Plan?

 

Yes. You can withdraw by submitting a Withdrawal Agreement to the Company’s
Human Resources Department at least 10 business days before the last day of the
Offering Period. If you withdraw in a timely manner, all payroll deductions
taken during the period will be refunded to you and no further payroll
deductions will be taken. However, if your Withdrawal Notice is not received by
the Company’s Human Resources Department at least 10 business days before the
last day of the Offering Period, your deductions will be stopped as soon as
possible, but your accumulated deductions during that period will be applied to
the purchase of stock. You may not make a partial withdrawal.

 

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Exhibit 10.78

 

14. If I withdraw, may I participate in the Plan again?

 

Yes. However, you will not be able to participate before the beginning of the
next Offering Period following your withdrawal. Upon rejoining the Plan, you
will be considered a new participant and a new Enrollment Agreement must be
submitted.

 

15. May I assign or transfer my rights to buy stock under the Plan?

 

No. The rights granted to you under the Plan are yours alone and may not be
assigned or transferred to anyone else.

 

16. Who administers the Plan?

 

The Plan is administered by the board of directors. The board has hired
Computershare Investor Services to assist it as the Plan’s custodian. The board
has the authority to interpret the Plan and to establish rules and regulations.
Each of the directors of the Company is elected by the stockholders of the
Company each year, to serve a term of one year. Directors may be removed with or
without cause at any time by the affirmative vote of the holders of at least
two-thirds of the voting power of the Company.

 

17. Are there limitations on the sale of my stock purchased under the Plan?

 

No. Although the Plan is intended to provide you with an ownership interest as
an investment, you may sell stock purchased under the Plan at any time you
choose. If you sell or otherwise dispose of your shares, including making gifts
of your shares, you should consider the tax results. In addition, because of
federal income tax requirements, a legend will be placed on any certificates
issued to you requiring that the Company’s Human Resources Department be
notified if you sell shares within two years after the date of the grant of your
option to purchase the shares or within one year after the date you acquired the
shares.

 

18. What are the tax considerations for Plan participants?

 

You should review the section titled “Basic Federal Income Tax Consequences” for
a summary of general rules that apply when you acquire or dispose of shares
under the Plan. However, that section deals only with typical transactions, and
there may be state income tax consequences to consider when disposing of shares.
If you have any questions, you should consult your own tax advisor.

 

19. What kind of account statement do I receive?

 

You will receive a quarterly statement summarizing all transactions in your
account since the previous statement. If you move, you must notify the Company’s
Human Resources Department of your new address, as this information is not
forwarded automatically. Keep these statements in a safe place. You will need
them for income tax purposes.

 

20. What about dividends?

 

The Company does not anticipate that it will pay any dividends. If the Company
does elect to pay dividends, and if you have not requested a certificate for
your shares of common stock purchased under the Plan, any dividends will
automatically be reinvested for you in the common stock. Once a stock
certificate is registered in your name, your dividends on that certificate will
not be automatically reinvested, but will be paid directly to you. Any stock
dividends or stock splits that may be declared will be handled in the same
manner. If you have certificates registered in your name, the certificate
representing the stock dividend or split will be sent directly to you, or the
number of shares you own for which certificates have not been issued will be
increased appropriately in your account and reflected in your quarterly
statement.

 

21. Will I receive information provided to stockholders?

 

As a result of owning shares purchased under the Plan, you will automatically
receive the annual report, proxy materials and any other materials issued by the
Company for the benefit and information of its stockholders.

 

22. After becoming a stockholder, do I vote my own stock?

 

Yes. You may vote your stock in accordance with your written proxy instructions,
or otherwise in accordance with applicable laws.

 

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23. How do I sell my stock and how much does it cost?

 

If certificates have not been issued in your name, you may sell your stock by
notifying Computershare Investor Services who will deliver your instructions to
a clearing broker who will sell for you the amount of shares you specify. You
will pay commissions at the then current rates for such sale. A special
toll-free number is provided for this purpose. Sales of shares represented by
certificates issued to you may be handled through any broker you may choose. Of
course, you will be responsible for commissions on the sales at the commission
rates being charged at the time. Normally, the shares you specify to be sold
will be sold on the date following the receipt of your sell order. However,
because of the mechanics associated with this type of stock purchase plan, it
may not be possible to sell the shares within the first three to five days of
their purchase. You should discuss all concerns and questions you have with your
financial advisor prior to any sale.

 

24. Can my account be used for any other transactions?

 

The Plan only allows for the purchase and sale of Company common stock. You may
sell any Company shares in your account. It is not necessary that you close your
account in the event you leave the Company. If you wish to close your account,
you may ask Computershare Investor Services to arrange to send you a stock
certificate for the number of full shares you own, plus a check for the amount
represented by any fractional interest in a share credited to you. If you do not
wish to keep your shares and desire cash instead, on instructions from you,
Computershare Investor Services will arrange to sell your stock and send you a
check for the proceeds, less commissions and charges. All commissions and
charges will be in accordance with rates from time to time in effect under the
rules of the American Stock Exchange, if applicable, or at such other rates in
effect at the time of the transactions.

 

25. Where do I find additional details of the Plan?

 

You should read the full text of the Plan which is contained in this prospectus
as Part III. The information provided above is simply a guide to the principal
provisions of the Plan.

 

BASIC FEDERAL INCOME TAX CONSEQUENCES

 

The Plan is intended to qualify as an “employee stock purchase plan” as defined
in Section 423 of the Internal Revenue Code of 1986, as amended.

 

The general rules set forth below apply to employees for federal income tax
purposes:

 

1.   You will not recognize taxable income either at the time options are
granted under the Plan, which is the first day of the Offering Period, or at the
time the options are exercised under the Plan, which is the last day of the
Offering Period.

 

2.   If your shares were acquired for 90% of the fair market value on the last
day of the Offering and you dispose of shares, for example through sales or
gifts, two years or more after the beginning of the Offering Period in which you
acquired the shares, then in the year you dispose of the shares, you will
recognize as ordinary income an amount equal to the lesser of:

 

a. the excess of the fair market value of the shares on the date of disposition
over the amount you paid for the shares, or

 

b. 10% of the fair market value of the shares at the end of the Offering Period
in which you acquired the shares.

 

If, instead, you acquired the shares 100% of the fair market value on the first
day of the Offering Period and you dispose of the shares two years or more after
the beginning of the Offering Period, you will not recognize any ordinary
income.

 

Note that, in addition to any ordinary income recognized, you will recognize a
long-term capital gain or loss in an amount equal to the difference between the
amount realized upon the sale of the stock and your basis in the stock, which is
the purchase price of the stock plus the amount, if any, taxed to you as
ordinary income.

 

3.   If you dispose of the shares (including any gifts of shares) within two
years of the beginning of the Offering Period in which you acquired the shares,
you will recognize ordinary income in the year you dispose of the shares, equal
to the fair market value of the shares on the day you purchased them less the
amount you paid for the shares. In addition, you will recognize a capital gain
or loss in an amount equal to the difference between the amount realized upon
the sale of the stock and your basis in the stock, which is the purchase price
of the stock plus the amount taxed to you as ordinary income.

 

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Exhibit 10.78

 

4.   If you satisfy the two-year holding period, the Company will not receive
any deduction for federal income tax purposes with respect to the options or the
shares issued to you. If you do not satisfy the two-year holding period, the
Company may be entitled to a deduction in an amount equal to the amount that is
considered ordinary income.

 

9

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Exhibit 10.78

 

PART III - TEXT OF THE PLAN

 

ENGlobal Corporation

 

2004 Employee Stock Purchase Plan

 

Effective February 1, 2004

 

10

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Exhibit 10.78

 

TABLE OF CONTENTS

1.

   Purpose of the Plan    1

2.

   Participation in the Plan    1      2.1 Eligibility    1      2.2 Enrollment
to Buy Stock    1      2.3 Designation of Beneficiary    1      2.4
Contributions; Payroll Deductions; Account; No Interest    1      2.5 Changes in
Contributions    2      2.6 Withdrawal    2      2.7 Termination of Employment;
Leave of Absence    2      2.8 Transferability    3

3.

   Purchase of Stock    3      3.1 Offering Periods    3      3.2 Purchase of
Stock    3      3.3 Payment for Shares    3      3.4 Delivery of Shares;
Restrictions on Transfer; Voting    3      3.5 Periodic Reports    4      3.6 No
Rights in Shares Prior to Purchase    4

4.

   Operation of the Plan    4      4.1 Effective Date and Term of Plan    4     
4.2 Shares Authorized for Sale and Issuance Under the Plan    4      4.3
Conditions Upon Issuance of Shares    4      4.4 Administration; Committee    4
     4.5 Amendment or Termination    5      4.6 Approval of the Stockholders   
6      4.7 No Liability for Good Faith Determinations    6

5.

   Miscellaneous Legal Provisions    6      5.1 Definitions    6      5.2
Adjustments Upon Changes in Capitalization    8      5.3 Notices; Waiver of
Notice    8      5.4 Severability    8      5.5 Successors and Assigns    9     
5.6 Headings    9      5.7 Governing Law; Venue    9      5.8 No Right to
Employment    9

 

 

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Page 1 of Plan

   Exhibit 10.78

 

ENGlobal Corporation

 

2004 Employee Stock Purchase Plan

(Effective February 1, 2004)

 

1. Purpose of the Plan. ENGlobal Corporation has adopted this Plan to provide
Eligible Employees with the opportunity and a convenient means to purchase
Shares as an incentive to exert their maximum efforts for the success of the
Company. Capitalized terms have the meanings ascribed to them in Section 5.1.
ENGlobal intends that options to purchase stock granted under this Plan qualify
as options granted under an “employee stock purchase plan” as defined in Section
423(b) of the Code, and this Plan will be construed and applied so as to be
consistent with Section 423 of the Code, including the requirement of Section
423(b)(5) of the Code that all Participants granted options to purchase Shares
under the Plan have the same rights and privileges with respect to such options.

 

2. Participation in the Plan.

 

2.1 Eligibility. Each Eligible Employee who is employed by an Employer on an
Enrollment Date may participate in the Plan during the relevant Offering Period,
except for employees whose customary employment is 20 hours or less per week or
employees whose customary employment is for not more than 5 months in any
calendar year, unless the Code prohibits his or her participation in that
Offering Period because:

 

(a) Immediately after the grant of an option under this Plan on the Purchase
Date, the Eligible Employee (together with certain individuals and entities
associated with or related to the Eligible Employee as described in Section
424(d) of the Code) would be deemed to own a number of shares of stock and
certain exercisable options to purchase stock that together represent 5% or more
of the total combined voting power or value of all classes of stock of the
ENGlobal (computed in accordance with Section 423(b)(3) of the Code); or

 

(b) Immediately after the grant of an option under this Plan to an Eligible
Employee on the Purchase Date, the Eligible Employee’s rights to purchase Shares
under all of the employee stock purchase plans described in Section 423 of the
Code of ENGlobal would accrue at a rate that exceeded $25,000 (computed based on
the Fair Market Value on the Purchase Date in accordance with Section 423(b)(8)
of the Code) during the calendar year of that Offering Period.

 

2.2 Enrollment to Buy Stock. On the Purchase Date for each Offering Period, and,
subject to the other provisions of this Plan, the Company shall purchase Shares
for the account of each Eligible Employee who:

 

(a) has completed an Enrollment Agreement in the form, format, and as otherwise
required by the Stock Administrator, and

 

(b) delivered that Enrollment Agreement to the Stock Administrator at least 10
business days before the Enrollment Date for an Offering Period.

 

2.3 Designation of Beneficiary. Each Participant may from time to time designate
a beneficiary by filing a written beneficiary designation form with the Stock
Administrator. Such beneficiary shall receive, on Participant’s death, any
refunds of amounts not used to purchase Shares and any Shares purchased on
Participant’s behalf but not yet issued to the Participant. If no beneficiary is
designated at the time of a Participant’s death, then any cash refunds and
transfers of Shares shall be made to the appropriate representative of the
Participant’s estate.

 

2.4 Contributions; Payroll Deductions; Account; No Interest.

 

(a) The Company will withhold from each Participant’s paycheck the percentage of
Eligible Compensation specified in his then-current Enrollment Agreement
commencing on the first pay date after the Enrollment Date next following the
delivery by Employee to the Company of an Enrollment Agreement. In addition, the
Company may make a discretionary Matching Contribution to each Participant’s
Account. The Company shall continue to withhold a like amount and to reserve the
right to make a Matching Contribution on each pay date throughout that Offering
Period and each future Offering Period until the Employee ceases to be a
Participant or, if earlier, changes his Enrollment Agreement. Notwithstanding
anything to the contrary, the Company shall not withhold or allow any
Participant’s contributions to exceed the lesser of 15% of Eligible Compensation
or $25,000 per calendar year.

 

(b) ENGlobal will hold and use the amounts withheld from each Participant’s
paycheck (or otherwise contributed by Participant) together with any Matching
Contributions made by ENGlobal for the benefit of each Participant until the
earlier of the date those amounts are (i) used to purchase Shares, or (ii)
refunded to the Participant and to ENGlobal in accordance with Sections 2.6 and
2.7. ENGlobal will not be required to segregate any of these funds from its
general corporate fund, and will not pay interest on any of these funds unless
otherwise required by applicable law. Under no circumstances will ENGlobal be
required to pay to Participant any Matching Contribution that is not used for
the purchase of Shares.

 

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Page 2 of Plan

   Exhibit 10.78

 

2.5 Changes in Contributions. During an Offering Period, a Participant may not
change the percentage of Eligible Compensation to be withheld from his paycheck
(or otherwise to be contributed), except by withdrawing from the Plan. However,
a new Enrollment Agreement may be submitted for any subsequent Offering Period.

 

2.6 Withdrawal.

 

(a) A Participant may stop participating in the current Offering Period and each
future Offering Period by delivering a Withdrawal Agreement to the Stock
Administrator at least 10 business days before the Purchase Date for the
then-current Offering Period. Delivery of a Withdrawal Agreement will:

 

(i) permanently and irrevocably terminate the Withdrawing Employee’s
participation in the then-current Offering Period, and

 

(ii) suspend the Withdrawing Employee’s participation in any future Offering
Periods until he delivers an Enrollment Agreement to the Stock Administrator.

 

An election to stop participating in one Offering Period will not prevent an
Eligible Employee from participating in any future Offering Period or in any
other Plan adopted by ENGlobal, provided that the Eligible Employee will not
participate in any future Offering Period until he submits a new Enrollment
Agreement.

 

(b) As soon as practical after receiving a Withdrawal Agreement, ENGlobal will:

 

(iii) stop withholding the applicable percentage of Eligible Compensation from
the Withdrawing Employee’s paychecks or otherwise accepting contributions to the
Withdrawing Employee’s Participant Account, and

 

(iv) refund to the Withdrawing Employee all amounts previously withheld from his
paychecks or otherwise contributed to the Withdrawing Employee’s Participant
Account (excluding any Matching Contributions) during the then-current Offering
Period, but only if such amounts withheld or other contributions have not
otherwise been used to purchase Shares for and on behalf of the Eligible
Employee.

 

(v) refund to ENGlobal all amounts previously contributed as Matching
Contributions on behalf of the Withdrawing Employee during the then-current
Offering Period, but only if such contributions have not otherwise been used to
purchase Shares for and on behalf of the eligible Employee.

 

2.7 Termination of Employment; Leave of Absence.

 

(a) If a Participant’s employment with the Company terminates, including by
death, on or before a Purchase Date, he will be deemed to have elected to
withdraw from the Plan effective as of the date that his employment terminates.

 

(b) As soon as practical after a Participant’s termination of employment,
ENGlobal will:

 

(i) refund all amounts withheld from his paycheck or otherwise contributed under
this Plan (excluding any Matching Contributions) that have not been used to
purchase Shares from ENGlobal or otherwise refunded;

 

(ii) refund to ENGlobal all Matching Contributions made on behalf of the
terminated Employee that have not been used to purchase Shares from ENGlobal;
and

 

(iii) distribute, or direct the Plan Custodian to distribute, any Shares held by
the Employer or the Plan Custodian on the Participant’s behalf to the
Participant or his designee.

 

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(c) A Participant on an approved leave of absence will be deemed to have elected
to withdraw from the Plan on the first day of the approved leave of absence, and
such deemed election to withdraw shall be effective for each such Offering
Period and each subsequent Offering Period until he returns to work and submits
a new Enrollment Form.

 

2.8 Transferability. Neither the amounts credited to a Participant Account nor
any other rights of a Participant under the Plan may be assigned, transferred,
pledged, or otherwise disposed of in any way (other than by will or the laws of
descent and distribution) by the Participant. Shares shall be purchased under
this Plan on Participant’s behalf only during Participant’s lifetime. Any
attempt at assignment, transfer, pledge, or other disposition will be without
effect, except that ENGlobal will treat such act as an election to withdraw
funds in accordance with Section 2.6 and Section 2.7.

 

3. Purchase of Stock.

 

3.1 Offering Periods. Each calendar year, the Company shall have four Offering
Periods: one beginning on January 1 and ending on March 31, one beginning on
April 1 and ending on June 30, one beginning on July 1 and ending on September
30 and one beginning on October 1 and ending on December 31.

 

3.2 Purchase of Stock. On each Enrollment Date, ENGlobal will offer each
Participant the opportunity to have Eligible Compensation withheld from his
paycheck (or to contribute Eligible Compensation in a manner approved by
ENGlobal) to be used to purchase Shares on the next Purchase Date. The number of
Shares the Participant will purchase on each Purchase Date, using the funds
accumulated since the prior Enrollment Date, will be a number of whole and
fractional Shares equal to (i) the balance of his Participant Account divided by
an amount equal to the lesser of (x) 100% of the Fair Market Value per Share on
the first day of the Offering Period or (y) 90% of the Fair Market Value per
Share on the last day of the Offering Period, minus (ii) the number of whole and
fractional Shares, if any, necessary to prevent that Participant from exceeding
the limits established in Section 2.4(a).

 

3.3 Payment for Shares. Immediately upon each purchase of shares on
Participant’s account, the amount held by ENGlobal for the benefit of that
Participant will be reduced by the Purchase Price per Share multiplied by the
number of Shares purchased on behalf of that Participant.

 

3.4 Delivery of Shares; Restrictions on Transfer; Voting.

 

(a) As soon as practical after each Purchase Date, a stock certificate will be
issued to the Plan Custodian (or if a Participant so requests, to such
Participant) for the benefit of each Participant, (or if the Plan Administrator
so directs, the Company’s transfer agent shall note the Participants stock
ownership electronically) for the Shares purchased on that Purchase Date. Such
certificate may be issued in nominee name.

 

(b) All Shares purchased under this Plan will be held by ENGlobal or the Plan
Custodian until the earlier of (i) a request for delivery of the Shares by the
Participant, or (ii) the termination of the Participant’s employment with the
Company.

 

(c) As soon as practical after termination of a Participant’s employment with
the Company, and if timely requested by that Participant in a form approved by
the Plan Custodian, certificates representing Shares purchased under the Plan
will be issued in the name of that Participant.

 

(d) All Shares purchased under this Plan shall be nontransferable and
nonassignable for six months after the date such Shares are issued to the
Participant (whether or not such issuance is accomplished by delivery of a share
certificate or by electronic notation by the transfer agent). Any attempt to
sell, gift, pledge or otherwise transfer any Shares prior to the expiration of
six months from issuance shall be ineffective and void.

 

(e) ENGlobal will pay all issue or initial transfer taxes of the Company with
respect to the initial purchase of Shares, as well as all fees and expenses
necessarily incurred by the Company in connection with such purchase.

 

(f) Subject to the restrictions of Section 3.4(d), a Participant who purchases
Shares under this Plan shall have, as of the date such Shares are purchased,
substantially all of the rights of ownership of such Shares in accordance with
Treasury Regulations Section 1.421-1(f) as in effect on the Effective Date. Such
rights of ownership shall include the right to vote, the

 

14

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   Exhibit 10.78

 

right to receive declared dividends, the right to share in the assets of Company
in the event of liquidation, the right to inspect Company’s books (to the extent
granted by applicable law), and the right to pledge or sell such Shares, subject
to the restrictions on such rights in this Plan and the restrictions on such
rights imposed by applicable law.

 

3.5 Periodic Reports. As soon as practical after each Offering Period, a
statement will be sent to each person who was a Participant under this Plan
during the Offering Period, which statement will include (i) the total amount of
all payroll deductions or other contributions, including Matching Contributions,
made during the applicable Offering Period or otherwise held under this Plan for
the benefit of the Participant, (ii) the number of Shares purchased on behalf of
Participant on each applicable Purchase Date, (iii) the per share and aggregate
purchase price per Share for those Shares, (iv) the remaining cash balance, if
any held by any Employer for the benefit of Participant, and (v) such other
information as the Stock Administrator or Plan Custodian deems appropriate.

 

3.6 No Rights in Shares Prior to Purchase. Neither a Participant nor his
beneficiaries will have any interest or voting right in Shares prior to the
Purchase Date on which such Shares are purchased.

 

4. Operation of the Plan.

 

4.1 Effective Date and Term of Plan. This Plan has been adopted to be effective
on February 1, 2004 and will remain effective until December 31, 2010, unless
sooner terminated under Section 4.5.

 

4.2 Shares Authorized for Sale and Issuance Under the Plan.

 

(a) The maximum number of Shares that may be sold and issued under this Plan
will be 1,200,000 Shares, although the stated maximum will be adjusted as
provided in Section 5.2 below. The maximum number of Shares that may be sold on
a Purchase Date resulting from one Offering Period will be 150,000 Shares,
adjusted as provided in section 5.2. If any option to purchase Shares granted
under this Plan is not exercised for any reason, the Shares subject to that
option will remain available to be sold and issued under this Plan.

 

(b) If, for any reason, the number of Shares available for sale and issuance
under this Plan under Section 4.2(a) is less than the number of Shares to be
sold and issued under Section 3.3 on a Purchase Date, the Company will allocate
the Shares available for sale and issuance pro rata among the Participants in as
uniform a manner as it determines to be equitable. In such event, the Stock
Administrator or Plan Custodian will notify each Participant of the reduction in
the number of Shares and the reason for such reduction.

 

(c) Shares sold and issued under this Plan may, in the sole and absolute
discretion of the Board, be either authorized and unissued Shares or treasury
Shares that are bought or otherwise acquired in public or private transactions.

 

4.3 Conditions Upon Issuance of Shares.

 

(a) Compliance With Laws. ENGlobal will not be required to sell or issue any
Shares under this Plan to any Eligible Employee unless the sale, issuance and
delivery of Shares complies, in the opinion of ENGlobal’s counsel, with all
applicable laws and regulations, including, but not limited to, the Securities
Act of 1933 and the rules and regulations of the United States Securities and
Exchange Commission, and all rules and regulations of the American Stock
Exchange or other applicable stock exchange or quotation system upon which the
Shares are listed or traded.

 

(b) Investment Intent. As a condition to participation in the Plan, ENGlobal may
require a Participant to represent and warrant at the time that the Shares are
being acquired that such Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

 

4.4 Administration; Committee.

 

(a) Board of Directors. This Plan will be administered by the Board (or a duly
appointed committee of the Board as set forth in this Plan). Unless otherwise
provided in this Plan, the Board has the power:

 

(i) To determine when and how rights to purchase Shares will be granted and the
provisions of each offering of such rights (which need not be identical);

 

(ii) To designate Participating Affiliates;

 

15

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   Exhibit 10.78

 

(iii) To construe and interpret the Plan and rights granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it deems necessary or
expedient;

 

(iv) To amend or terminate this Plan as provided in Section 4.4;

 

(v) To delegate administration of this Plan to the Committee; and

 

(vi) Generally, to exercise such powers and to perform such acts as the Board
deems necessary or expedient to promote the best interests of ENGlobal.

 

(b) Committee. If administration of this Plan is delegated to the Committee, the
Committee will have all the powers of the Board with respect to this Plan,
subject to any limitations on such powers stated in the Board’s resolutions
delegating administration to the Committee. Whether or not the Board delegates
administration of this Plan to the Committee, the Board retains the final power
to determine all questions of policy, procedure, and expediency that arise in
the administration of this Plan.

 

(c) Participation by Members of the Board. No members of the Board may
participate in this Plan.

 

(d) Stock Administrator. ENGlobal’s day-to-day obligations under this Plan will
be managed by the Stock Administrator, subject to the Board’s final power to
determine all questions of policy, procedure, and expediency that arise in the
administration of this Plan. The Stock Administrator will have all of the
following powers:

 

(vii) To manage, or to select and direct a Plan Custodian to manage, the daily
operations of this Plan in accordance with its terms;

 

(viii) To adopt rules of procedure and regulations necessary for the operation
of this Plan, provided they are consistent with the terms of this Plan;

 

(ix) To determine all questions with regard to rights of Eligible Employees and
Participants under the Plan, including, but not limited to, the eligibility of
any person to participate in the Plan;

 

(x) To enforce the terms, rules and regulations of this Plan;

 

(xi) To direct the distribution of the Shares purchased hereunder;

 

(xii) To furnish the Company with information which it requires for tax or other
purposes;

 

(xiii) To engage the service of counsel (who may, if appropriate, be counsel for
the Company) and a Plan Custodian or other agents it deems advisable to assist
it with the performance of its duties;

 

(xiv) To prescribe procedures to be followed by Participants in electing to
participate in this Plan;

 

(xv) To receive from each Company and Eligible Employee any information
necessary to administer or manage this Plan;

 

(xvi) To maintain, or cause ENGlobal, the Employer or the Plan Custodian to
maintain, an account in the name of each Participant to reflect his
participation in this Plan;

 

(xvii) To interpret and construe the Plan; and

 

(xviii) To make any changes or modifications necessary to administer and
implement the provisions of this Plan.

 

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   Exhibit 10.78

 

4.5 Amendment or Termination.

 

(a) The Board may amend or terminate this Plan without notice, provided that the
Board will not, without the approval of the shareholders of the Company, (i)
increase the maximum number of Shares that may be sold or issued under this Plan
(except pursuant to Section 5.2), or (ii) amend the requirements as to the class
of Eligible Employees eligible to purchase Shares under this Plan or if a
Committee is appointed to administer this Plan, permit the members of the
Committee to participate in this Plan.

 

(b) This Plan will automatically terminate on the Purchase Date that
Participants become entitled to purchase a number of Shares greater than the
number available for purchase under Section 4.2. In the event of an automatic
termination, reserved Shares remaining as of such Purchase Date will be sold to
Participants on a pro rata basis.

 

4.6 Approval of the Stockholders. Commencement of the Plan will be subject to
approval by the stockholders of the Company within 12 months after the date the
Plan is adopted. Notwithstanding any provision to the contrary, failure to
obtain such stockholder approval will void the Plan, any options granted under
the Plan, any Share purchases pursuant to the Plan, and all rights of all
Participants.

 

4.7 No Liability for Good Faith Determinations. Neither the members of the
Board, the Stock Administrator nor the Plan Custodian (nor their delegates) will
be liable for any act, omission, or determination taken or made in good faith
with respect to the Plan or any right to purchase Shares granted under it.
Members of the Board and the Stock Administrator (and their delegates) will be
entitled to indemnification and reimbursement by ENGlobal in respect of any
claim, loss, damage, or expense (including attorneys’ fees, the costs of
settling any suit, provided such settlement is approved by independent legal
counsel selected by ENGlobal, and amounts paid in satisfaction of a judgment,
except a judgment based on a finding of bad faith) arising therefrom to the full
extent permitted by law and under any directors and officers’ liability or
similar insurance coverage that may from time to time be in effect.

 

5. Miscellaneous Legal Provisions

 

5.1 Definitions.

 

(a) “Board” means the Board of Directors of ENGlobal or a duly appointed
committee of the Board.

 

(b) “Code” means the Internal Revenue Code of 1986, as amended.

 

(c) “Committee” means the Compensation Committee of the Board or such other
committee of the Board appointed to administer this Plan

 

(d) “Company” means ENGlobal and each Participating Affiliate.

 

(e) “Eligible Compensation” means the regular rate of compensation paid to a
Participant by any Employer during an Offering Period, including wages, salary,
bonuses, and commissions, but excluding all other extraordinary pay. Eligible
Compensation excludes the amount of a Participant’s elective contributions that
are made by the Employer on behalf of that Participant that are not includable
in gross income under the Internal Revenue Code of 1986, as amended, Sections
125, 402(e)(3), 132(f)(4), 402(h), and 401(k).

 

(f) “Eligible Employee” means a natural person who, on an Enrollment Date, has
been on the payroll records of an Employer for at least the preceding
three-month period (i) as receiving wages from the Employer, and (ii)
customarily employed as a common law employee of the Employer (A) on a full-time
basis, or (B) for more than 20 hours per week on a regular basis by the Employer
for more than five months per calendar year. Notwithstanding the foregoing,
officers, non-employee directors, or persons who hold 5% or more of the issued
and outstanding Shares of ENGlobal, as determined under Section 2.1(a), shall
not be Eligible Employees.

 

(g) “Employer” means ENGlobal or the Participating Affiliate by which an
Eligible Employee is employed.

 

(h) “ENGlobal” means ENGlobal Corporation, a Nevada corporation, or any
successor in interest that adopts this Plan.

 

(i) “Enrollment Agreement” means the agreement submitted to the Stock
Administrator pursuant to Section 2.2.

 

(j) “Enrollment Date” means the first day of the applicable Offering Period.

 

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   Exhibit 10.78

 

(k) “Fair Market Value” of one share of Shares on a particular date will be (i)
if the Shares is listed or admitted to trading on the American Stock Exchange,
then (A) if sales of Shares occurred on that date, the closing selling price per
share of Shares on the American Stock Exchange (or other exchange on which the
Company’s shares are then traded) for that date (1) as reported by the Dow Jones
News/Retrieval Service of Dow Jones and Company, Inc., or (2) if not so
reported, in a newspaper of national circulation or other authoritative source
selected by the Board, or (B) if no sales of Shares occurred on that date, the
closing selling price per share of Shares as of the next preceding date for
which the price is reported on the American Stock Exchange (or other exchange on
which the Company’s shares are then traded) on that date, or (ii) in all other
cases, determined in a reasonable way selected by the Board for that purpose.

 

(l) “Matching Contribution” means the amount contributed by the Company prior to
the Purchase Date to each Participant Account in an amount to be determined by
the Company in its sole discretion, which amount may be zero dollars ($0). Under
no circumstance will a Participant receive the Matching Contributions other than
through the purchase of Shares as outlined in the Plan. Without limitation,
Matching Contributions are refundable to the Company until and unless they are
used towards the purchase of Shares pursuant to Section 3. If the Stock
Administrator cannot determine whether Matching Contributions were used to
purchase Shares, the Stock Administrator shall have the sole and absolute
discretion to seek a refund of Matching Contributions based upon the ratio that
Matching Contributions in such Participant Account immediately before the
Purchase Date bear to the total amount in such Participant Account immediately
before such Purchase Date (excluding any Shares in such Participant Account
which had been purchased on prior Purchase Dates).

 

(m) “Offering Period” means each period for every year commencing on January 1
and ending on March 31, or commencing on April 1 and ending on June 30, or
commencing on July 1 and ending on September 30, or commencing on October 1 and
ending on December 31. The only exception is the first offering period under
this Plan per Section 3.1.

 

(n) “Participant” means an Eligible Employee who has elected to participate in
any Offering Period and continues to participate in that Offering Period through
its Purchase Date.

 

(o) “Participant Account” means any account or accounting entry maintained by
ENGlobal, the Employer, the Stock Administrator or the Plan Custodian to record
the amount of Eligible Compensation that a Participant has contributed to the
Plan during an Offering Period in accordance with Section 2.4 of this Plan, any
Matching Contributions made on behalf of that Participant, and the Shares
purchased under this Plan.

 

(p) “Participating Affiliate” means any corporation in an unbroken chain of
corporations beginning with ENGlobal, of which ENGlobal, directly or indirectly,
holds, on the applicable Purchase Date, not less than 50% of the total combined
voting power of all classes of stock in one of the other corporations in such
chain, whether or not such corporation now exists or is hereafter organized or
acquired by ENGlobal or any Subsidiary which adopts the Plan with the consent of
ENGlobal.

 

(q) “Plan” means this ENGlobal Corporation 2004 Employee Stock Purchase Plan, as
amended from time to time.

 

(r) “Plan Custodian” means the third party administrator appointed by ENGlobal
to manage this Plan in accordance with its terms, and in the absence of a third
party administrator, the Stock Administrator shall be the Plan Custodian.

 

(s) “Purchase Date” means a date determined by the Stock Administrator, which
date shall occur as soon as administratively practicable after the last day of
each month during the applicable Offering Period.

 

(t) “Shares” means the common stock, $.001 par value per share, of ENGlobal.

 

(u) “Stock Administrator” means the chairperson of the Compensation Committee of
the Board, or his designee.

 

(v) “Subsidiary” means any corporation of which not less than 50% of the total
combined voting power of all classes of stock is held either by (i) ENGlobal or
(ii) any other corporation in an unbroken chain of corporations (beginning with
ENGlobal, and in which not less than 50% of the total combined voting power of
all classes of stock is held by each corporation in the chain), without regard
to whether such corporation now exists or is hereafter organized or acquired.

 

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   Exhibit 10.78

 

(w) “Withdrawal Agreement” means the agreement submitted to the Stock
Administrator pursuant to Section 2.6.

 

(x) “Withdrawing Employee” means a Participant who withdraws from this Plan as
provided in Section 2.6(a).

 

5.2 Adjustments Upon Changes in Capitalization.

 

(a) If any change is made in the Shares, or subject to any rights granted under
the Plan (through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan and outstanding rights will be appropriately adjusted in the
class(es) and maximum number of Shares subject to the Plan and the class(es) and
number of Shares and price per Share of Shares subject to outstanding rights.
Such adjustments will be made by the Board, the determination of which will be
final, binding and conclusive. The conversion of any convertible securities of
the Company will not be treated as a “transaction not involving the receipt of
consideration by the Company.”

 

(b) If (i) a dissolution or liquidation of ENGlobal or a sale of all or
substantially all of ENGlobal’s assets; (ii) a merger or consolidation in which
ENGlobal is not the surviving corporation; (iii) a reverse merger in which
ENGlobal is the surviving corporation but the shares of Shares outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (iv)
any other capital reorganization in which more than 50% of the shares of the
Company entitled to vote are exchanged, is proposed to be consummated, then, the
Purchase Date for the applicable Offering Period will be accelerated to the date
such transaction is consummated, and the payroll deductions of the Participants
made through the Purchase Date will be used to purchase Shares immediately prior
to such transaction and all further rights of the Participants will terminate,
unless otherwise provided by the Board in its sole discretion.

 

5.3 Notices; Waiver of Notice.

 

(a) To a Participant. All notices or other communications relating to the Plan
given to a Participant or former Participant by the Board, ENGlobal, or any
Employer will be deemed delivered on the day the notice or other communication
is (i) personally delivered to that person, (ii) electronically transmitted to a
person who on the date of that transmission either is an Eligible Employee or
has consented to receiving notices by electronic transmission to the last known
electronic transmission address of that person, or (iii) placed in the United
States mail in an envelope addressed to the last known address of that person,
whichever is earlier.

 

(b) By a Participant. All notices or other communications relating to the Plan
given to the Board, ENGlobal, or an Employer will be deemed delivered on the day
the notice or other communication is (i) received in tangible written form by
the Stock Administrator at ENGlobal’s corporate headquarters address, or (ii)
electronically transmitted by an Eligible Employee to the Stock Administrator by
means of ENGlobal’s internal corporate e-mail or intranet system, provided that
such notice is in the form specified by ENGlobal and is acknowledged by the
Stock Administrator.

 

(c) Consent to Electronic Delivery of Notices, Plan Documents and Prospectuses.
By requesting to participate in the Plan, an Eligible Employee will be deemed to
consent to receiving copies of all notices and other communications relating to
the Plan by electronic transmission, including but not limited to the Prospectus
relating to the Plan, all enrollment and other participation materials, and all
other documents required to be delivered in connection with the Plan. Upon
request, ENGlobal will provide any such documents to any Eligible Employee in
tangible written form.

 

(d) Waiver of Notice. Any person entitled to notice under the Plan may waive the
notice.

 

5.4 Severability. If any provision of this Plan is held by final judgment of a
court of competent jurisdiction to be invalid, illegal or unenforceable, such
invalid, illegal or unenforceable provision shall be severed from the remainder
of this Plan, and the remainder of this Plan shall be enforced. In addition, the
invalid, illegal or unenforceable provision shall be deemed to be automatically
modified, and, as so modified, to be included in this Plan, such modification
being made to the minimum extent necessary to render the provision valid, legal
and enforceable. Notwithstanding the foregoing, however, if the severed or
modified provision concerns all or a portion of the essential consideration to
be delivered under this Plan by one party to the other, the remaining provisions
of this Plan shall also be modified to the extent necessary to equitably adjust
the parties’ respective rights and obligations hereunder.

 

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   Exhibit 10.78

 

5.5 Successors and Assigns. The Plan is binding on all Participants and their
respective heirs, legatees, and legal representatives, including but not limited
to their estate and the executors, any receiver, trustee in bankruptcy or
representative of creditors of such person, and upon the Employer, its
successors and assigns.

 

5.6 Headings. The titles and headings of the paragraphs are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof. Reference to sections are to Sections of this Plan unless
otherwise indicated.

 

5.7 Governing Law; Venue. This Plan and rights to purchase Shares that may be
granted under this Plan will be governed by and construed in accordance with the
laws of the State of Texas, without giving effect to any conflicts of law rules
or principles that might require the application of the laws of another
jurisdiction, except to the extent this Plan or those rights are governed by the
Nevada General Corporation Law, or the federal law of the United States. Any
claims brought against this Plan must be brought in Harris County, Texas.

 

5.8 No Right to Employment. Nothing in this Plan, any amendment to this Plan, or
the creation of any Participant Account, the execution or submission of any
Enrollment Agreement or Withdrawal Agreement, or the issuance of any Shares of
Shares, will give any Eligible Employee any right (a) to continue employment
with any Employer, (b) any legal or equitable right against ENGlobal or any
Employer, or any officer, director, or Employee of ENGlobal or its Participating
Affiliates, in connection with his employment by the Employer, or (c) interfere
in any way with the Employer’s right to terminate or otherwise modify his
employment at any time, except as expressly provided by the Plan or by
applicable law.

 

This Plan has been executed by a duly authorized officer of the Company, this
         day of December, 2003, to be effective as of February 1, 2004.

 

ENGLOBAL CORPORATION

 

By:  

 

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

   

Mike Burrow, Chairman and CEO

 

20

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Exhibit 10.78

 

PARTICIPATING AFFILIATES

 

The following corporations are approved by the Board as Participating Affiliates
to participate in this Plan:

 

ENGlobal Engineering, Inc.

 

RPM Engineering, Inc. d/b/a ENGlobal Engineering, Inc.

 

ENGlobal Construction Resources, Inc. also d/b/a Total Staffing Services

 

ENGlobal Systems, Inc.

 

ENGlobal Constant Power, Inc.

 

ENGlobal Technologies, Inc.

 

ENGlobal Corporate Services, Inc.

 

ENGlobal Design Group, Inc.

 

21

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Exhibit 10.78

 

PART IV - INFORMATION ABOUT THE COMPANY

 

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

 

For a description of the Company, its directors and officers, its equity
securities, audited financial statements for its latest fiscal year and
unaudited financial information for subsequent quarterly periods, reference is
made to the following documents which are incorporated by reference herein:

 

1.   the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2002 filed with the SEC on March 27, 2003;

 

2.   the Company’s Schedule 14A filed with the SEC on April 30, 2003;

 

3.   the Company’s Quarterly Report on Form 10-Q for the three-month period
ended March 31, 2003 filed with the SEC on May 13, 2003;

 

4.   the Company’s Current Report on Form 8-K filed with the SEC on May 14,
2003;

 

5.   the Company’s Form S-8 filed with the SEC on June 10, 2003;

 

6.   the Company’s Current Report on Form 8-K filed with the SEC on July 7,
2003;

 

7.   the Company’s Current Report on Form 8-K filed with the SEC on July 15,
2003;

 

8.   the Company’s Quarterly Report on Form 10-Q for the three-month period
ended June 30, 2003 filed with the SEC on August 14, 2003;

 

9.   the Company’s Current Report on Form 8-K filed with the SEC on August 14,
2003;

 

10.   the Company’s Current Report on Form 8-K filed with the SEC on August 19,
2003;

 

11.   the Company’s Current Report on Form 8-K filed with the SEC on October 20,
2003;

 

12.   the Company’s Current Report on Form 8-K filed with the SEC on November 3,
2003;

 

13.   the Company’s Current Report on Form 8-K filed with the SEC on November
12, 2003;

 

14.   the Company’s Quarterly Report on Form 10-Q for the three-month period
ended September 30, 2003 filed with the SEC on November 13, 2003; and

 

15.   the description of Common Stock, par value $.001 per share (the “Common
Stock”), of the Company set forth in the Registration Statement on Form 8-A12B,
filed with the SEC on June 11, 1998, including any amendment or report filed for
the purpose of updated such description.

 

All documents filed with the SEC by the Company pursuant to Sections 13 and 14
of the Securities Exchange Act of 1934 subsequent to the date hereof, and prior
to filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities remaining
unsold, shall be deemed incorporated by reference herein and to be a part hereof
from the date of filing such documents.

 

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