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		 	Key Manager Incentive Plan	 
	
	








1.    PURPOSE



     1.1    
The purpose of this Key Manager Incentive Plan (the “Plan”) is  to
incentivize certain key managers of ENGlobal Corporation (the  “Company”)
and its subsidiaries to promote the Company’s  core values, which are described in
Section 5. Employees may participate in only  one ENGlobal Incentive Plan at a time.
Eligible Participants in the  Company’s Executive Level Incentive Plan, or any other
plans, shall not be  entitled to participate in this Plan.



     1.2   
This Plan has been approved by the Board of Directors on December 16, 2004, to  be
effective as of January 1, 2005, and amended by the Board of Directors on  March 28,
2006, to be effective as of January 1, 2006.




2.    ELIGIBLE
PARTICIPANTS



     2.1   
Participants shall include individuals who have been guaranteed participation in  this
Plan through specific provisions in their employment contracts and may also  include
subsidiary presidents (or equivalent), profit center (divisional)  managers and officers,
business development managers and officers, and key  departmental and project management
personnel, unless they are eligible to  participate in a separate bonus plan (“Eligible
Participants”).  The Company will pay bonuses under this Plan only to those
Eligible Participants  who are employed on a regular, full-time basis on the last day
(the  “Bonus Determination Date”) of each calendar year (each, a  “Bonus
Period”) for which the bonus is paid. Unless otherwise  prohibited by law, an
employee whose employment with the Company or its  subsidiaries is terminated for any
reason prior to the Bonus Determination Date  for a particular Bonus Period will not be
eligible to receive any bonus under  this Plan based on his performance in that Bonus
Period.



     2.2   
The Chief Executive Officer, with the approval of the Board of Directors, may  change the
positions that qualify as Eligible Participants as he determines  appropriate from time
to time.



     2.3   
If  the Chief Executive Officer, after consultation with the Company’s Chairman  of
the Board and Chief Financial Officer (the “Management Bonus  Committee”),
determines that an Eligible Participant has exhibited bad  behavior, poor teamwork, or
unsafe work practices, has failed to comply with  Company policies and procedures or risk
management practices, has used Company  funds inappropriately, or has engaged in similar
types of behavior, he shall not  be entitled to receive a bonus until the Chief Executive
Officer has determined  that the behavior has been corrected. In making the determination
to restore the  Eligible Participant’s right to a bonus, the Chief Executive Officer
shall  consult with the members of the Management Bonus Committee and the person who
supervises the Eligible Participant.



     2.4   
The fact that an individual is an Eligible Participant does not guarantee that  he will
receive a bonus under this Plan. Rather, payment of a bonus under this  Plan is entirely
discretionary and will depend on the Company’s evaluation  of the individual’s
performance, as more particularly described in this  Plan.



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3.    BONUS
DETERMINATIONS



     3.1   
Following the end of each Bonus Period, the Chief Executive Officer will consult  with
each member of the Management Bonus Committee to discuss how the total  bonus pool shall
be divided among the Eligible Participants and if portions of  the Bonus Pool shall be
set aside for certain key managers (the  “Supervising Managers”) to
distribute to Eligible Participants  under their supervision, as further described in
Section 3.2. The substance and  results of the consultations between the Chief Executive
Officer and the other  members of the Management Bonus Committee shall be documented.
Following the  consultations, the Chief Executive Officer will determine which Eligible
Participants will receive a bonus for that Bonus Period and the amounts of funds  to be
allocated to Supervising Managers for further distribution to Eligible  Participants who
are their subordinates. The Chief Executive Officer and the  members of the Management
Bonus Committee will seek to reach a consensus  decision on the payment of bonuses;
however, lacking a consensus, the Chief  Executive Officer will be entitled to make the
final decision.



     3.2   
Only individuals who report directly to the members of the Management Bonus
Committee are eligible to be Supervising Managers. As an example, the presidents
of the Company’s subsidiaries, and other key managerial positions who
report to any member of the Management Bonus Committee are eligible to serve as
Supervising Managers. The Supervising Managers shall evaluate Eligible
Participants who are their subordinates using the criteria described in this
Plan. Without the approval of the Chief Executive Officer, bonuses may not be
awarded to any employees below the level of department head (for both billable
and overhead positions) or to any project manager. The Company intends that this
Plan be used to reward a smaller number of individuals with bonuses large enough
to incentivize individuals to promote the goals and objectives described in this
Plan. Based on studies reviewed by members of the Management Bonus Committee, it
appears that this typically cannot be achieved with bonuses that are less than
7% of an individual’s annual salary. Supervising Managers should keep this
in mind in awarding bonuses to their subordinates.



     3.3   
Notwithstanding the other provisions herein, no bonus (other than the safety
bonus, if earned) shall be paid to any profit center manager whose contribution
to the Company’s net operating income for the Bonus Period is significantly
below the budgeted contribution to net operating income for that profit center
as set forth in the Annual Budget. Likewise, no bonus shall be paid to
any profit center manager (other than the Safety Bonus, if earned) if the actual
departmental costs for his profit center are significantly above (on a
percentage of revenue basis) those provided for in the Annual Budget.



     3.4   
The Chief Executive Officer shall also have the final authority to resolve all
disputes that may arise related to this Plan. The Chief Executive Officer’s
decisions will be without recourse by members of the Management Bonus Committee
or the affected employees. This Plan is not intended to be, and does not
constitute, a contract between the Company and any Eligible Participant or other
employee. This Plan may be revised or terminated at any time by the Board of
Directors without prior notice to, or the consent of, any of the Eligible
Participants.



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4.    BONUS
POOL AND BONUS PAYMENTS



     4.1   
As  long as this Plan is in effect, at the end of each Bonus Period, the Company  shall
designate an amount of money (the “Bonus Pool”) to be  used for the
payment of bonuses to Eligible Participants. The amount of the  Bonus Pool shall be
determined by reference to the Company’s Adjusted  Earnings per Share (as herein
defined) as compared to its prior year’s  Adjusted Earnings per Share for the
relevant period. “Adjusted Earnings  per Share” shall mean the Company’s
actual Earnings per Share for  the Bonus Period as stated in the Company’s audited
financial statements  filed with its Annual Report on Form 10-K, but adjusted each year
to exclude  unusual or infrequent transactions. The amount of the “Bonus  Pool” shall
be determined as follows:



     4.2   
If  the Company’s adjusted earnings per share (“EPS”) for the  year
for which the bonus is being paid (the “Current Year”),  after
subtracting any and all incentive compensation, exceeds adjusted EPS in  the immediately
preceding calendar year (the “Base Year”), then  the Company shall
contribute to the Bonus Pool in the amounts, and with the  restrictions, as set below.



	(1)	 	
$65,000 for each penny per share of earnings the Company makes which is over and above the
prior year’s EPS. 







	(2)	 	
Notwithstanding anything herein to the contrary, the total Bonus Pool for this plan, plus
the Executive Level Incentive Plan, shall not exceed 13.10% of adjusted pre-tax, pre-bonus
earnings. 







     4.3   
Bonus payments, if due hereunder, will be made within 75 days following the end of each
year.



     4.4   
The manner in which the total Bonus Pool is determined may be modified from time  to time
by the Board of Directors, without prior notice to the Participants.  Notwithstanding the
percentages set forth herein, unless the Board of Directors  authorizes additional
funding, the total of all Bonus Pools, including the  Executive Level Incentive Plan and
any other bonuses, for any Bonus Period shall  not exceed 13.10% of adjusted pre-tax,
pre-bonus earnings.



     4.5   
In  the discretion of the Chief Executive Officer, after consultation with the
Management Bonus Committee, an amount equal to 10% to 15% of the total Bonus  Pool may be
allocated for any employees exhibiting performance over and above  requirements of their
position, when their performance has resulted in the  addition of new clients, an
improvement in the Company’s financial  performance, the award of new projects, or
other significant activities that  reflect the Company’s core values as defined in
this Plan. If this amount  is not awarded for any Bonus Period, it may, at the election
of the Chief  Executive Officer, be added to the Bonus Pool for the next Bonus Period.



     4.6   
Bonus payments, if due hereunder, will be made no later than 75 days following  the end
of the Bonus Period or, if earlier, within 10 days after the Company  files its Annual
Report on Form 10-K for the Bonus Period.



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5.    CORE
VALUE SYSTEM



     This
Plan is intended to reward performance that reinforces and supports the
Company’s core values as applicable for each Eligible Participant. The
evaluations for non-profit center managers (e.g. Accounting, HR, IR, Governance
and IT) shall be adjusted for their “spheres of influence.” For
example, “client satisfaction” would be measured based on
“internal client satisfaction” for accounting managers as opposed to
“external client satisfaction” for operations managers. In making
bonus determinations, the Chief Executive Officer and the Management Bonus
Committee will consider the following:



     5.1   Safety and Security



	 	     (a)
The safety and security of the Company’s employees and contractors is of  paramount
importance. Each manager who takes every required monthly safety test,  who has not
sustained any recordable injuries to himself, and who has a  recordable incident rate of
less than 0.5 for the group of employees (if any)  under his control during the 12-month
period ending on the Bonus Determination  Date shall receive an automatic bonus equal to
10% of the Bonus Pool multiplied  by a fraction, the numerator of which is one and the
denominator of which is the  total number of Eligible Participants on the Bonus
Determination Date.







	 	     (b)
Notwithstanding Section 5.1(a), if a majority of the members of the Management  Bonus
Committee determines that any manager has acted in a manner that endangers  the safety of
the Company’s employees, he shall not be entitled to receive  a bonus under this
Plan until further notice.







     5.2   
Financial Results



     As
a public corporation, the Company is in the business of creating value for its
shareholders. Consequently, for Eligible Participants who are responsible for
profits or for a budget, the Company will consider each Eligible
Participant’s performance in accomplishing his budget. Just as project
managers are accountable for project budgets even though they may not have
personally prepared the project estimate, managers are accountable to meet the
budgets approved by the Board of Directors even if the approved budget differs
from the budget submitted by the manager. If a manager fails to meet his budget
for any Bonus Period without valid reasons, he may not be eligible for a bonus
for that Bonus Period. For operations (profit center) managers, the primary
budget number to be considered will be the Net Operating Income from the profit
center (without any allocation of corporate general and administrative expenses)
as determined in the Company’s consolidated financial statements. The
Company will also consider actual variable overhead costs, actual general and
administrative expenses, and accounts receivable balances greater than 60 days
outstanding and actual income earned.



     5.3
    Marketing



     Since
higher profits are critical to the Company’s success, the Company places a
high value on successful sales and marketing efforts. The Company may develop a
point system to measure individual marketing efforts and to be considered in
awarding bonuses. Until then, the Company will consider monthly marketing
reports as well as the growth in an Eligible Participant’s particular area
of operations in determining each business development manager’s bonus.



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     5.4   Work-Sharing and Cooperation



     The
Company values high employee utilization rates and cross-marketing efforts. One
of the Company’s key strategic goals is to encourage profit centers to work
together. This Plan recognizes this in two ways: (1) the Bonus Pool is based on
the consolidated profits of the Company, and (2) Eligible Participants will be
evaluated on how well they cooperate with other divisions and departments
through work-sharing, cross-marketing, and other types of assistance. The
Company is able to serve its clients better through the strength of its combined
operations rather than on a strictly local or individualized basis. During slow
work periods, the Company’s goal is to keep the best people, no matter what
office they are working in, by placing them on other work, if necessary, from
other offices outside their local area. Under-utilization of employees is
detrimental to the Company. Eligible Participants who encourage full utilization
of all employees, work-sharing among Company locations and divisions, and
cross-marketing will be favorably considered for a bonus under this Plan.



     5.5   Client Satisfaction



     The
Company operates in a competitive environment in which clients require the
Company to accept ever-increasing liability and accountability for its
employees’ actions. Consequently, satisfying clients under these conditions
can be difficult. Nevertheless, the Company reinforces the concept that it is in
business to satisfy its clients and to obtain repeat business. The Company will
give favorable consideration to Eligible Participants who succeed in this
endeavor.



     5.6
   Entrepreneurial Spirit



     The
Company recognizes that it will be difficult to achieve significant growth
internally without new business ventures and investments in new key personnel.
Thus, the Company encourages its managers to make well thought out
entrepreneurial decisions. Managers who have an entrepreneurial idea that they
believe could help the Company achieve its goals should submit a business plan
in Executive Summary format to the Chief Executive Officer for his
consideration, and if appropriate, for his presentation to the Board of
Directors.



     5.7
    Growth Contribution



     Typically,
the largest operations contribute the highest profits to the Company’s  consolidated
results, giving the managers of those operations the opportunity to  earn a significant
bonus under this Plan. However, managers of smaller  operations can also qualify for a
substantial bonus by achieving significant  growth in the operations they manage. As a
publicly traded company, the Company  is seeking to be a high growth company. The Company
anticipates that much of the  Company’s growth will be derived from acquisitions;
however, internal  growth typically creates even more value for the Company’s stock.
Consequently, the Company will award bonuses to managers of operations that grow
significantly and in a manner that is sustainable. Because it is often easier  for
smaller operations to achieve a higher rate of growth, managers of small  operations will
also have an opportunity to receive a significant bonus.  Criteria for measuring growth
shall include the following weighted equally:



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	(1)	 	
Revenue growth year over year (% and total dollars). 







	(2)	 	 Earnings
growth year over year (% and total dollars). 







	(3)	 	
Percentage growth in earnings relative to other profit centers. 







     5.8   Long-Term Stability and Risk Management



     The
Company’s management expects each division to grow in a sustainable fashion
and to create as much stability as the marketplace allows. It is relatively easy
to show very fast growth rates by taking on high risk projects, such as lump sum
and fixed price work. While the Company has no general objection to that type of
work, it does expect the profitability of such work to be commensurate with the
risks. Additionally, the Company expects the managers in charge to be diligent
in managing risks so that the Company will not sustain significant losses even
if a project does not go as planned. The Company may conduct audits of such
projects to see if they were bid and performed in accordance with the
Company’s procedures for risk management, safety, cost control, and
scheduling. Fast growth will not be rewarded if the growth was obtained through
undertaking unreasonable risks.



     5.9
    Market Share



     Because
many clients utilize alliances and partnerships with engineering firms like the
Company, market share has become even more important than in the past. The
Company’s goal is to be number one or two in its local, geographical area
within the niche markets that it serves. These goals will be easier to obtain in
markets outside of large oil and gas complexes like the Houston area. The
Houston goal is to become one of the primary players in that marketplace. In the
other geographical areas that the Company currently serves, the goal is to be
number one or two in market share. The Company will view favorably all efforts
that bring the Company closer to obtaining these goals.



     5.10   Leadership



     Employee
morale is significantly influenced by the leadership qualities of the
Company’s managers. The Company encourages management personnel to operate
as a cohesive team and speak with integrity and truthfulness, and believes
employees will emulate management’s actions. Thus, the Company values
leadership, as opposed to dictatorial management styles, and will consider this
in its evaluation of Eligible Participants.



     5.11   Credibility



     Part
of leadership is to exhibit the highest degree of integrity and truthfulness in
dealing with employees, suppliers, subcontractors, and clients. While this does
not mean discussing Company business in an inappropriate manner or failing to
speak tactfully, the Company values employees who are honest and accountable in
their dealings. The Company’s goal is for its employees to have complete
credibility with others. The Company will reward Eligible Participants whose
actions support this goal.



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     5.12   Accountability



     The
Company recognizes that employee performance is often influenced by outside
circumstances beyond its control. However, the Company values managers who are
accountable for their areas of responsibility and for the performance of their
subordinates even when the unexpected occurs. Managers should accept
responsibility for their area rather than asking forgiveness or making excuses
when business does not go as planned. The Company values accountability and will
reward Eligible Participants accordingly.



     5.13    Empowerment



     The
Company cannot grow at the pace it has established unless managers empower their
subordinates to make decisions and hold their subordinates accountable for their
actions. While employees are expected to participate and cooperate with each
other to achieve the goals described in this Plan, the Company’s general
operating philosophy should be one of empowering associates and providing them
with coaching, mentoring, and training necessary to make good decisions.




6.   
MISCELLANEOUS



     6.1   
This Bonus Plan shall be governed by the laws of the State of Texas, excluding  choice of
law and conflict of law principles that direct the application of the  laws of a
different state. The Board of Directors is hereby authorized to  resolve any ambiguities
in this Plan.



     6.2   
This Bonus Plan represents the sole Bonus Plan covering the Eligible  Participants, and
all rights to participate in any other bonus plans (other than  any plan under which the
Company may award options or other equity  consideration) are hereby revoked in their
entirety. This Bonus Plan may be  modified or amended at any time by the Board of
Directors of the Company, with  or without prior notice to the Eligible Participants.



     6.3   
There are no third party beneficiaries to this Bonus Plan.



     6.4   
This Bonus Plan is an unfunded and unsecured  compensation arrangement.  It is not
governed by the Employee’s  Retirement and  Income Security Act of 1974.




Adopted by
Resolution of the Compensation Committee of the Board of Directors
 April 17, 2006




/s/    William A.
Coskey, P.E.
 William A. Coskey, P.E. 
 Chairman of the Board




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