Related Party Transactions and Outside Related Director Information

ENGlobal Corporation (ENG)

5/1/2006 Proxy Information

The Board of Directors has adopted a policy requiring that all transactions between the Company and its officers, Directors, principal stockholders and their affiliates be on terms no less favorable to the Company than could be obtained from unrelated third parties and that any such transactions be approved by a majority of the disinterested members of the Company's Board. The Company's Audit Committee is responsible for the review and assessment of all related party transactions.

Until September 2005, the Company leased approximately 14,000 square feet of office space in Beaumont, Texas ("Executive II") from a joint venture owned one-third by each of: (1) ENGlobal Engineering, Inc., (2) Michael L. Burrow, the Company's President and Chief Executive Officer, and (3) a stockholder of the Company who owns less than 1% of the Company's stock. Upon its review of comparable lease rates in the area, the Committee believed that this lease is at a commercially reasonable rental rate. In September 2005, Hurricane Rita destroyed a significant portion of the Executive II building in Beaumont, Texas. Shortly thereafter, the insurance company deemed the building inhabitable and a decision is pending as to whether the building will be demolished or rebuilt. The Company has not paid rental expenses under this lease since September 2005.