10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-14217

ENGlobal Corporation

(Exact name of registrant as specified in its charter)

Nevada

(State or, other jurisdiction of

corporation or organization)

88-0322261

(I.R.S. Employer Identification Number)

600 Century Plaza Drive, Suite 140, Houston, Texas	77073-6033
(Address of Principal Executive Offices)	(Zip Code)

(281) 821-3200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x     No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨     No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the close of business of October 20, 2003.

$0.001 Par Value Common Stock 24,030,288 shares

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2003

TABLE OF CONTENTS

			Page Number
Part I.		Financial Information
	Item 1.	Financial Statements
		Condensed Consolidated Statements of Income for the Three Months Ended and the Nine Months Ended September 30, 2003 and September 30, 2002	1
		Condensed Consolidated Balance Sheets at September 30, 2003 and December 31, 2002	2
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and September 30, 2002	3
		Notes to Condensed Consolidated Financial Statements	4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16
	Item 4.	Controls and Procedures	17
Part II.		Other Information
	Item 1.	Legal Proceedings	17
	Item 2.	Changes in Securities and Use of Proceeds	18
	Item 3.	Defaults Upon Senior Securities	18
.	Item 4.	Submission of Matters to a Vote of Security Holders	18
	Item 5.	Other Information	18
	Item 6.	Exhibits and Reports on Form 8-K	18
		Signature	20

i

Part I.    Financial Information

Item 1.    Financial Statements

ENGlobal Corporation

Condensed Consolidated Statements Of Income

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2003			2002			2003			2002
OPERATING REVENUES	$	35,910,394		$	23,509,392		$	89,407,928		$	67,026,512
OPERATING EXPENSES:
Direct costs		31,501,408			19,961,220			76,519,295			56,302,023
Selling, general and administrative		3,011,636			2,430,050			8,961,473			7,578,599
Depreciation and amortization		237,521			191,544			672,571			599,853
Total operating expenses		34,750,565			22,582,814			86,153,339			64,480,475
Operating income		1,159,829			926,578			3,254,589			2,546,037
OTHER INCOME (EXPENSE):
Other income (expense)		(301,599	)		(1,395	)		(336,219	)		136,467
Interest (expense)		(206,619	)		(229,746	)		(621,077	)		(664,351	)
Total other (expense)		(508,218	)		(231,141	)		(957,296	)		(527,884	)
INCOME BEFORE PROVISION FOR INCOME TAXES		651,611			695,437			2,297,293			2,018,153
PROVISION FOR INCOME TAXES		269,601			233,714			873,602			791,236
NET INCOME		382,010			461,723			1,423,691			1,226,917
PREFERRED STOCK DIVIDENDS		26,900			51,760			131,100			157,233
EARNINGS AVAILABLE TO COMMON STOCKHOLDERS	$	355,110		$	409,963		$	1,292,591			$1,069,685
EARNINGS PER COMMON SHARE (BASIC)	$	0.02		$	0.02		$	0.06		$	0.05
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (BASIC)		23,447,429			22,861,199			23,056,609			22,861,199
EARNINGS PER COMMON SHARE (DILUTED)	$	0.01		$	0.02		$	0.05		$	0.05
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (DILUTED)		24,061,823			22,861,199			23,637,894			22,861,199

See accompanying notes to interim condensed consolidated financial statements.

1

ENGlobal Corporation

Condensed Consolidated Balance Sheets

	September 30, 2003		December 31, 2002
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	125,260	$	75,095
Accounts receivable—trade, less allowance for doubtful accounts of approximately $298,000 for 2003 and $209,000 for 2002		19,158,959		16,491,847
Cost and estimated earnings in excess of billings on uncompleted contracts		1,660,565		2,043,603
Inventory		385,185		531,575
Prepaid and other		466,491		759,330
Deferred tax asset		461,000		461,000
Total current assets		22,257,460		20,362,450
GOODWILL		13,286,628		13,211,628
PROPERTY AND EQUIPMENT, net		5,297,606		5,758,386
DEFERRED TAX ASSET		2,553		402,000
OTHER ASSETS		444,118		333,552
Total assets	$	41,288,365	$	40,068,016
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	5,751,387	$	4,039,818
Accrued compensation and benefits		5,811,634		3,900,499
Billings and estimated earnings in excess of cost on uncompleted contracts		499,690		811,845
Other liabilities		808,428		932,934
Current portion—long term debt		686,974		743,039
Notes payable		—		485,850
Dividends payable		—		120,773
Current portion—capital lease payable		57,452		53,392
Income taxes payable		151,359		319,228
Total current liabilities		13,766,924		11,407,378
Long term debt, net of current portion		10,020,408		12,579,702
Capital lease payable, net of current portion		63,577		104,155
Total liabilities		23,850,909		24,091,235
PREFERRED STOCK:
Series A redeemable convertible preferred stock: 2,265,167 and 5,000,000 shares authorized, 0 and 2,588,000 shares issued and outstanding at September 30, 2003 and December 31, 2002, respectively		—		2,588,000
STOCKHOLDERS’ EQUITY:
Common stock, $.001 par value; 75,000,000 shares authorized; 24,030,288 and 22,861,199 issued and outstanding at September 30, 2003 and December 31, 2002, respectively		24,030		22,862
Additional paid-in capital		12,090,386		9,335,471
Retained earnings		5,323,040		4,030,448
Total stockholders’ equity		17,437,456		13,388,781
Total liabilities and stockholders’ equity	$	41,288,365	$	40,068,016

See accompanying notes to interim condensed consolidated financial statements.

2

ENGlobal Corporation

Condensed Consolidated Statements Of Cash Flows

(Unaudited)

	For the Nine Months Ended September 30,
	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,423,691		$	1,226,917
Adjustment for non-cash items		1,384,325			1,026,507
Changes in working capital, net		1,047,667			212,152
Net cash provided by operating activities		3,855,683			2,465,576
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment acquired		(1,049,280	)		(812,845	)
Proceeds from sale of property		554,865			42,523
Net cash used by investing activities		(494,415	)		(770,332	)
CASH FLOW FROM FINANCING ACTIVITIES:
Net payments on borrowings under line of credit		(2,159,841	)		(1,108,530	)
Issuance of common stock upon exercise of options		21,250			—
Short-term note repayments		(484,021	)		(423,974	)
Capital lease repayments		(36,517	)		(38,523	)
Long-term debt repayments		(651,974	)		(1,279,167	)
Net cash used by financing activities		(3,311,103	)		(2,850,194	)
NET CHANGE IN CASH		50,165			(1,154,940	)
CASH, at beginning of period		75,095			1,244,907
CASH, at end of period	$	125,260		$	89,967
SUPPLEMENTAL DISCLOSURES:
Interest paid	$	574,240		$	581,064
Income taxes paid		547,210			206,076
Dividend payments		105,040			219
NON-CASH:
Accrual of preferred dividends		131,100			157,233
Conversion of all preferred stock to common		2,734,834			88,000
Goodwill upon acquisition of Petro-Chem		75,000			—
Issuance of preferred stock dividends		146,833			—

See accompanying notes to interim condensed consolidated financial statements.

3

ENGlobal Corporation

Notes To Condensed Consolidated Financial Statements

1. Basis of Presentation

The condensed consolidated financial statements of ENGlobal Corporation, (“ENGlobal” or the “Company”), included herein, are unaudited for the three and nine-month periods ended September 30, 2003 and 2002. These financial statements reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary to fairly depict the results for the periods presented. Certain information and note disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. It is suggested these condensed financial statements be read in conjunction with the Company’s audited financial statements for the years ended December 31, 2002 and 2001, which are included in the Company’s annual report on Form 10-K. The Company believes that the disclosures made herein are adequate to make the information presented not misleading.

2. Name Change

On June 6, 2002, the stockholders voted on a proposal to amend the Articles of Incorporation to change the name of the Company from Industrial Data Systems Corporation to ENGlobal Corporation. The Company believes the new name reflects its broader capabilities and vision for future growth, providing a common identity, and building name recognition and credibility among existing and potential customers.

The ENGlobal name change was adopted by the Company’s operating subsidiaries effective January 25, 2003 (except Thermal Corporation).

3. Line of Credit and Debt

The Company has a Credit Facility with Fleet Capital Corporation (“Fleet”) that consists of a line of credit. The loan agreement positions the Fleet debt as senior to all other debt. The line of credit is limited to $15,000,000, subject to borrowing base restrictions. The Credit Facility is collateralized by substantially all the assets of the Company. The outstanding balance on the line of credit as of September 30, 2003 was $7,924,000. The Credit Facility matures on June 30, 2005. The interest rate is one-quarter of one percent plus prime (4.25 percent at September 30, 2003), and the commitment fee on the unused line of credit is 0.375 percent. The remaining borrowings available under the line of credit as of September 30, 2003, were $2,724,000 after consideration of the borrowing base limitations and cash timing differences. The Company’s Credit Facility contains covenants which require the maintenance of certain ratios, including cumulative fixed charge coverage and debt coverages and specified levels of certain other items.

An amendment to the Credit Facility was agreed upon between Fleet and the Company effective June 30, 2003 whereby one of the covenants, the ratio of senior debt to EBITDA, was increased.

4

ENGlobal Corporation

Notes To Condensed Consolidated Financial Statements

	September 30, 2003			December 31, 2002
	(in thousands)
Fleet Credit Facility-Line of credit, prime plus 0.25% (4.25% at September 30, 2003), maturing in 2005	$	7,924		$	10,084
Equus note payable, interest at 9.5%, principal payments in installments of $110,000 plus interest due quarterly maturing through 2005		2,450			2,780
Petrocon Arabia Limited uncollateralized note payable, interest at 8%, principal due monthly in installments of $25,000, interest paid annually, maturing in August 2004		250			451
Petro-Chem note payable, payments of $25,000 due annually maturing through 2006		75			—
Miscellaneous		8			8
		10,707			13,323
Less—current maturities		(687	)		(743	)
Long-term debt, net of current portion	$	10,020		$	12,580

The Company carries commercial insurance financed by short-term notes from October 1 to September 30. At December 31, 2002 the balance in notes payable for the insurance was $485,000. At September 30, 2003 the note had matured and been paid in full.

4. Conversion of Preferred Stock

Prior to August 15, 2003, Equus II Incorporated (“Equus”) held all of the issued and outstanding Series A Preferred Stock of the Company (the “Series A Preferred Stock”). The Certificate of Designation, Preferences and Rights of the Terms of the Preferred Stock (“the Designation”) provides for the conversion of each share of Series A Preferred Stock, at the option of the Company, if the Company’s Common Stock has been publicly traded on a national securities exchange for at least 20 consecutive days at a closing price of at least $3.00 per share. This requirement was met as of the close of business on August 14, 2003, and on August 15, 2003, the Board authorized conversion of all outstanding Series A Preferred Stock, including the dividends accrued thereon since May 31, 2003, into 1,149,089 shares of Common Stock. All converted preferred shares are required to be cancelled in accordance with the Designation, resulting in a reduction of the authorized shares from 5,000,000 to 2,265,167 authorized shares of Series A Preferred Stock.

5. Allocation of Goodwill

On December 21, 2001 the Company merged with Petrocon Engineering, Inc. and subsidiaries (the “Merger”) in exchange for 9,800,000 shares of the Company, valued at $0.71 per share. The purchase price totaled $23,806,000. The transaction was financed by issuance of Common Stock valued at $6,637,000, net of registration costs, issuance of Series A Preferred Stock with a liquidation value of $2,500,000 and assumption of debt totaling $13,737,000. The purchase resulted in the recognition of goodwill of $13,211,000, and deferred tax assets.

5

ENGlobal Corporation

Notes To Condensed Consolidated Financial Statements

Effective June 30, 2003, the Company acquired selected assets of Petro-Chem Engineering, Inc., an engineering services firm in Freeport, Texas. This asset acquisition was financed through the issuance of a $100,000 note payable. The acquired assets had a fair market value of $25,000, resulting in $75,000 in goodwill. The Company’s goodwill increased to $13,286,628 as a result of this acquisition.

In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, goodwill is no longer amortized over its estimated useful life, but rather will be subject to at least an annual assessment for impairment. The initial test for impairment, as of January 1, 2002, was completed by the end of the second quarter of 2002 and no impairment occurred. The second annual test for impairment was completed effective January 1, 2003 and no impairment occurred. The goodwill has been allocated to the lowest reporting units, the engineering services and engineered systems segments. The test for impairment is made on each of these reporting units. Due to the performance in the systems segment, a possibility exists that impairment may be realized by December 31, 2003. The Company cannot predict at this time the amount, if any, of a goodwill impairment.

6. Fixed Fee Contracts

Costs, estimated earnings and billings on uncompleted contracts consisted of the following at September 30, 2003 and December 31, 2002 (in thousands):

	September 30, 2003			December 31, 2002
Costs incurred on uncompleted contracts	$	16,112		$	18,629
Estimated earnings on uncompleted contracts		2,381			3,096
Earned revenues		18,493			21,725
Less billings to date		17,332			20,493
Net cost and estimated earnings in excess of billings on uncompleted contracts	$	1,161		$	1,232
Cost and estimated earnings in excess of billings on uncompleted contracts	$	1,661		$	2,044
Billings and estimated earnings in excess of cost on uncompleted contracts		(500	)		(812	)
Net cost and estimated earnings in excess (under) billings on uncompleted contracts	$	1,161		$	1,232

7. Taxes

The Company benefited from Petrocon’s net operating loss carryforwards at the time of the Merger. Based on the completion of the research and advice of tax counsel, the realization of an additional net operating loss carryforward asset is available to the Company. The Company has net operating loss carryforwards of approximately $1,592,000 as of December 31, 2002 with an annual limitation of $1,176,000. Current and non-current deferred tax assets representing the net operating loss carryforward and other timing differences total $464,000 and $863,000 as of September 30, 2003 and December 31, 2002, respectively. The reduction in deferred tax assets during the nine months ended September 30, 2003 reflects the expected usage of net operating loss carryforwards in 2003 to offset taxable income.

6

ENGlobal Corporation

Notes To Condensed Consolidated Financial Statements

8. Stock Option Plan

The Company accounts for its nonqualified incentive stock option plan under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations. Accordingly, no stock-based compensation cost is reflected in the net income, as all options granted under the Company’s plan were equal to or greater than the market value of the Company’s stock on the date of grant. The following table illustrates the effect on net income and earnings per share for the three months ended and nine months ended September 30, 2003 and 2002, as if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS 148, Accounting for Stock-Based Compensation Transition and Disclosure, issued in December 2002.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
	(in thousands)						(in thousands)
Pro forma impact of fair value method (SFAS 148):
Net income attributable to common stockholders, as reported	$	355		$	410		$	1,293		$	1,070
Less compensation expense determined under fair value method, net of tax		(14	)		(39	)		(56	)		(115	)
Pro forma net income attributable to common stockholders	$	341		$	371		$	1,237		$	955
Earnings per share (basic):
As reported	$	0.02		$	0.02		$	0.06		$	0.05
Pro forma	$	0.01		$	0.02		$	0.05		$	0.04
Earnings per share (diluted):
As reported	$	0.01		$	0.02		$	0.05		$	0.05
Pro forma	$	0.01		$	0.02		$	0.05		$	0.04
Weighted average Black-Scholes fair value assumptions:
Risk free interest rate		5.0%			5.0%			5.0%			5.0%
Expected life		3-10 years			3-10 years			3-10 years			3-10 years
Expected volatility		83%-93%			83%-93%			83%-93%			83%-93%
Expected dividend yield		0.0%			0.0%			0.0%			0.0%

7

ENGlobal Corporation

Notes To Condensed Consolidated Financial Statements

9. Segment Information

The Company operates in three business segments: (1) Engineering Services, provided primarily to major integrated oil and gas companies; (2) Systems Engineering, referred to in prior reports as Engineered Systems, providing design and implementation of control systems for specific applications primarily in the energy and process industries, uninterruptible power systems and battery chargers; and (3) Manufacturing of air handling equipment for commercial heating, ventilation and cooling systems. Sales and operating income set forth in the following table are the results of these segments.

Segment information was as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
Net sales from external customers:
Engineering Services	$	32,376		$	19,743		$	75,948		$	56,243
Systems Engineering		3,059			3,130			11,765			8,858
Manufacturing		475			636			1,695			1,926
Total	$	35,910		$	23,509		$	89,408		$	67,027
Operating profit (loss):
Engineering Services	$	2,887		$	1,979		$	7,891		$	5,211
Systems Engineering		(143	)		(13	)		57			485
Manufacturing		(31	)		(35	)		(88	)		(65	)
Corporate		(1,553	)		(1,005	)		(4,605	)		(3,085	)
Total	$	1,160		$	926		$	3,255		$	2,546

10. Subsequent Events

Effective November 3, 2003, the Company’s subsidiary ENGlobal Technologies, Inc. purchased all the ownership interest in Senftleber & Associates, L.P. (“Senftleber”), a Houston-based provider of technical personnel with expertise in SCADA systems (supervisory, control, and data systems). Senftleber produced over $2,000,000 in revenues in each of the last three calendar years. Although this acquisition is relatively small, it adds valuable technical capabilities to ENGlobal Technologies, which can be utilized with many of our existing clients. The Company is negotiating with several larger potential acquisition candidates as part of our business strategy to expand our presence in new or existing markets.

8

Item 2.    Management’s Discussion And Analysis And Results Of Operations

Forward-Looking Statements

Certain information contained in this Quarterly Report on Form 10-Q, the Company’s Annual Report to Stockholders, as well as other written and oral statements made or incorporated by reference from time to time by the Company and its representatives in other reports, filings with the Securities and Exchange Commission, press releases, conferences, or otherwise, may be deemed to be forward-looking statements with the meaning of Section 21E of the Securities Exchange Act of 1934. This information includes, with limitation, statements concerning the Company’s future financial position, and results of operations; planned capital expenditures; business strategy and other plans for future operations; the future mix of revenues and business; commitments and contingent liabilities; and future demand and industry conditions. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “may,” and similar expressions, as they relate to the Company and its management, identify forward-looking statements. Actual results could differ materially from the results described in the forward-looking statements due to the risks and uncertainties set forth with this Quarterly Report on Form 10-Q.

The following discussion is qualified in its entirety by, and should be read in conjunction with, the Company’s Consolidated Financial Statements including the Notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Update on the Sale of Thermal

The transaction for the sale of the Company’s wholly owned subsidiary, Thermaire, Inc. d/b/a Thermal Corporation (“Thermal”) was terminated in August, 2003. The Company continues to have and is pursuing several interested buyers for the operation. The Company cannot predict the outcome of these inquiries.

Results of Operations

The following is a discussion of the results of operations for the third quarter and first nine months of 2003 compared to the third quarter and first nine months of 2002 with a discussion of the changes in financial condition during the first nine months of 2003.

Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002

Total Revenue. Total revenue increased by $12,401,000 or 52.7% for the three months ended September 30, 2003 compared to the three months ended September 30, 2002. The Engineering Services segment reported an increase in sales during the period, Systems Engineering sales were relatively level, and Manufacturing incurred a decline.

9

	For the Three Months Ended September 30,
	2003				2002				Change from prior year
	(in thousands)
Revenues:
Engineering Services	$	32,376	90.2	%	$	19,743	84.0	%	$	12,633		64.0	%
Systems Engineering		3,059	8.5	%		3,130	13.3	%		(71	)	(2.3	)%
Manufacturing		475	1.3	%		636	2.7	%		(161	)	(25.3	)%
Total	$	35,910	100.0	%	$	23,509	100.0	%	$	12,401		52.7	%

Revenues in the Engineering Services segment increased $12,633,000 (64.0%) to $32,376,000 for the three-month period ended September 30, 2003. The revenue increase resulted primarily from several large projects including an EPC project (engineering, procurement, and construction) and a co-generation project out of the Beaumont office both of which began in 2003. The procurement phase of the EPC project commenced in 2003, is being performed on a cost plus basis, and is expected to provide an estimated $28,000,000 in total revenues over the life of the project. The co-generation project, which also includes procurement of materials, began during the three months ended September 30, 2003. Revenues recognized from procurement activities during the period exceeded $10,000,000. The Beaumont office, our largest office, achieved a 229% increase in revenues or $14,131,000 over last year for the three months ended September 30, 2003. Tulsa experienced improvements in revenues, also. Partially offsetting these increases, the Baton Rouge and Houston offices continued to see declines in revenues due to weak market conditions in their respective geographic areas.

The revenues in the Systems Engineering segment declined by $71,000 or 2.3% from $3,130,000 for the three months ended September 30, 2002 to $3,059,000 for the same period in 2003. This decrease occurred primarily at ENGlobal Constant Power (“ECP”) resulting from a depressed economy for the UPS and battery chargers systems. ECP has taken steps to upgrade its marketing efforts by adding additional sales representatives.

The Manufacturing segment’s revenues decreased for the three months ended September 30, 2003 by $161,000 or 25.0% from $636,000 for the three months ended September 30, 2002 to $475,000 for the same period in 2003. Economic conditions during 2003 have continued to exert downward pressure on the industry in which Thermal operates.

10

Gross Profit. Gross profit increased $861,000 or 24.3% for the three months ended September 30, 2003 as compared to the three months ended September 30, 2002. Gross profit and percentage of revenue follows:

	For the Three Months Ended September 30,								Change from prior year
	2003				2002
	(in thousands)
Gross profit (loss):
Engineering Services	$	3,941	12.2	%	$	3,071	15.6	%	$	870		28.3	%
Systems Engineering		400	13.1	%		329	10.5	%		72		21.8	%
Manufacturing		68	14.2	%		148	23.3	%		(81	)	(54.4	)%
Total	$	4,409	12.3	%	$	3,548	15.1	%	$	861		24.3	%

Gross profit for the Engineering Services segment increased by $870,000 during the three months ended September 30, 2003 as compared to the same period in 2002 due to the increase in sales. The margin decreased from 15.6% to 12.2% due primarily to large material purchases, which have a lower markup and deflate the overall gross profit percentage. Margins were also positively impacted by the reduction of insurance reserves during the period.

The Systems Engineering segment gross profit increased $72,000 or 21.8% from $329,000 to $400,000 for the three months ended September 30, 2002 and 2003, respectively. Gross profit as a percent of revenue improved from 10.5% in 2002 to 13.1% for the same period in 2003. The increase is primarily attributable to ECP’s losses on lump sum projects in 2002. Although revenues were lower at EPC in the three months ended September 2003 from the same period in 2002, the gross profit improved $105,000 to $19,000 in 2003 compared to a loss of $86,000 in 2002. Partially offsetting this increase in gross profits were budget over-runs on fixed price projects at ENGlobal Systems, Inc. (“ESI”) coupled with competitive market pressures on contract pricing. Due to the rapid growth in revenues at ESI, new initiatives have been put in place to strengthen administrative and support service controls.

The Manufacturing segment saw a decrease in gross profit by $81,000 or 54.4% for the three months ended September 30, 2003 compared to the same period for 2002. Competition on pricing forced Thermal to lower its margins in order to compete successfully for projects.

Selling, General, and Administrative. Selling, general and administrative expenses, excluding depreciation and amortization, increased $582,000 or 23.9% for the three months ended September 30, 2003 as compared to the same period in 2002. A majority of the increased costs resulted from the creation of a business development department established in the corporate division, which combined the marketing activities for the various locations of Engineering Services and added several new marketing representatives. These salaries and expenses accounted for approximately $346,000 of the increase for the three months ended September 30, 2003. Increases in the bad debt reserves, software maintenance, and rent on offices facilities contributed $236,000 to the total increase. Depreciation and amortization increased $46,000 or 24.0% due to the installation of new computer software.

Operating Income. Operating income increased by $233,000 to $1,160,000 for the three months ended September 30, 2003, compared to $927,000 for the same period in 2002. Operating income did not increase at the same rate as revenues because the direct cost on engineering services projects contained large material purchases which have lower markups, tending to deflate profits. Also cost overruns on systems projects, and higher marketing, general, and administrative expenses put further pressure on operating income.

11

Other Income and Deductions. The Company owned two office buildings in Baton Rouge, one of which was vacant. The Company elected to sell its vacant office building in Baton Rouge. The sale resulted in cash proceeds of $555,000; however, a loss of $312,000 was incurred on the transaction. The Company used the proceeds of the sale to reduce long-term debt.

Net Income. Net income after taxes decreased by $80,000 or 17.3% from $462,000 to $382,000 for the three months ended September 30, 2002 and 2003, respectively. As a percentage of total revenue, the net income percentage decreased from 2.0% to 1.1%.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002

Total Revenue. Total revenue increased by $22,381,000 or 33.4% for the nine months ended September 30, 2003 compared to the nine months ended September 30, 2002. The Engineering Services segment and the Systems Engineering segment each reported increases in sales during the period, while the Manufacturing segment reflected a decrease.

	For the Nine Months Ended September 30,								Change from prior year
	2003				2002
	(in thousands)
Revenues:
Engineering Services	$	75,948	84.9	%	$	56,243	83.9	%	$	19,705		35.0	%
Systems Engineering		11,765	13.2	%		8,858	13.2	%		2,907		32.8	%
Manufacturing		1,695	1.9	%		1,926	2.9	%		(231	)	(12.0	)%
Total	$	89,408	100.0	%	$	67,027	100.0	%	$	22,381		33.4	%

The Engineering Services segment increased revenues by $19,705,000 or 35.0%, to $75,948,000 during the nine months ended September 30, 2003 compared to the nine months ended September 30, 2002. The revenue increase resulted from several large projects including both a large EPC project (engineering, procurement, and construction) and a large co-generation project, in the Beaumont office, both of which began in early 2003. The procurement phase commenced for the Beaumont projects during the three months ended June 30, 2003 and will be performed on a cost plus basis, providing an estimated $28,000,000 in total revenues over the life of the project. Revenues recognized from procurement activities during the period exceeded $16,000,000. The Beaumont office, our largest office, experienced a 142% or $23,449,000 increase in revenues for the nine months ended September 30, 2003 over the same period in 2002. Revenues generated from the Lake Charles and Tulsa locations improved during the nine months ended September 30, 2003 versus the nine months ended September 30, 2002 due to new clients. Baton Rouge revenues for the nine months ended September 30, 2003 lagged behind the revenues for the same period in 2002 by $5,052,000 due to the completion of lump sum projects and the general economic malaise in the refining and petrochemical marketplace served by this office.

12

Revenues in the Systems Engineering segment, which represents 13.2% of total revenues increased by 32.8% or $2,907,000 from $8,858,000 in revenues for the nine months ended September 30, 2002 to $11,765,000 in revenues for the same period in 2003. Rapid growth occurred at ENGlobal Systems with increasing revenues of approximately $3,908,000 or 59.1%. This growth was attributable to large fixed-price sales of remote instrument enclosures to two clients. Offsetting this increase was a decrease in revenues at ECP of $1,200,000. ECP has taken steps to upgrade its marketing efforts by expanding its sales representative network.

Revenues in the Manufacturing segment decreased for the nine months ended September 30, 2003 by $231,000 or 12.0% from $1,926,000 for the nine months ended September 30, 2002 to $1,695,000 for the same period in 2003. Economic conditions during 2003 have continued to put pressure on the industry in which Thermal operates.

Gross Profit. Gross profit increased $2,164,000 or 20.2% for the nine months ended September 30, 2003 as compared to the nine months ended September 30, 2002. Gross profit and percentage of revenue follows:

	For the Nine Months Ended September 30,								Change from prior year
	2003				2002
	(in thousands)
Gross profit (loss):
Engineering Services	$	10,846	14.3	%	$	8,757	15.6	%	$	2,089		23.9	%
Systems Engineering		1,645	14.0	%		1,473	16.6	%		172		11.7	%
Manufacturing		397	23.4	%		494	25.7	%		(97	)	(19.6	)%
Total	$	12,888	14.4	%	$	10,724	16.0	%	$	2,164		20.2	%

The gross profit as a percent of revenue in the Engineering Services segment decreased from 15.6% to 14.3%. The lower margins, despite a $2,089,000 increase in profits over 2002, were due primarily to the lower margins on large material procurement activity on the EPC and co-generation projects.

The Systems Engineering segment gross profit increased $172,000 or 11.7% from $1,473,000 to $1,645,000 for the nine months ended September 30, 2002 and 2003, respectively. However, gross profit as a percent of revenue declined from 16.6% in 2002 to 14.0% for the same period in 2003. This decline in gross profit was due primarily to budget over-runs on fixed-price projects and competitive market pressures on contract pricing. Due to the rapid growth in revenues at ESI, new initiatives have been put in place to strengthen the administrative and support service controls. Gross profit for ECP decreased due to the loss in revenues during the period.

Gross profit in the Manufacturing segment decreased by $97,000 or 19.6% for the nine months ended September 30, 2003 compared to the same period for 2002. This decrease was due to competition in pricing, partially offset by a reduction in contract labor costs and decreased expenses during the first quarter of 2003.

Selling, General, and Administrative. Selling, general and administrative expenses, excluding depreciation and amortization increased $1,383,000 or 18.2% for the nine months ended September 30, 2003 as compared to the same period in 2002. A majority of the increase resulted from the creation of a

13

business development department in the corporate division, which combined all marketing activities for Engineering Services and added several new marketing representatives. These salaries and expenses contributed approximately $820,000 to the increase for the first nine months of 2003 with an additional $80,000 in direct advertising. Other sources of increased expenses during 2003 included increased consulting services of $191,000 for the upgrade to the accounting system, increases in rent of $163,000 due to expansion of office space in Beaumont, and increases in supplies and miscellaneous expenses of $129,000. Depreciation and amortization increased $73,000 or 12.1% due to the installation of new computer software.

Operating Income. Operating income increased by $709,000 to $3,255,000 for the nine months ended September 30, 2003, compared to $2,546,000 for the same period in 2002. As a percentage of revenues, operating income decreased from 3.8% to 3.6%. The decrease is attributable to the increase in corporate selling, general and administrative expenses and the lower margins on the projects.

Other Income and Deductions. The Company owned two office buildings in Baton Rouge, one of which was vacant. The Company sold its vacant office building in Baton Rouge resulting in cash proceeds of $555,000; however, a loss of $312,000 was incurred on the transaction. The Company used the proceeds from the sale to reduce long-term debt.

Net Income. Net income after taxes increased by $197,000 or 16.0% from $1,227,000 to $1,424,000 for the nine months ended September 30, 2002 and 2003, respectively. As a percentage of total revenue, the net income percentage decreased from 1.8% to 1.6%.

Liquidity and Capital Resources

The Company has a financing arrangement with Fleet known as the Credit Facility, which is comprised of a line of credit. The loan agreement positions the Fleet debt as senior to all other debt with the line of credit limited to $15,000,000, subject to borrowing base restrictions. The Credit Facility is collateralized by substantially all the assets of the Company. At September 30, 2003, $7,924,000 was outstanding on the line of credit. The Credit Facility matures on June 30, 2005. The interest rate is one-quarter of one percent plus prime, and the commitment fee on the unused line of credit is 0.375 percent. The remaining borrowings available under the line of credit as of September 30, 2003 were $2,724,000 after consideration of the borrowing base limitations and cash timing differences. The Company’s Credit Facility contains covenants, which require the maintenance of certain ratios, including cumulative fixed charge coverage and debt coverages and specified levels of certain other items.

An amendment to the Credit Facility was agreed upon between Fleet and the Company effective June 30, 2003 whereby one of the covenants, the ratio of senior debt to EBITDA, was increased.

The Company must meet all covenants through the maturity date of the Credit Facility. The Company is currently in compliance and Management believes it will remain in compliance with all loan covenants, although no assurances can be given regarding such compliance.

As of September 30, 2003, Management believes the Company’s cash position was sufficient to meet its working capital requirements. EBITDA (earnings before interest, taxes, depreciation and amortization) for the nine months ended September 30, 2003 was $3,591,000. Any future decrease in demand for the Company’s services or products would reduce the availability of funds through operations.

The Company benefited from Petrocon’s net operating loss carryforwards at the time of the Merger. Based on the research and advice of tax counsel, the realization of an additional net operating loss

14

carryforward asset is available to the Company. The Company had net operating loss carryforwards of approximately $1,592,000 as of December 31, 2002 with an annual limitation of $1,176,000. Current and non-current deferred tax assets representing the net operating loss carryforward and timing differences total $464,000 and $863,000 as of September 30, 2003 and December 31, 2002, respectively. The reduction in deferred tax assets during the nine months ended September 30, 2003 reflects the expected use of net operating loss carryforwards in 2003 to offset taxable income.

The Company’s working capital was $8,491,000 and $8,955,000 at September 30, 2003 and December 31, 2002, respectively. The change in working capital resulted from the growth of trade payables due to the increased procurement activities and to the increase in salaries and benefits accrual, caused by the timing of the payment of paychecks and payroll taxes, offset by growth in trade receivables.

The Company had total long-term debt outstanding of $10,707,000 and $13,323,000 as of September 30, 2003 and December 31, 2002, respectively. Total long-term debt includes the Credit Facility of $7,924,000 on the line of credit as of September 30, 2003 that matures on June 30, 2005.

One component of our business strategy is to expand our presence in new or existing markets through acquisition. We may acquire businesses using a combination of cash, equity and debt, with some acquisitions also involving the assumption of liabilities and contingent payments. Acquisitions involve a number of special risks, including:

• failure to realize the value of the acquired assets, businesses or projects;

• diversion of management’s attention;

• failure to retain key personnel;

• entrance into markets in which we have limited or no prior experience;

• increased general and administrative expenses;

• client dissatisfaction or performance problems with acquired assets, businesses or projects;

• write-offs due to impairment of goodwill and other intangible assets and other charges against earnings;

• assumption of unknown liabilities;

• the potentially dilutive issuance of our common stock, the use of significant amounts of cash or the incurrence of substantial amounts of debt; and

• other unanticipated events or circumstances.

We may not be able to identify, acquire or profitably manage additional businesses or integrate successfully any acquired businesses without substantial expense, delay or other operational or financial problems. Without additional acquisitions, we are unlikely to maintain historical growth rates.

Cash Flow

Operating activities provided net cash totaling $3,856,000 and $2,466,000 for the nine months ended September 30, 2003 and 2002, respectively. The increase in cash provided by operating activities primarily reflects the increase in operating earnings, trade payables and accrued salaries and benefits, partially offset by the increase in trade receivables for the period ended September 30, 2003 as compared to the same period in 2002.

Cash used for purchase of property and equipment total $1,049,000 for the nine months ended September 30, 2003 and $813,000 for the same period in 2002. The Company’s investing activities that used cash during the period ended September 30, 2003 consisted of leasehold improvements being made on

15

our Beaumont offices, purchases of computer equipment and software, and web site development. Investing activities during the same period in 2002 consisted primarily of software development costs.

Financing activities used cash totaling $3,311,000 for the nine months ended September 30, 2003, as compared to $2,850,000 for the same period in 2002. The increase in cash used for financing activities reflects higher net payments on the line of credit in 2003 as compared to 2002 and increased payments on other long-term debt.

The Company believes that it has adequate access to cash for the next 12 months through expected operating cash flow and availability under the line of credit. Cash and the availability of cash, could be materially restricted if circumstances prevent the timely internal processing of invoices into receivable accounts, if such accounts are not collected within 90 days of the original invoice date, if project mix shifts from cost reimbursable to fixed cost contracts during significant periods of growth, or if ENGlobal is not able to meet the monthly covenants of the Fleet Credit Facility. If any such events occur the Company would be forced to consider alternative financing options.

Asset Management

The Company’s cash flow from operations has been affected primarily by the timing of its collection of trade accounts receivable. The Company typically sells its products and services on short-term credit terms and seeks to minimize its credit risk by performing credit checks and conducting its own collection efforts. The Company had net trade accounts receivable of $19,159,000 and $16,492,000 at September 30, 2003 and December 31, 2002, respectively. The number of days’ sales outstanding in trade accounts receivable was 54 days and 60 days, respectively.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, notes and capital leases payable, and debt obligations. The book value of cash and cash equivalents, accounts receivable, accounts payable and short-term notes payable are considered to be representative of fair value because of the short maturity of these instruments.

We do not utilize financial instruments for trading purposes and we do not hold any derivative financial instruments that could expose us to significant market risk. Our exposure to market risk for changes in interest rates relates primarily to our obligations under the Fleet Credit Facility. As of September 30, 2003, $7,924,000 had been borrowed under the line of credit, accruing interest at 4.25% per year, excluding amortization of prepaid financing costs. A 10% increase in the short-term borrowing rates on the Credit Facility outstanding as of September 30, 2003 would be 43 basis points. Such an increase in interest rates would increase our annual interest expense by approximately $34,000 assuming the amount of debt outstanding remains constant.

The above sensitivity analysis for interest rate risk excludes accounts receivable, accounts payable and accrued liabilities because of the short-term maturity of such instruments. The analysis does not consider the effects this movement may have on other variables including changes in revenue volumes that could be indirectly attributed to changes in interest rates. The actions that Management would take in response to such a change are also not considered. If it were possible to quantify this impact, the results could well be different than the sensitivity effects described above.

16

Item 4.    Controls and Procedures

With the participation of Management, the Company’s chief executive officer and chief financial officer reviewed and evaluated the Company’s disclosure controls and procedures as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended as of a date within 90 days prior to the filing of this report. Based on this evaluation, the chief executive officer and chief financial officer concluded that the disclosure controls and procedures are effective in bringing to their attention on a timely basis information relating to the Company and its consolidated subsidiaries in connection with the Company’s filing of its quarterly report on Form 10-Q for the period ended September 30, 2003. There have been no significant changes in the Company’s internal controls for financial reporting or in other factors that could significantly affect these controls, including any significant deficiencies or material weaknesses of internal controls that would require corrective action. In connection with the new rules, the Company is currently in the process of further reviewing and documenting its disclosure controls and procedures, including its internal accounting controls, and may from time to time make changes aimed at enhancing their effectiveness and ensuring that the Company’s systems evolve with its business.

PART II.    Other Information

Item 1.    Legal Proceedings

From time to time, the Company is involved in various legal proceedings arising in the ordinary course of business. The Company is currently party to legal proceedings that have been reserved for, are covered by insurance, or that, if determined adversely to us individually or in the aggregate, would not have a material affect on the Company’s results of operations.

Engineered Carbons, Inc. filed a claim in 2000 against the Company in the 60^th District Court of Jefferson County, Texas, alleging failure of contractual performance purportedly caused by faulty design. The claim is covered by the Company’s errors and omissions insurance. The Company has further reserved $100,000, the amount of its deductible under such insurance. This litigation remains pending and is in the discovery phase. Engineered Carbons has yet to specify the relief that it is seeking in the litigation.

During the first nine months of 2003, the Company (and/or its subsidiaries, in particular RPM Engineering, Inc.), and more than 40 other parties were named defendants in several petitions for damages filed in various district courts in Louisiana (East Baton Rouge, Calcasieu, Iberville, Ascension, and Orleans Parishes) on behalf of former employees of Barnard and Burk, Inc. The plaintiffs, who allege exposure to asbestos during the course of their employment, were employees of Barnard and Burk, Inc. during a period covering the late 1950’s through the early 1980’s at facilities located within the state of Louisiana. In 1994, AMEC Engineering, Inc. assigned the trade name “Barnard and Burk” to RPM Engineering, Inc. along with selected assets. No liabilities were acquired by RPM. The Company’s indirect wholly owned subsidiary, ENGlobal Engineering, Inc., formerly known as Petrocon Engineering, Inc., acquired RPM (RPM along with the “Barnard and Burk” trade name) in 1996 pursuant to a stock purchase agreement with Willie E. Rigsby and Robert A. Marks (collectively, the “Sellers”). Because Petrocon acquired only the “Barnard and Burk” trade name, and none of its liabilities, the Company is seeking to be extricated from the suits via summary judgment. In addition, AMEC has an obligation to indemnify RPM, and furthermore, the Company is seeking indemnification from the Sellers in connection with claims relating to products shipped or manufactured by, or any services provided by, RPM and any of its subsidiaries prior to Petrocon’s acquisition of RPM. The Company believes the lawsuits are without merit and intends to defend them vigorously.

17

Item 2.    Changes in Securities and Use of Proceeds

Prior to August 15, 2003, Equus held all of the issued and outstanding Series A Preferred Stock. The Designation provided for the conversion of each share of Series A Preferred Stock, at the option of the Company, if the Company’s Common Stock was publicly traded on a national securities exchange for at least 20 consecutive days at a closing price of at least $3.00 per share. This requirement was met as of the close of business on August 14, 2003, and on August 15, 2003, the Board authorized conversion of all outstanding Series A Preferred Stock, including the dividends accrued thereon since May 31, 2003, into 1,149,089 shares of Common Stock. All converted preferred shares are required to be cancelled in accordance with the Designation, resulting in a reduction of the authorized shares from 5,000,000 to 2,265,167 authorized shares of Series A Preferred Stock.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Submission of Matters to a Vote of Security Holders

None.

Item 5.    Other Information

The Company, Equus and certain other shareholders of the company entered into a Voting Agreement dated December 21, 2001 which provided among other things, that the parties thereto would vote their shares to cause the board of directors to include one representative designated by Equus. Randall B. Hale is Equus’s current board designee. In a letter to the Company dated September 19, 2003, Equus advised the Company that it irrevocably relinquished its right under the Voting Agreement to designate a representative for election to the board of directors. The Company currently intends to retain Mr. Hale on its board of directors.

The Tulsa office relocated to new facilities July 2003, occupying 11,250 square feet of the CityPlex Towers Building in Tulsa, Oklahoma. The Company executed an agreement for additional space in October 2003.

Item 6.    Exhibits and Reports on Form 8-K

a.    Exhibits

10.74	Sublease Agreements between Family Connect, Inc., a tenant of CityPlex Towers Building, and IDS Engineering, dated February 2, 2003
10.75	Lease Agreement between Oral Roberts University and IDS Engineering, dba ENGlobal Engineering, Inc., dated October 20, 2003
10.76	Sixth Amendment to Second Amended and Restated Loan and Security Agreement as of June 30, 2003 between ENGlobal Corporation and Subsidiaries and Fleet Capital Corporation
31.1	Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act for 2002 for the Third Quarter 2003
31.2	Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act for 2002 for the Third Quarter 2003
32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act for 2002 for the Third Quarter 2003

18

b. Current Report on Form 8-K

July 7, 2003. Item 9. Regulation FD Disclosure. A press release regarding the award of a large cogeneration project was issued on July 7, 2003 and a copy was filed under Regulation FD on Form 8-K. (Headline: ENGlobal Awarded Cogeneration Contract; Project Man-hours Expected to Exceed Three-Hundred Thousand.)

July 15, 2003. Item 9. Regulation FD Disclosure. A press release regarding the acquisition of assets from Petro-Chem Engineering, Inc., which allows ENGlobal to expand into Freeport, Texas, was issued July 14, 2003 and a copy was filed with the SEC under Regulation FD on Form 8-K. (Headline: ENGlobal Opens Office in Freeport, Texas; Purchases Selected Assets of Petro-Chem Engineering, Inc.)

August 14, 2003. Item 9. Regulation FD Disclosure. A press release regarding the Second Quarter 2003 results was issued on August 14, 2003 and a copy was filed with the SEC under Regulation FD on Form 8-K. (Headline: ENGlobal Reports Record Revenues and Profits; Revenue Growth Exceeds 30%.)

August 19, 2003. Item 9. Regulation FD Disclosure. A press release regarding the conversion of all of its outstanding preferred stock into common stock was issued on August 19, 2003 and a copy was filed with the SEC under Regulation FD on Form 8-K. (Headline: ENGlobal Exercises Conversion Rights on Preferred Stock and Provides Details Concerning this Action.)

October 20, 2003. Item 9. Regulation FD Disclosure. A press release regarding the award of a contract on an instrument replacement project for the Baton Rouge area was issued on October 20, 2003 and a copy was filed with the SEC under Regulation FD on Form 8-K. (Headline: ENGlobal Awarded Instrument Replacement Project; Contract Provides New Jobs for Baton Rouge Office.)

November 3, 2003. Item 9. Regulation FD Disclosure. A press release regarding the acquisition of Senftleber & Associates, L.P. by ENGlobal Corporation’s subsidiary, ENGlobal Technologies, Inc. was issued on November 3, 2003 and a copy was filed with the SEC under Regulation FD on Form 8-K. (Headline: ENGlobal Completes Strategic Acquisition; Control System Capabilities Expanded.)

19

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ENGlobal Corporation
Dated: November 12, 2003	By:	/s/ Robert W. Raiford
	Robert W. Raiford, Chief Financial Officer and Treasurer

20

EX-10.74

Exhibit 10.74

SUBLEASE AGREEMENT

AGREEMENT, made this 28^th day of February, between FamilyConnect. Inc., a              (hereinafter referred to as “Sublessor”) and IDS Engineering, Inc. dba ENGlobal Engineering. Inc. (hereinafter referred to as “Sublessee”).

WITNESSETH

WHEREAS, pursuant to Lease dated July 5, 2000 between Oral Roberts University, as Landlord, and FamilyConnect.lnc., as Tenant, a copy of which Lease is attached hereto as Exhibit “B” (hereinafter referred to as the “Lease”), covering a portion of the CityPlex Towers Building (hereinafter referred to as the “Leasehold”); and

WHEREAS, Sublessee desires to sublease from Sublessor and Sublessor desires to sublease unto Sublessee the portion of the Leasehold indicated in red on Exhibit B containing approximately 11,250 square feet (hereinafter referred to as the “Premises”); and

NOW, THEREFORE, in consideration of the Premises and the mutual undertakings, covenants, promises and agreements of the parties, IT IS AGREED AS FOLLOWS:

1. Providing all of the terms and conditions contained within this Agreement are fulfilled, Sublessor shall sublease unto Sublessee and Sublessee shall accept the sublease of the Premises from the date hereof through August 1, 2005, subject to the rents, terms, covenants, conditions and provisions set forth in the Lease.

2. The Occupancy and Commencement date is August     , 2003 and is conditioned upon the completion of all of the following:

a) This Agreement is executed by the Sublessor and Sublessee; and

b) The Landlord has approved the Sublease, in writing.

3. This Agreement shall automatically terminate on August 1, 2005 or such earlier date as provided herein.

4) Possession of space shall be allowed to begin July 1, 2003.

5) Sublessee represents and warrants that it has read the Lease and agrees that:

a) The terms, covenants, promises and conditions of the Lease are incorporated herein;

b) Sublessee shall comply with and be bound by all of the terms, covenants, promises and conditions of the Lease; and

c) Sublessee shall comply (without delay) with all reasonable requirements of the Landlord’s consent to this Sublease.

5. Sublessor shall duly observe and perform those obligations imposed upon the Tenant under the lease to the extent that such obligations are not provided in this Sublease to be observed or performed by Sublessee, except with respect to any failure in such observance or performance which results from any default by Sublessee.

6. Sublessor warrants and represents to Sublessee that on the Commencement Date:

a) The Lease is valid and existing, there are no existing defaults on the part of the Landlord or the Tenant with respect thereto, and the Landlord does not hold any claim against the Tenant; and

b) There are and will be no contracts for services or otherwise on account of maintenance or repairs which expressly or impliedly are or will be binding upon Sublessee or upon the Premises.

7. In consideration for this Sublease, Sublessee shall pay Sublessor an annual rental for the Premises of One Hundred Four Thousand Sixty Four Dollars ($ 104,064.00) to be paid in equal monthly payments in advance on the first day of each and every month of Eight Thousand Six Hundred Seventy Two Dollars ($ 8,672.00 ). Simultaneously with the execution of this Sublease, Sublessee shall pay a security deposit equal to one month’s rent and the first month’s rent in advance. Commencing N/A. the annual rent shall be increased or decreased by one-third of any adjustments to Sublessor’s rent paid to Landlord.

8. Sublessee shall pay Sublessor $8,672.00 (equivalent to one month’s lease rate) for the cubicles listed in Exhibit A.

9. Any notices shall be in writing and shall be sent by registered or certified mail, return receipt requested, addressed to the parties at the addresses indicated on page one hereof, or such other address as such party has been advised of in writing.

10. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the Premises, and there are no other terms, covenants, obligations, or representations, oral or written, of any kind whatsoever.

11. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto, their respective heirs, executors, administrators, successors and assigns and may not be revoked or amended, except by instrument, in writing, subscribed by the party sought to be charged therewith.

12. SPECIAL CONDITIONS. Existing furniture and cubicles per the Addendum attached as Exhibit “A” shall be a part of this Sublease.

13. For value received and in consideration for, and as an inducement to, Sublessor making this Sublease, IDS Engineering, Inc. dba ENGlobal Engineering, Inc. guarantees to Sublessor and Sublessor successors and assigns, the full performance and observance of all the covenants, conditions and agreements herein provided to be performed by Sublessee, without requiring any notice of non-payment, non-performance, or non-observance, or proof, or notice or demand, all of which the guarantor waives and expressly agrees that the validity of this guaranty

and the obligations of the guarantor hereunder shall in nowise be terminated, affected, or impaired by reason of the assertion by Sublessor against Sublessee or any or the rights or remedies reserved to Sublessor under the Sublease.

14. This Agreement shall be interpreted and governed by the laws of the State of Oklahoma.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date, month and year first above written.

SUBLESSOR FAMILYCONNECT, INC.	SUBLESSEE IDS ENGINEERING, INC. DBA ENGLOBAL ENGINEERING, INC.
By: Kirk Murdoch	By: William A. Coskey
Name: Kirk Murdoch Title: President & CFO	Name: William A. Coskey Title: President

CONSENT OF LANDLORD

Landlord consents to the Sublease of Sublessor’s premises on the 33^rd floor of the                     subject to the lease to Sublessee on the express conditions that (1) Sublessor shall remain fully and completely liable for all of the obligations under the lease, (2) this consent will not be deemed to be a consent to any subsequent assignment or sublease and that no further assignment or subletting of all or any portion of the premises subject to the lease will be made without the prior written consent of the Lessor, (3) if the lease is terminated or surrendered, in addition to all other rights and remedies of Lessor, the Sublease shall be automatically and simultaneously terminated, (4) no modification or amendment of the Sublease will be made without the prior written consent of Lessor, and (5) if any conflict between the lease and the Sublease exists, the lease shall control.

WITNESS:

/s/ ILLEGIBLE

MWW IdcO20603-2

LANDLORD

ORAL ROBERTS UNIVERSITY

By: /s/ ILLEGIBLE

Title: Vice President

Date: 3/10/03

EXHIBIT A

ADDENDUM

Cube Inventory

12-17-02

NOTE: The following is an inventory of the cubes. I counted each individual cube on the floor and estimated what was in storage. The various parts, connectors, screws and power outlets was not inventoried, however I believe we have enough parts to connect everything together properly. Most of the cubes are already setup and functional.

Item	Length	Depth	Quantity
Desktop	5'	2'4"	29
Desktop	5'2"	2'	4
Desktop	5'	2'	7
	Height	Length
Panel	4'4"	2'4"	56
Panel	4'4"	5'	29
Panel	3'4"	2'	4
Panel	4'4"	2'	7
Panel	3'4"	5'	7
	Height	Dimensions
Posts	4'4"	2" x 2"	36
Posts	3'4"	2" x 2"	5

Power Poles	7
File Cabinets	43
Desk Drawer	25
Chairs	25
Keyboard Pullouts	8

MWW IdcO20603-2

THIS LEASE AGREEMENT (the “Lease”) is made and entered into on this the 5th day of July, 2000, between Oral Roberts University, an Oklahoma corporation (“Landlord) and FamilyConnect, Inc., an Oklahoma corporation (“Tenant”).

WITNESSETH:

Definitions.

(a) “Project” shall mean the real property described in Exhibit “A” attached hereto and made a part hereof and the improvements constructed thereon.

(b) “Building” shall mean the CityPlex Towers Building, located on the real property described in Exhibit “A” attached hereto and made a part hereof which has a street address of 2448 E. 81st Street, Suite 3300, Tulsa, Oklahoma 74137.

(c) “Premises” shall mean the suite of offices outlined on the floor plan attached to this Lease as Exhibit “0” attached hereto and made a part hereof. The Premises are stipulated for all purposes to contain approximately 11,250 square feet of “Net Rentable Area” (as hereafter defined) provided, however, that Landlord may, at any time during the term of this Lease, cause precise measurements of the Building (including Common Areas and Service Areas, as hereafter defined) and the Premises to be made, and the Net Rentable Area of the Building and of the Premises, as well as the Base Rental (as hereafter defined) shall be adjusted upward or downward accordingly, effective as of the Commencement Date. The Premises are located In the Building.

(d) “Base Rental” shall mean the sum of $126,562.50 per annum as adjusted under Paragraph 29 hereof. The Base Rental due for the first month of the Lease Term (as hereafter defined) has been deposited with Landlord by Tenant contemporaneously with the execution hereof.

(e) “Commencement Date” shall mean August 1, 2000, except as such date may be delayed pursuant to the provisions of paragraph 3(c) hereof.

(f) “Lease Term” shall mean the term commencing on the Commencement Date: and continuing Until 60 months after the first day of the first full month following the Commencement Date.

(g) “Security Deposit” shall mean the sum of $10,500.00.

(h) “Building Common Areas” shall mean those areas devoted to lobbies and entryways.

(i) “Common Areas” shall mean the Building Common Areas and corridors, elevator foyers, restrooms, mechanical rooms, janitorial closets, electrical and telephone closets, vending areas and other similar facilities provided for the common use or benefit of tenants generally and/or the public.

(j) “Single Floor Common Areas” shall mean that pan of the Common Areas located on a designated floor.

(k) “Service Areas” shall mean those areas within the outside walls of the Building used for elevator mechanical rooms, building stairs, fire towers, elevator shafts, flues, vents, stacks, pipe shafts and vertical ducts (but shall not include any such areas for the exclusive use of a particular Tenant).

(l) “Net Rentable Area” of one floor or the Building shall mean the gross area within the inside surface of the outer glass or other material comprising the exterior walls or the Building to the Common Areas or Service Areas side of walls separating the Common Areas and Service Areas from any other areas of the floor.

(m) “Net Rentable Area of the Building” shall mean the total of the Net Rentable Area of all floors of the Building.

(n) “Net Rentable Area of the Premises” shall mean the gross area within the inside surface of the outer glass or other material comprising the exterior walls of the Premises from Common Areas and Service Areas, subject to the following:

(1) Areas.

Net Rentable Area of the Premises shall not include any Service.

(2) Net Rentable Area of The Premises shall include a pro rata part of the Building Common Areas plus a pro rata part of the Single Floor Common Areas on the floor on which The Premises are located, such prorations based upon an allocation to each floor of The Building of Building Common Areas (based upon the Net Rentable Area of each floor and the Net Rentable Area of The Building, exclusive of Building Common Areas) and upon the ratio of the Net Rentable Area of the Premises to The total Net Rentable Area of such flour.

(3) Net Rentable Area of the Premises shall include any columns and/or projection(s), which protrude into the Premises and/or the Common Areas.

(o) “Basic Costs” intentionally omitted.

(p) “Exterior Common Areas” shall mean Those areas of the Project which are not located within the Building and which are provided and maintained for the common use and benefit of Landlord and Tenants of the Building generally and the employees, invitees and licensees of Landlord and such Tenants; including without limitation all parking areas, enclosed or otherwise, all streets, sidewalks and landscaped areas located within the Project.

(q) “Tenant Improvements”, when used herein, shall mean those improvements to the Premises which landlord has agreed to provide pursuant to the plans and specifications (“Plans”) attached (or to be attached) hereto as Exhibit “C” and made a part hereof. In the event the Plans are not attached to this lease as of the date of execution hereof, this lease shall terminate, at landlord’s option, on the day next following the 14th day from the date hereof unless landlord and Tenant initial and attach the Plans to this Lease on or before such date. Landlord’s approval of and initialing of any plans and specifications shall be at landlord’s sole discretion. All Tenant Improvements shall be made and constructed only by Landlord or Landlord’s designee. Except to the extent otherwise agreed (and described on an addendum to the Plans), the making and constructing of the Tenant Improvements shall be at Tenant’s expense. “Building Standard” shall mean the type, brand and/or quality of materials landlord designates from time to time to be the minimum quality to be used in the Building or the exclusive type, grade or quality of material to be used in the Building.

2. Lease Grant, Subject to and upon the terms herein set forth, landlord leases to Tenant and Tenant leases from landlord the Premises.

3). Lease Term.

(a) This Lease shall continue in force during a period beginning on the Commencement Date and continuing until the expiration of the Lease Term, unless this Lease is sooner terminated or extended to a later day under any other term or provision hereof.

(b) If by the date specified in Paragraph I(e) the Tenant Improvements have not been substantially completed pursuant to the Plans due to omission, delay or default by Tenant or anyone acting under or for Tenant, landlord shall have no liability as a result of such noncompletion and the obligations or this Lease (including without limitation, the obligation to pay rent) shall nonetheless commence as of the Commencement Date.

(c) If, however, the Tenant Improvements are not substantially completed due to any reason other than an omission, delay or default by Tenant or someone acting under or for Tenant, then, as Tenant’s sole remedy for the delay in Tenant’s occupancy of the Premises, the Commencement Date shall be delayed and the rent herein provided shall not commence until the earlier to occur of actual occupancy by Tenant or substantial completion of the Tenant Improvements.

4. Use. The Premises shall be used for office purposes and for no other purpose. Tenant agrees not to use or permit the use of The Premises for any purpose which is illegal including the sale, directly or indirectly, of pornographic material, or the sale of any other product or service which, in landlord’s judgement, creates a nuisance or which would increase the cost of insurance coverage with respect to The Project or The Building.

(a) Tenant agrees to pay to Landlord during the lease term, without any setoff or deduction whatsoever, the Base Rental and all such other sums of money as shall become due hereunder as additional rent, all of which are sometimes herein collectively called “rent”, for the nonpayment of which landlord shall be entitled to exercise all such rights and remedies as are herein provided in the case of the nonpayment of Base Rental. The annual Base Rental for each calendar year or portion thereof during the Lease Term, together with any estimated adjustments thereof pursuant to Paragraphs 20, 21, and 29 hereof, shall be due and payable in advance in equal monthly installments on the first day of each calendar month during the Lease Term and any extensions or renewals thereof, and Tenant hereby agrees to pay such Base Rental and any adjustments thereto to Landlord at Landlord’s address provided herein (or such other address in Tulsa County as may be designated by Landlord in writing from time to time) monthly, in advance, and without demand. If the Lease Term commences on a day other than the first day of a calendar month or terminates on a day other than the last day of a calendar month, then the installments of Base Rental and any adjustments thereto for such month or months shall be prorated, based on the number of days in such month.

(b) In the event any installment of rent is not paid when due and payable, Tenant shall pay a late charge of $25.00 per day for each day of delinquency.

6. Basic Cost Increase Adjustment, Intentionally omitted.

7. Services to be Furnished by Landlord. Landlord agrees to furnish Tenant the following services:

(a) Hot and cold water at those points of supply provided for general use of tenants in The Building on the floor(s) on which The Premises are located and central heal and air conditioning in the Premises in season, al such temperatures and in such amounts as are considered by Landlord to be standard or as required by governmental authority; provided, however. heating and air conditioning service at times other than for “Normal Business Hours” for the Building (which are 7:30 a.m. 10 6:00 pm. on Mondays through Fridays and 8:00 a.m. to 1:00 p.m. on Saturdays, exclusive of normal business holidays), shall be furnished only upon the written request of Tenant delivered to Landlord prior to 3:00 p.m. at lease three (3) days in advance of The date such usage is requested. Tenant shall bear the entire cost of such additional service allocable to The Premises as such costs are determined by Landlord from lime to time and shall pay such costs to Landlord upon demand.

(b) Routine maintenance and electric lighting service for all Exterior Common Areas, Building Common Areas, Single Floor Common Areas on the floor on which the Premises arc located, and Service Areas in the manner and to the extent deemed by Landlord to be standard.

(c) Janitor service in the Premises, Monday through Friday, exclusive of normal business holidays; provided, however, if Tenant’s floor covering or other improvements require special treatment, Tenant shall pay the additional cleaning cost attributable thereto as additional rent upon presentation of a statement therefor by Landlord. Tenant shall cooperate with Landlord’s employees In the furnishing by Landlord of janitorial services at such times (including Normal Business Hours) as Landlord elects to have the necessary work performed; provided, however, that janitorial services performed by landlord during Normal Business Hours shall be performed in such a manner as to not interfere unreasonably with Tenants use of the Premises.

(d) Subject to the provisions of Paragraph 13, facilities to provide all electrical current required by Tenant in its use and occupancy of the Premises.

(e) All Building Standard fluorescent bulb replacement in the Premises and fluorescent and incandescent bulb replacement in the Building Common Areas. Single Floor Common Areas on the floor on which the Premises are located, and Services Areas.

(f) Landlord may elect to provide security in the form of limited access to the Building during other than Normal Business Hours. In such event Landlord may require those tenants requesting access to the Building during other than Normal Business Hours to pay a fee for access to partially reimburse Landlord for the cost of the system which limits after-hours access. Landlord, however, shall have no liability to Tenant, its employees, agents, invitees or licensees for losses due to theft or burglary, or for damages done by unauthorized persons on the Premises and Landlord shall not be required to insure against any such losses.

The failure by Landlord to any extent to furnish these services or the interruption or termination of these defined services in whole or in part, resulting from causes beyond the reasonable control of Landlord shall neither render Landlord liable in any respect nor be construed as an eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from the obligation to fulfill any covenant or agreement hereof. Should any of the equipment or machinery used in the provision of such services for any cause cease to function properly, Tenant shall have no claim for offset or abatement of rent or damages on account of an interruption in service occasioned thereby or resulting therefrom.

8. Tenant Improvements to be Made by Landlord. Except for those of the Tenant Improvements to be at Landlord’s cost, all installations and improvements now or hereafter placed on the Premises shall be for Tenant’s account and at Tenant’s cost (and Tenant shall pay ad valorem taxes and increased Insurance thereon or attributable thereto), which cost shall be payable by Tenant to Landlord in advance, as additional rent. All such installations and improvements must be approved in writing by Landlord in advance of installation or construction.

9. Maintenance and Repair of Premises by Landlord. Except as otherwise expressly provided herein, Landlord shall not be required to make any repairs to the Premises, the Building, or the Project.

10. Graphics. Tenant shall not erect or install any sign or other type display whatsoever, either upon the exterior of the Building, upon or in any window, or in any lobby, without the prior express written consent of Landlord. The color and fabric of the lining of all drapes or, if unlined, the draperies themselves which Tenant desires to place on exterior windows or openings of the Building must be approved by Landlord prior to their installation so that a uniform color appearance may be preserved from the exterior of the Building. Landlord agrees to furnish a directory of the names and locations of its tenants and to install and maintain the same at a convenient location in the lobby of the Building. The initial listing of the name and room number of the Tenant shall be furnished without charge. The listings of additional names or room numbers and changes or revisions of listings shall be made by Landlord at the cost of Tenant.

11. Care of the Premises by Tenant. Tenant agrees not to commit or allow any waste to be committed on any portion of the Premises, and at the termination of this Lease to deliver up the Premises to Landlord In as good condition as at the date of the commencement of the term of this Lease, ordinary wear and tear excepted.

12. Repairs and Alterations by Tenant. Tenant covenants and agrees with landlord that all repairs and replacements to the Building or Project occasioned by damage done to the Building or Project or any part thereof caused by Tenant or Tenant’s agents, employees, invitees, or visitors shall be made by landlord or landlord’s designee al the Tenant’s sole cost and expense. Such repairs shall restore the Building or Project to as good a condition as it was in prior to such damage and shall be effected in compliance with all applicable laws. Tenant shall pay the landlord’s cost of such repairs and alterations to the Landlord in advance as additional rent. Tenant agrees with landlord not to make or allow to be made any alterations to the Premises, install any vending machines on the Premises, or place signs on the Premises which are visible from outside the Premises, without first obtaining the prior written consent of landlord in each such instance, which consent may be given on such conditions as Landlord may elect. Any and all alterations to the Premises shall be made by landlord or landlord’s designee and shall become the property of landlord upon termination of this lease (except for movable equipment or furniture owned by Tenant), landlord may, nonetheless, require Tenant to remove any and all fixtures, equipment and other improvements installed on the Premises which removal, if required, shall be performed by landlord or landlord’s designee and, in such event Tenant shall pay to landlord on demand landlord’s cost of restoring the Premises to Building Standard.

13. Use of Electrical Services by Tenant. Tenant’s use of electrical services furnished by Landlord shall be subject to the following:

(a) Tenant’s electrical equipment shall be restricted to that equipment which individually does not have a rated capacity greater than .5 kilowatts per hour and/or require voltage other than 120/208 volts, single phase. Collectively, Tenant’s equipment shall not have an electrical design load greater than an average of 2 watts per square foot of Net Rentable Area of the Premises.

2 watts per square foot of Net Rentable Area of the Premises.

(c) If tenant’s consumption of electrical services exceeds either the rated capacities and/or design loads as per Paragraphs 13(a) and 13(b), or generates heat in excess of that Landlord’s air conditioning system is designed to handle, then Tenant shall remove such equipment and/or lighting to achieve compliance within ten (10) days after receiving notice from landlord or, upon receiving Landlord’s prior written approval, such equipment and/or lighting may remain in the Premises, subject to the following:

(i) Tenant shall pay for all costs of installation and maintenance of submeters, wiring, additional air conditioning systems and other items required by landlord, in landlord’s discretion, to accommodate Tenant’s excess design loads and capacities or heat generation.

(ii) Tenant shall reimburse to Landlord, upon demand, the cost of the excess demand and consumption of electrical service at rates charged to Landlord (which rates shall be in accordance with any applicable laws) as well as all costs of operating additional air conditioning systems deemed necessary by Landlord on account of Tenant’s excess consumption and/or heat generation.

(iii) Landlord may, at its option, upon not less than thirty- (30) days’ prior written notice to Tenant, discontinue the availability of such extraordinary utility service and/or air conditioning service. If Landlord gives any such notice, Tenant will contract directly with such public utility at Tenant’s cost for the supplying of such utility service to the Premises.

14. Parking. During the Term of this Lease, Tenant shall have the non-exclusive use in common with Landlord, other tenants of the Building, their guests and invitees, of the non-reserved common automobile parking areas, driveways, and footways, subject to rules and regulations for the use thereof as prescribed from time to time by Landlord. Landlord reserves the right to designate park areas within the Project or in reasonable proximity thereto, for Tenant and Tenant’s agents and employees. Tenant shall provide landlord with a list of all license numbers for the cars owned by Tenant, its agents and employees. In the event that Tenant, its agents and employees, park on portions of the Common Area other than those assigned to Tenant, Landlord reserves the right to charge Tenant as additional rental hereunder Twenty-five Dollars ($2500) for each such occurrence.

15. Laws and Regulations. Tenant agrees to comply with all applicable laws, ordinances, rules and regulations of any governmental entity or agency having jurisdiction of the Premises.

16. Building Rules. Tenant will comply with the Rules of the Building and the Project adopted and altered by Landlord from lime 10 time and will cause all of its agents, employees, invitees and visitors to do so; all changes to such Rules will be sent by Landlord to Tenant in writing. The initial Rules for the Project are attached hereto as Exhibit “0” and made a part hereof.

17. Entry by Landlord. Tenant agrees to permit Landlord or its agents or representatives to enter into and upon all or any part of the Premises or to the Building at all reasonable hours (and in emergencies at all times) to inspect the same, to show the Premises to prospective purchasers, mortgagees, tenants or insurers, or to clean or make repairs, alterations or additions thereto, and Tenant shall not be entitled to any abatement or reduction of rent by reason thereof.

18. Assignment and Subletting.

(a) Tenant shall not assign, sublease, transfer, sell or encumber this Lease or any interest therein. Any attempted assignment, sublease, transfer, sale or encumbrance by Tenant in violation of the term and covenants of this paragraph shall be void.

(b) All cash or other proceeds of any assignment, sublease, transfer, or sale of Tenant’s interest in this Lease, whether consented to by landlord or not, shall be paid to Landlord, notwithstanding the fact such proceeds exceed the rentals called fur hereunder, unless Landlord agrees to the contrary in advance in writing, and Tenant hereby assigns to Landlord all rights it might have or ever acquire in any such proceeds. This covenant and assignment shall run with the land and shall bind Tenant and Tenant’s heirs, executors,

transferees, and purchasers being hereinafter referred to as “Successors”), by assuming Tenant’s obligations hereunder, shall assume liability to Landlord for all amounts paid to persons other than Landlord by such Successor in consideration of any such assignment, subletting, transfer, or sale in violation of the provisions hereof.

19. Mechanic’s Liens. Tenant will not permit any mechanic’s or materialman’s lien or liens to be placed upon the Premises, the Building, or the Project and nothing in this Lease shall be deemed or construed in anyway as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any person for the performance of any labor or the furnishing of any materials to the Premises, the Building, or the Project, or any part thereof, nor as giving Tenant any right, power, or authority to contract for or permit rendering of any services or the furnishing of any materials that would give rise to any mechanic’s, materialman’s, or other liens against the Premises. In the event any such lien is attached to the Premises, then, in addition to any other right or remedy of Landlord, Landlord may, but shall not be obligated to, discharge the same. Any amount paid by Landlord for any of the aforesaid purposes shall be paid by Tenant to landlord on demand as additional rent.

20. Insurance

(a) Landlord shall maintain fire and extended coverage insurance on the Building and The Premises in such amounts, as the building’s mortgagees shall require payable solely to Landlord or the mortgagees of the Building, as their interests shall appear Tenant shall maintain at its expense, in an amount equal to full replacement cost, fire and extended coverage insurance on all of its personal property, including removable trade fix lures, located In The Premises and in such additional amounts as are required to meet Tenant’s obligations pursuant to Paragraph 24 hereof. Tenant’s insurance pursuant to the provisions of Paragraphs 20(a) and 20(b) hereof shall provide that such Insurance may not be cancelled or expire without at least thirty (30) days’ prior written notice to Landlord from the insurer. Tenant shall, at Landlord’s request from lime to time, provide Landlord with current certificates of insurance evidencing Tenant’s compliance with this Paragraph 20(a) and Paragraph 20(b).

(b) Tenant and landlord shall, each al its own expense, maintain a policy or policies of comprehensive general liability insurance with respect to the respective activities of each in the Building with the premiums thereon fully paid on or before due date, issued by and binding upon an insurance company approved by landlord, such insurance 10 afford minimum protection of not less than $1,000,000 combined single limit coverage of bodily injury, property damage or combination thereof and shall name Landlord and Tower Realty Group, Inc. as additional insureds landlord shall not be required to maintain insurance against thefts within the Premises, the Building or the Project generally.

21. Property Taxes. Landlord agrees (subject to the provisions of Paragraph 6 hereof) to pay all ad valorem taxes levied against the Project, but Tenant shall be liable for all taxes levied against personal property and trade fixtures placed by Tenant in the Premises. If any taxes for which Tenant is liable under this Paragraph are levied against Landlord or Landlord’s property and if Landlord elects to pay the same or if the assessed value of Landlord’s property is increased by inclusion of personal property and trade fixtures placed by Tenant in the Premises and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is liable hereunder.

22. Indemnity. Landlord and its officers, agents, managers, and employees shall not be liable: to Tenant, or to Tenant’s agents, servants, employees, customers, or invitees for any injury to person or damage to property caused by any act, omission, or neglect of Tenant, its agents, servants, or employees, invitees, licensees or any other person entering the Project under the invitation of Tenant or arising out of the use of the Premises by Tenant and the conduct of its business or out of a default by Tenant in the performance of its obligations hereunder. Tenant hereby indemnifies and holds landlord and its officers, agents, managers, and employees harmless from all liability and claims for any such damage or injury.

23. Waiver or Subrogation Rights. Anything in this Lease to the contrary notwithstanding, Landlord and Tenant each hereby waives any and all rights of recovery, claim, action, or cause of action, against the other, its agents, officers, managers, or employees, for any loss or damage that may occur to the Premises, or any improvements thereto, or the Building or the Project, or any improvements thereto, or any personal property of such party therein, by reason of fire, the elements, or any other cause(s) which are insured against under the terms of the standard fire and extended coverage insurance policies referred to in Paragraph 20 hereof.

24. Casualty Damage, If the Premises or any pan thereof shall be damaged by fire or other casualty, Tenant shall give prompt written notice thereof to Landlord. In case the Building shall be so damaged that substantial alteration or reconstruction of the Building shall, in Landlord’s sole opinion, be required (whether or not the Premises shall have been damaged by such casualty) or in the event any mortgagee of the Building should require that the insurance proceeds payable as a result of a casualty be applied to the payment of the mortgage debt or in the event of any material uninsured loss to the Building, landlord may, at its option, terminate this Lease by notifying Tenant in writing of such termination within ninety (90) days after the date of such damage. If Landlord does not thus elect to terminate this Lease, Landlord shall commence and proceed with reasonable diligence to restore the Building to substantially the same condition in which it was immediately prior to the happening of the casualty, except that Landlord’s obligation to restore shall not exceed the scope of the work required to be done by Landlord at Landlord’s expense in originally constructing the Building and installing the Tenant’s improvements, nor shall Landlord be required to spend for such work an amount in excess of the insurance proceeds actually received by landlord as a result of the casualty. When the portions of the Premises originally furnished at landlord’s expense have been restored by Landlord, Tenant shall, at Tenant’s expense, complete the restoration of the Premises, including the reconstruction of all improvements in excess of those Tenant Improvements originally installed at landlord’s expense, and the restoration of Tenant’s furniture and equipment. Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from such damage or the repair thereof, except that, subject to the provisions of the next sentence, landlord shall allow Tenant a fair diminution of rent during the time and to the extent the Premises are unfit for occupancy. If the Premises or any other portion of the Building or the Project be damaged by fire or other casualty resulting from the fault or negligence of Tenant or any of Tenant’s agents, employees, or invitees, the rent hereunder shall not be diminished during the repair of such damage and Tenant shall be liable to Landlord for the cost of the repair and restoration of the Building or the Project caused thereby to the extent such cost and expense is not covered by insurance proceeds.

25. Condemnation. If the whole or substantially the whole of the Building or the Premises should be taken for any public or quasi-public use, by right of eminent domain or otherwise, or should be sold In lieu of condemnation, then this Lease shall terminate as of the date when physical possession of the Building or the Premises is taken by the condemning authority. If less than The whole or substantially the whole of the Building or the Premises is thus taken or sold, Landlord (whether or not the Premises are affected thereby) may terminate this Lease by giving written notice Thereof to Tenant; in which event, this Lease shall terminate as of the date when physical possession of such portion of the Building or Premises is taken by the condemning authority. If the Lease is not so terminated upon any such taking or sale, the Base Rental payable hereunder shall be diminished by an equitable amount, and Landlord shall, to the extent Landlord deems feasible, restore the Building and the Premises to substantially their former condition, but such work shall not exceed the scope of the work done by Landlord in originally constructing the Building and the Tenant Improvements, nor shall landlord in any event be required to spend for such work an amount in excess of the amount received by landlord as compensation for such taking. All amounts awarded upon a taking of any part or all of the Building or the Premises shall belong to Landlord, and Tenant shall not be entitled to, and expressly waives all claims to, any such compensation.

26. Damages From Certain Causes. Landlord shall not be liable to Tenant for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition, or order of governmental body or authority or by any other cause beyond the control of Landlord. Nor shall Landlord be liable for any damage or inconvenience, which may arise through repair or alteration of any part of the Building, the Project, or the Premises.

27. Events of Default/Remedies.

(a) The following events shall be deemed to be events of default by Tenant under this Lease: (i) Tenant shall fail to comply with any provision of this lease or any other agreement between Landlord and Tenant all of which terms, provisions and covenants shall be deemed material; (ii) the leasehold hereunder demised shall be taken on execution or other process of law in any action against Tenant; (iii) Tenant shall fail to promptly move into and take possession of the Premises when the Premises are ready for occupancy or shall cease to do business in or abandon any substantial portion of the Premises; (iv) Tenant shall become insolvent or unable: to pay its debts as they become due, or Tenant notifies Landlord that it anticipates either condition; (v) Tenant takes any action to, or notifies landlord that Tenant

intends to file a petition under any section or chapter of the United States Bankruptcy Code, as amended, or under any similar law or statute of The United States or any State thereof; or a petition shall be filed against Tenant under any such statute or Tenant or any creditor of Tenant’s notifies Landlord that it knows such a petition will be filed or Tenant notifies Landlord that it expects such a petition to be filed; or (vi) a receiver or trustee shall be appointed for Tenant’s leasehold interest in the Premises or for all or a substantial part of the assets of Tenant.

(b) If Tenant does not make payment when due of any rental installment required of Tenant in the Lease, or if default by Tenant under this Lease otherwise occurs, in addition to the imposition or appropriate late charges, Landlord may, at its option, declare the total Base Rental due or to be due under this Lease immediately due and payable and, if the same is not paid upon demand, said total Base Rental shall be past due, delinquent, and in default.

If Tenant does not make payment when due of any rental installment, Tenant waives notice of rent due and demand for payment of said unpaid installment and waives notice and demand by Landlord for the Tenant to quit and vacate the Premises if such rent not be paid.

(c) Upon the occurrence of any event or events of default by Tenant, whether enumerated in this Paragraph 27 or not, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand for possession whatsoever (and without limiting the generality of the foregoing), Tenant hereby specifically waives notice and demand for payment of rent or other obligations due and waives any and all other notices or demand requirements imposed by applicable law): (i) terminate this Lease In which event Tenant shall immediately surrender the Premises to Landlord; (ii) terminate Tenant’s right to occupy the Premises and re-enter and take possession of the Premises (without terminating this lease); (iii) enter upon the Premises and do whatever Tenant is obligated to do under the terms of this lease; and Tenant further agrees that landlord shall not be liable for any damages resulting to the Tenant from such action; and (iv) exercise all other remedies available to landlord at law or in equity, including, without limitation, injunctive relief of all varieties.

In the event landlord elects to re-enter or take possession of the Premises after Tenant’s default, Tenant hereby waives notice of such re-entry or repossession and of landlord’s intent to re-enter or take possession. Landlord may, without prejudice to any other remedy which he may have for possession or all arrearages in rent, expel or remove Tenant any other persons who may be occupying said Premises or any pan thereof. In addition, the provisions of Paragraph 30 hereof shall apply with respect to the period from and after the giving of notice of such election to Tenant. All landlords’ remedies shall be cumulative and not exclusive. Forbearance by landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default.

(d) This Paragraph 27 shall be enforceable to the maximum extent not prohibited by applicable law, and the unenforceability of any portion thereof shall not thereby render unenforceable any other portion. To the extent any provision of applicable law requires some action by landlord to evidence or effect the termination of this Lease or to evidence the termination of Tenant’s right of occupancy, Tenant and landlord hereby agree that notice, either oral or by telephone, or by any act of Landlord that comes to the attention of Tenant, its agents, servants, or employees, which reflects Landlord’s intention to terminate, shall be sufficient to evidence and effect the termination herein provided for, but Tenant hereby agrees that, as between Landlord and Tenant, its successors and assigns, no such notice shall ever be necessary to effect a termination hereunder.

(e) landlord shall be in default hereunder in the event Landlord has not begun and pursued with reasonable diligence the cure of any failure of Landlord to meet its obligations hereunder within thirty (30) days of the receipt by Landlord of written notice from Tenant of the alleged failure to perform. In no event shall Tenant have the right to terminate or rescind this Lease as a result of Landlord’s default as to any covenant or agreement contained in this Lease or as a result of the breach of any promise or inducement hereof, whether in this Lease or elsewhere. Tenant hereby waives such remedies of termination and rescission and hereby agrees that Tenant’s remedies for default hereunder and for breach of any promise or inducement shall be limited to a suit for damages and/or injunction. In addition, Tenant hereby covenants that, prior to the exercise of any such remedies, it will give the mortgagees holding mortgages on the Building notice and a reasonable time to cure any default by Landlord.

Peaceful Enjoyment. Tenant shall, and may peacefully have, hold, and enjoy the Premises, subject to other terms hereof, provided that Tenant pays the rent and other sums here in required to be paid by Tenant and performs all of Tenant’s covenants and agreements herein

each of Landlord and its successors only with respect to breaches occurring during the respective periods of ownership of each of the Landlord’s interest hereunder.

29. Consumer Price Index Adjustment. Effective the first day following each one-year period of the lease Term, the Base Rental hereunder shall be increased over The Base Rental payable hereunder during the preceding year by an amount which represents a percentage increase in the Base Rental payable during the preceding year, equal to the percentage increase in the CPI (hereafter defined) between The most recent CPI publication prior to the commencement of the preceding one-year period and the most recent CPI publication as of the date thirty (30) days prior to such annual adjustment in Base Rental. CPI shall mean the Consumer Price Index for All Urban Consumers (CPI-U) for all items (Dallas/Forth Worth, Texas Area) published by the Bureau of labor Statistics, U.S., U.S. Department of Labor (1967 equals 100). If the Bureau of Labor Statistics shall ever cease to compile or publish The

CPI-U, then CPI shall thereafter mean such other index of prices published by the U.S. Government as most nearly approximates the CPI-U now published. All calculations made hereunder shall, if necessary, be adjusted to reflect any change in the base year used in calculating the CPl. Landlord shall be entitled to require that the payment of the adjustment to Base Rental provided for in this paragraph be made in monthly installments equal to 1/12 of such adjustment for each year during the remainder of that year, such installments being due and payable on the first day of each calendar month during such year. The percentage increase in Base Rental called for hereunder shall not exceed two percent (2%) per year.

30. Holding Over. In the event of holding over by Tenant after expiration or other termination of this Lease, or in the event Tenant continues to occupy the Premises after the termination of Tenant’s right of possession pursuant to Paragraph 27 (c)(ii) hereof, Tenant shall, throughout the entire holdover period, pay rent equal on a per diem basis, to twice the Base Rental and additional Base Rental which would have been applicable had the term of this Lease continued through the period of such holding over by Tenant. No holding over by Tenant after the expiration of the Lease Term shall be construed to extend the term of the Lease. The provision of this paragraph shall not be in place of or in lieu of, but shall be in addition to, the provisions of Paragraph 27(b).

31. Subordination to Mortgage. Tenant accepts this Lease subject and subordinate to any mortgage, deed of trust or other lien presently existing or hereafter arising upon the Premises, upon the Building or upon the Project as a whole, and to any renewals, refinancing and extensions thereof, but Tenant agrees that any such mortgagee shall have the right at any time to subordinate such mortgage, deed of trust or other lien to this Lease on such terms and subject to such conditions as such mortgagee may deem appropriate in its discretion. Landlord is hereby irrevocably vested with full power and authority to subordinate this Lease to any mortgage, deed of trust or other lien now existing or hereafter placed upon the Premises, the Building or the Project as a whole, and Tenant agrees upon demand to execute such further instruments subordinating this Lease or attorning to the holder of any such liens as Landlord may request. The terms of this Lease are subject to approval by the Building’s permanent lender(s), and such approval is a condition precedent to Landlord’s obligations hereunder. In the event that Tenant should fail to execute any instrument of subordination herein required to be executed by Tenant promptly as requested, Tenant hereby irrevocably constitutes Landlord as its attorney-in-fact to execute such instrument in Tenant’s name, place and stead, it being agreed that such power is one coupled with an interest. Tenant agrees that it will from time to time upon request by Landlord execute and deliver to such persons as Landlord shall request a statement in recordable form certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), stating the dates to which rent and other charges payable under this lease have been paid, stating that Landlord is not in default hereunder (or if Tenant alleges a default stating the nature of such alleged default) and further stating such other matters as Landlord shall reasonably require.

32. Landlord’s Lien. Tenant hereby grants to landlord a lien and security interest on all equipment, goods, furniture, fixtures, and inventory of Tenant now or hereafter placed in or upon the Premises and the proceeds thereof, and such property shall thereafter, wherever located, be and remain subject to such lien and security interest of landlord for payment of all rent and other sums agreed to be paid by Tenant herein. The provisions of this paragraph relating to such lien and security interest shall constitute a security agreement under and subject to the Oklahoma Uniform Commercial Code so that landlord shall have and may enforce a security interest on all such property of Tenant now or hereafter placed in or on the Premises, in addition to and cumulative of the Landlord’s liens and rights provided by law or by the other terms and provisions of this Lease. Tenant agrees to execute as debtor such financing statement

33. Attorney’s Fees. In the event either party defaults in the performance of any of the terms of this Lease and the other party employs an attorney in connection therewith, the defaulting party agrees to pay the other party’s reasonable attorney’s fees.

34. No Implied Waiver. The failure of landlord to insist at any time upon the strict performance of any covenant or agreement of this Lease or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of rent due under this Lease shall be deemed to be other than on account of the earliest rent due hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy in this lease provided.

35. Personal Liability. The liability of landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited to the interest of Landlord in the Project and Tenant agrees to look solely to Landlord’s interest in the Project for the recovery of any judgment from the Landlord, it being intended that Landlord shall not be personally liable for any judgment or deficiency.

36. Security Deposit. The Security Deposit shall be held by Landlord without liability for interest and as security for the performance by Tenant of Tenant’s covenants and obligations under this Lease, it being expressly understood that the Security Deposit shall not be considered an advance payment or rental or a measure of Tenant’s damages in case of default by Tenant. Unless otherwise provided by mandatory non-waivable law or regulation, Landlord may commingle the Security Deposit with Landlord’s other funds. Landlord may, from time to time, without prejudice to any other remedy, use the Security Deposit to the extent necessary to make good any arrearages of rent or to satisfy any other covenant or obligation of Tenant hereunder. Following any such application of all or any part of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount. If Tenant is not in default at the termination of this Lease, Landlord shall return the balance of the Security Deposit remaining after any such application to Tenant. If Landlord transfers its interest in the Premises during the term of the Lease, landlord may assign the Security Deposit to the transferee and thereafter shall have no further liability for the return of such Security Deposit.

37. Notice. Any notice in the Lease provided for must, unless otherwise expressly provided herein, be in writing, and may, unless otherwise in this Lease expressly provided, be given or be served by depositing the same in the United States mail, postpaid and certified and addressed to the party to be notified, with return receipt requested. Notice deposited in the mail in the manner hereinabove described shall be effective from and after the expiration of three (3) days after it is so deposited. Notices mailed shall be addressed to the parties at the following addresses:

If to Landlord:

c/o Tower Realty Group, Inc.

2488 E. 81st St., Suite 188

Tulsa, OK 74137

If to Tenant

FamilyConnect, Inc.

2448 E. 81st St., Ste. 3300

Tulsa, OK 74137

or in each case to such other address as either party may from time to time designate in writing.

38. Severability. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law.

39. Recordation. Tenant agrees not to record this Lease.

40. Governmental Law. This Lease and the rights and obligations of the parties hereto shall be interpreted, construed, and enforced in accordance with the laws or the State or Oklahoma.

41. Force Majeure. Whenever a period of time is herein prescribed for the taking of any action by Landlord, Landlord shall not be liable or responsible for, and there shall be

God, shortages of labor or materials, war, governmental laws, regulations or restrictions, or any other cause whatsoever beyond the control of landlord.

42. Time of Performance. Except as expressly otherwise herein provided, with respect to all required acts of Tenant time is of the essence of this Lease.

43. Transfers by Landlord. Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Premises, the Building, The Project, and property referred to herein, and in such event and upon such transfer landlord shall be released from any further obligations hereunder and Tenant agrees to look solely to Landlord’s successor in interest then occupying Landlord’s position hereunder fur the performance of such obligations.

44. Commissions. Landlord and Tenant hereby indemnify and hold each other harmless against any loss, claim, expense, or liability with respect to any commissions or brokerage fees claimed on account of the execution and/or renewal of this and due to any action of the indemnifying party.

45. Effect of Delivery of This Lease. Landlord has delivered a copy of this Lease to Tenant for Tenant to lease the Premises. This lease shall not be effective until a copy executed by both landlord and Tenant is delivered to and accepted by landlord.

46. Relocation. In the event the Premises contain 5,000 square feet or less of Net Rentable Area of the Premises, Landlord shall be entitled to cause Tenant to relocate from the Premises to a comparable space (“Relocation Space”) within the Building at any time after reasonable written notice not in excess of ninety (90) days is given to Tenant of Landlord’s election. Any such relocations shall be entirely at the expense of Landlord or the third party tenant replacing Tenant in the Premises. Such a relocation shall terminate or otherwise affect or modify this Lease except that from and after the date or such relocation, “Premises” shall refer to the Relocation Space into which Tenant has been moved, rather than the original Premises as herein defined.

47. Building Name. Landlord reserves the right at any time and from time to time to change the name by which the Building is designated.

48. Corporate Authority. If Tenant is a corporation, Tenant warrants that it has legal authority to operate and is authorized to do business in the state of Oklahoma. Tenant and the person executing this Lease on behalf of Tenant warrant that the person or persons executing this Lease on behalf of Tenant has authority to do so and to fully obligate Tenant to all terms and provisions of this Lease. Tenant shall, upon request from Landlord, furnish Landlord with a certified copy of resolutions of Tenant’s Board of Directors authorizing this Lease and granting authority to execute it to the person or persons who have executed it on Tenant’s behalf.

49. Exhibits. Exhibits “A”, “B”, “C”, “D” and “Addendum” are attached hereto and incorporated herein and made a part of this Lease for all purposes.

50. Tenant acknowledges that prior to its entering into of this Lease the Landlord and Tower Realty Group, Inc. have disclosed to Tenant that:

(a) Tower Realty Group, Inc. is a licensed real estate broker in Oklahoma, and,

(b) with regard to the Building, Tower Really Group, Inc. is The Landlord’s leasing agent and property manager.

51. Broker. The parties hereto agree that the sole broker who negotiated and brought about this transaction was Austin Neal of Tower Realty Group, Inc. and Landlord agrees to pay a commission therefore as per separate agreement.

Tenant represents it neither consulted nor negotiated with any broker other than Austin Neal of Tower Realty Group, Inc. and with regard to the Leased Premises. Tenant agrees to indemnify, defend and save Landlord harmless from and against any claims for fees or commissions from anyone other than Austin Neal or Tower Really Group, Inc., and with whom Tenant has dealt in connection with the Leased Premises or this Lease.

The representations and indemnities contained in this Section 51 shall survive The expiration or earlier termination of this Lease.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in multiple counterparts as of the day and year first above written.

WITNESS:

/s/ [ILLEGIBLE]            

Name

WITNESS:

/s/ [ILLEGIBLE]            

Name

LANDLORD

Oral Robert University

An Oklahoma corporation

By /s/ [ILLEGIBLE]

Title Vice President

TENANT

FamilyConnect, Inc.

An Oklahoma corporation

By /s/ [ILLEGIBLE]

Title CEO

Exhibit “A”

LEGAL DESCRIPTION

According to the recorded plat thereof Tulsa County, City of Tulsa. State of Oklahoma, known as:

A tract of land that is part of Lot One (I). Block One (1), of ORAL ROBERTS UNIVERSITY HEIGHTS 2ND ADDITION and Addition to the City of Tulsa. Tulsa County. Oklahoma, according to the Recorded Plat thereof, more particularly described as follows, to-wit:

STARTING at the Northwest comer of said Lot I; thence South 89 degrees 48’ 06” E along the Northerly line of Lot I for 939.90 feet to the POINT OF BEGINNING of said tract of land; thence continuing South 89 degrees 48’ 06” E along said Northerly line for 558.08 feet; thence S 0 degrees 11’ 54” W for 30.29 feet to a point of curve; thence Southerly and Southwesterly along a curve to the Right, with a central angle of 45 degrees 00’ 00” and a radius of 21-7.87 feet, for 171.12 feet to a point of Reverse curve; thence Southwesterly along a curve to the left with a central angle of 38 degrees 21’ 41” and a radius of 191.83 feet, for 128.44 feet to a point of compound curve, thence Southwesterly, Southerly and Easterly along a curve to the left, with a central angle of 96 degrees 311’ 19” and a radius of 18.83 feet for 31.77 feet to a point of tangency; thence S 89 degrees 48’ 06” E along said tangency for 50.01 feet; thence S 00 degrees 11’ 54” W for 254.33 feet; thence N 89 degrees 48’ 06” W for 41.82 feet to a point of curve; thence Westerly, Southerly and Southeasterly along a curve to the left, with a central angle of 101 degrees 10’ 31” and a radius of 18.83 feet, for 33.26 feet to a point of compound curve; thence Southeasterly and Easterly along a curve to the left with a central angle of 78 degrees 49’ 29” and a radius of 511.83 feet, for 704.16 feet to a point of tangency; thence S 89 degrees 48’ 06” E along said tangency for 656.38 feet to a point on the Easterly line of said Lot 1, said point being 1008.29 feet Southerly of the Northeast comer thereof; thence S 0 degrees 24’ 38” W along said Easterly line for 598.22 feet; thence N 89 degrees 53’ 47” W along an extension of and along the Northerly line of Lot I in Block I of UNIVERSITY VILLAGE, an Addition to the City of Tulsa, Tulsa County, Oklahoma, for 2538.15 feet to the Northwest comer of said Lot I of University Village; thence N 0 degrees 0 I’ 32” W for 0.00 feet to a point of curve; thence Northerly along the Westerly line of Lot 1 of ORAL ROBERTS UNIVERSITY HEIGHTS 2ND ADDITION on a curve to the right, with a central angle of 0 degrees 00’ 58” and a radius of 350.00 feet, for 0 10 feet to a point of tangency; thence N 0 degrees 00’ 34” W along the Westerly line of said Lot I on said tangency for 602.32 feet; thence S 89 degrees 48’ 06” E for 546.16 feet to a point of curve; thence Easterly and Northeasterly along a curve to the left, with a central angle of 78 degrees 49’ 29” and a radius of 511.83 feet, for 704.16 feet to a point of compound curve; thence Northeasterly, Northerly, and Westerly along a curve to the left, with a central angle of 101 degrees 10’ 31” and a radius of 18.83 feet, for 33.26 feet to a point of tangency; thence N 89 degrees 48’ 06” W along said tangency for 41.82 feet; thence N 00 degrees 11’ 54” E for 254.33 feet; thence S 89 degrees 48: 06” E for 50.01 feet to a point of curve; thence Easterly, Northerly, and Northwesterly along a curve to the left, with a central angle of 96 degrees 38’ 19” and a radius of 18.83 feet, for 31.77 feet to a point of compound curve; thence Northwesterly along a curve to the left, with a central angle of 38 degrees 21’ 41” and a radius of 191.83 feet, for 128.44 feet to a point of reverse curve; thence Northwesterly and Northerly along a curve to the right, with a central angle of 45 degrees 00’ 00” and a radius of 217.87 feet, for 171.12 feet to a point of tangency; thence N 0 degrees II’ 54” E along said tangency for 21.30 feet to a point of curve; thence Northerly and Northwesterly along a curve to the left, with a central angle of 22 degrees 0 I’ 21” and a radius of 24.00 feet, for 9.22 feet to the Point of Beginning of said tract of land.

LESS AND EXCEPT:

A tract of land that is part of Lot I in Block I of ORAL ROBERTS UNIVERSITY HEIGHTS 2ND ADDITION, an Addition to the City of Tulsa, Tulsa County, Oklahoma, said tract of land being described as follows, to-wit:

Starting at the Northwest corner of Lot I of University Village, an Addition to the City of Tulsa, Tulsa County, Oklahoma, thence S 89 degrees 53’ 47” E along the Northerly line of said Lot 1 for 779.12 feet to the “Point of Beginning” of said tract of land; thence N 0 degrees 06’ 13” E for 64.50 feel; thence S 89 degrees 53’ 47” E fur 58.00 feet; thence S 0 degrees 06’ 13” W for 64.50 feet to . point on the Northerly line of Lot I of “University Village”; thence N 89 degrees 53’ 47” W along said Northerly line for 58.00 feet to the Point of Beginning of said tract of land.

Exhibit “C”

TENANT IMPROVEMENTS

Landlord shall provide the building standard improvements shown on Exhibit “B” at Landlord’s sole cost and expense. Tenant shall pay for the double herculite entry doors to the Premises and the installation of said entry doors.

Tenant agrees to pay any additional expense incurred in connection with the Premises other than the attached plans and specifications.

Exhibit “D”

RULES AND REGULATIONS

1. Sidewalks, doorway, vestibules, halls, stairways, and similar areas shall not be obstructed nor shall refuse, furniture, boxes or other items be placed therein by Tenant or its officers, agents, servants, and employees, or used for any purpose other than ingress and egress to and from the leased premises or for going from one part of the Building to another part of the Building. Canvassing, soliciting, and peddling in the Building are prohibited.

2. Plumbing fixtures and appliances shall be used only for the purposes for which constructed, and no unsuitable material shall be placed therein.

3. No signs, directories, posters, advertisements, or notices shall be painted or affixed on or to any of the windows or doors, or in corridors or other parts of the Building, except in such color, size, and style, and in such places as shall be first approved in writing by Landlord in its discretion. One (1) building standard identification sign will be prepared by Landlord al Landlord’s expense. No additional signs shall be posted without Landlord’s prior written consent as to location and form, and the cost of preparing and posting such signs shall be borne solely by Tenant. Landlord shall have the right to remove all unapproved signs without notice to Tenant, at the expense of Tenant.

4. Tenant shall not do, or permit anything to be done in or about the Building, or bring or keep anything therein, that will in any way increase the rate of fire or other insurance on the Building, or on property kept therein or otherwise increase the possibility or fire or other casualty (example: Candles, halogen floor lamps, electric heaters).

5. Landlord shall have the power to prescribe the weight and position or heavy equipment or objects, which may overstress any portion or the floor. All damage done to the Building by the improper placing or such heavy items will be repaired at the sole expense or the responsible tenant.

6. A tenant shall notify the Building manager when safes or other heavy equipment or objects are taken in or out of the Building, and the moving shall be done after written permission is obtained from Landlord on such conditions as Landlord shall require. Any moving in or moving out of Tenant’s equipment, furniture, files, and/or fixtures shall be done only with prior written notice to Landlord, and Landlord shall be entitled to prescribe the hours of such activity, the elevators which shall be available for such activity and shall, in addition, be entitled to place such other conditions upon Tenant’s moving activities as Landlord deems appropriate. Tenant shall bear all risk of loss relating to damage incurred with respect to Tenant’s property in the process of such a move, and in addition, shall indemnify and hold Landlord harmless as to all losses, damages, claims, causes of action, costs and/or expenses relating to personal injury or property damage sustained by Landlord or any third part on account of Tenant’s moving activities.

7. Corridor doors, when not in use, shall be kept closed.

8. All deliveries must be made via the service entrance and elevators designated by Landlord for service, if any, during normal working hours. Landlord’s written approval must be obtained for any delivery after normal working hours.

9. Each tenant shall cooperate with landlord’s employees in keeping leased premises neat and clean.

10. Tenant shall nor cause or permit any improper noises in the Building, or allow unpleasant odors to emanate from the leased premises, or otherwise interfere, injure, or annoy in any way other tenants or persons having business with them.

11. No animals shall be brought into or kept in or about the Building.

12. No boxes, crates, or other such materials shall be stored in hallways or other Common Areas. When Tenant must dispose of crates, boxes, etc., it will be the responsibility of Tenant to dispose of same prior to, or after the hours of 7:30 a.m. and 5:30 p.m, so as to avoid having such debris visible in the Common Area during Normal Business Hours.

13. No machinery of any kind, other than ordinary office machines such as computers, typewriters and calculators, shall be operated on leased premises without the prior

written consent of Landlord, nor shall a tenant use or keep in the Building any flammable or explosive fluid or substance (including Christmas trees and ornaments). or any illuminating materials, including candles. No space heaters, halogen floor lamps or fans shall be operated in the Building.

14. No bicycles, motorcycles, or similar vehicles will be allowed in the Building.

15. No nails, hooks, or screws shall be driven into or inserted in any part of the Building except as approved by Building maintenance personnel. Nothing shall be affixed to, or made to hang from the ceiling of the Premises without landlord’s prior written consent.

16. Landlord has the right to evacuate the Building in the event of an emergency or catastrophe.

17. No food and/or beverages shall be distributed from Tenant’s office without the prior written approval of the Building manager. Outside food services will be allowed in Tenant’s leased premises only.

18. No additional locks shall be placed upon any doors without the prior written consent of Landlord. All necessary keys shall be furnished by Landlord, and the same shall be surrendered upon termination of this lease, and Tenant shall then give Landlord of his agent an explanation of the combination of all locks on the doors or vaults. Tenant shall initially be given two (2) keys to the Demised Premises by Landlord. No duplicates of such keys shall be made by Tenant. Additional keys shall be obtained only from Landlord, at a fee to be determined by Landlord.

19. Tenant will not locate furnishings or cabinets adjacent to mechanical or electrical access panels so as to prevent personnel from servicing such units as routine or emergency access may require. Cost of moving such furnishing for Landlord’s access will be for Tenant’s account. The lighting and air conditioning equipment of The Building will remain the exclusive charge of the Building designated personnel.

20. Tenant shall comply with parking rules and regulations as may he posted and distributed from time to time.

21. No portion or the Building shall be used for the purpose or lodging rooms.

22. Tenant will not place vending machines or dispensing machines of any kind in the leased premises.

23. Prior written approval, which shall be at Landlord’s sole discretion, must be obtained for installation of window shades, blinds, drapes, or any other window treatment of any kind whatsoever. Landlord will control all internal lighting that may be visible from the exterior of the Building and shall have the right to change any unapproved lighting, without notice to Tenant, at Tenant’s expense.

24. No tenant shall make any changes or alterations to any portion of the Building without landlord’s prior written approval, which may be given on such conditions as landlord may elect. All such work shall be done by landlord or by contractors and/or workmen approved by Landlord working under Landlord’s supervision.

25. Tenant shall provide plexiglass or other pads for all chairs mounted on rollers or casters.

26. Landlord reserves the right to rescind any of these rules and make such other and further rules and regulations as in its judgement shall from lime to time be needful for the operation of the Building, which rules shall be binding upon each Tenant upon delivery to such Tenant of notice thereof in writing.

TO CITYPLEX TOWER OFFICE LEASE AGREEMENT BY AND BETWEEN

ORAL ROBERTS UNIVERSITY, AN OKLAHOMA CORPORATION, LANDLORD AND

FAMILYCONNECT, INC., AN OKLAHOMA CORPORATION TENANT

1. Right of First Refusal

A. Provided that this Lease is then in full force and effect, and provided further that Tenant is not then in breach or default under any of the terms, covenants or conditions in this Lease on Tenant’s part to observe or perform, if Landlord intends to lease any space on the 32^nd floor to a third-party tenant, Landlord shall give Tenant written notice (the “Refusal Space Notice”) of such intention. During the five (5) business day period commencing on the date Landlord gives the Refusal Space Notice to Tenant, Tenant shall have the option (the “Refusal Space Option”) to lease the Refusal Space from Landlord by giving to Landlord written notice by U.S. certified mail, return receipt requested (the “Exercise Notice”), of Tenant’s exercise of the Refusal Space Option. The terms and conditions for the Right of First Refusal space shall be the same as the bona fide third party offer continuous in the “Refusal Space Notice”.

B. If Tenant fails to give the Exercise Notice to Landlord within said five (5) business day period, time being of the essence, or if Tenant falls for any reason to duly execute and deliver to Landlord an amendment 10 this Lease Agreement adding the Refusal Space hereto, within fifteen (15) days after Tenant gives the Exercise Notice to Landlord, time being of tm essence, the Refusal Space Option shall be deemed revoked and of no further force and effect and Landlord may thereafter proceed with the leasing of the Refusal Space to any third-party tenant upon terms and conditions satisfactory to said Tenant and Landlord.

C. Notwithstanding anything contained in this Lease to the contrary, if on the date Landlord gives the Refusal Space Notice to Tenant or on the date Tenant gives the Exercise Notice to Landlord, this Lease is not in full force and effect or Tenant is in breach or default under any of the terms, covenants and conditions in this Lease on Tenant’s part to observe or perform then, in addition to all of Landlord’s rights and remedies, the Refusal Space Option shall be deemed revoked and of no further force and effect, and Landlord may thereafter proceed with the leasing of the Refusal space to any tenant and upon any terms and conditions.

2. Expansion Option

Provided that this Lease is then in full force and effect, and provided further that Tenant is not in breach or default under any of the terms, covenants or conditions in this Lease on Tenant’s part to observe or perform, Tenant shall have the right to lease up to 11,250 square feet (“Additional space Option”) on the 32^nd floor at any time during the initial Lease term, subject to availability. The terms and conditions for the Additional space Option shall be the same as for the Premises, including, but not limited to a term to be coterminous with the original Lease terms, and a Tenant improvement allowance, and any other concessions provided to Tenant under the original Lease, proportionately reduced based upon the number of years remaining in the Lease term.

3. Option to Renew

Provided that this Lease is then in full force and effect, and provided further that Tenant is not then in breach or default under any of these terms, covenants or conditions in this Lease on Tenant’s part to observe or perform. Tenant shall have the right to renew the Lease for all or a portion of the premises for one (1) additional period of three (3) years, provided Tenant gives Landlord six (6) months prior written notice to the then expiring Lease Term. If the Option to Renew is exercised, the Base Rent during the Renewal Terms shall be at the then prevailing fair market rent. The “fair market rent” shall mean the amount that a willing, comparable renewal tenant with a renewal right at market would pay and a willing, comparable, landlord of a comparable office building in the market area would accept at arm’s-length.

3. Furniture

Landlord shall sell the modular furniture (97 units with chairs) on the 33^rd floor to Tenant for the sum of $87,500.00. Payment for the modular furniture shall be due upon execution of this Lease.

CONFIRMATION OF PRIOR AGENCY DISCLOSURE

The Oklahoma Real Estate Commission Rules require a licensee, as agent or principal, to clearly disclose the agency relationship(s) to the Landlord and Tenant prior to their entering into a binding agreement, and to confirm the prior agency disclosure in a separate provision, incorporated in or attached to that agreement.

In compliance with this Commission Rule, Landlord and Tenant confirm that before they entered into this Lease Agreement, Tower Realty Group, Inc. and Austin Neal had previously disclosed that they represent the landlord.

LANDLORD

Oral Robert University

An Oklahoma corporation

By /s/ [ILLEGIBLE]

Title Vice President

Date 7/5/2000

TENANT

FamilyConnect, Inc.

An Oklahoma corporation

By /s/ [ILLEGIBLE]

Title CEO

Date 7/5/2000

23

EX-10.75

Exhibit 10.75

CITYPLEX TOWERS LEASE AGREEMENT

THIS LEASE AGREEMENT (the “Lease”) is made and entered into on this the 20^th day of October 2003, between Oral Roberts University, an Oklahoma corporation (“Landlord”) and IDS Engineering, Inc. dba ENGlobal Engineering, Inc., a Texas corporation (“Tenant”).

WITNESSETH:

1. Definitions.

(a) “Project” shall mean the real property described in Exhibit “A” attached hereto and made a part hereof and the improvements constructed thereon.

(b) “Building” shall mean the CityPlex Towers Building, located on the real property described in Exhibit “A” attached hereto and made a part hereof which has a street address of 2408, 2448 and 2488 E. 8lst Street, Tulsa, Oklahoma 74137.

(c) “Premises” shall mean the suite of offices outlined on the floor plan attached to this Lease as Exhibit “B” attached hereto and made a part hereof which has a street address of 2448 E. 8lst St., Suite 3200, Tulsa, Oklahoma, 74137. The Premises are stipulated for all purposes to contain approximately 5,319 square feet of “Net Rentable Area” (as hereafter defined). The Premises are located in the Building.

(d) “Base Rental” shall mean the sum of $ (See Addendum) per annum as adjusted under Paragraph 29 hereof. The Base Rental due for the first month of the Lease Term (as hereafter defined) has been deposited with Landlord by Tenant contemporaneously with the execution hereof.

(e) “Commencement Date” shall mean November 1, 2003, except as such date may be delayed pursuant to the provisions of Paragraph 3(c) hereof.

(f) “Lease Term” shall mean the term commencing on the Commencement Date and continuing until 12 months after the first day of the first full month following the Commencement Date.

(g) “Security Deposit” shall mean the sum of $4,800.00. The security deposit has been deposited with Landlord by Tenant contemporaneously with the execution hereof.

(h) “Building Common Areas” shall mean those areas devoted to lobbies and entryways.

(i) “Common Areas” shall mean the Building Common Areas and corridors, elevator foyers, restrooms, mechanical rooms, janitorial closets, electrical and telephone closets, vending areas and other similar facilities provided for the common use or benefit of tenants generally and/or the public.

(j) “Single Floor Common Areas” shall mean that part of the Common Areas located on a designated floor.

(k) “Service Areas” shall mean those areas within the outside walls of the Building used for elevator mechanical rooms, building stairs, fire towers, elevator shafts, flues, vents, stacks, pipe shafts and vertical ducts (but shall not include any such areas for the exclusive use of a particular Tenant).

(l) “Net Rentable Area” of one floor of the Building shall mean the gross area within the inside surface of the outer glass or other material comprising the exterior walls of the Building to the Common Areas or Service Areas side of walls separating the Common Areas and Service Areas from any other areas of the floor.

(m) “Net Rentable Area of the Building” shall mean the total of the Net Rentable Area of all floors of the Building.

1

(n) “Net Rentable Area of the Premises” shall mean the gross area within the inside surface of the outer glass or other material comprising the exterior walls of the Premises to the mid-point of any walls separating portions of the Premises from those of adjacent tenants and to the Common Areas or Service Areas side of walls separating the Premises from Common Areas and Service Areas, subject to the following:

(1) Net Rentable Area of the Premises shall not include any Service Areas.

(2) Net Rentable Area of the Premises shall include a pro rata part of the Building Common Areas plus a pro rata part of the Single Floor Common Areas on the floor on which the Premises are located, such prorations based upon an allocation to each floor of the Building of Building Common Areas (based upon the Net Rentable Area of each floor and the Net Rentable Area of the Building, exclusive of Building Common Areas) and upon the ratio of the Net Rentable Area of the Premises to the total Net Rentable Area of such floor.

(3) Net Rentable Area of the Premises shall include any columns and/or projection(s), which protrude into the Premises and/or the Common Areas.

(o) “Basic Costs” intentionally omitted.

(p) “Exterior Common Areas” shall mean those areas of the Project which are not located within the Building and which are provided and maintained for the common use and benefit of Landlord and Tenants of the Building generally and the employees, invitees and licensees of Landlord and such Tenants; including without limitation all parking areas, enclosed or otherwise, all streets, sidewalks and landscaped areas located within the Project.

(q) “Tenant Improvements”, when used herein, shall mean those improvements to the Premises which Landlord has agreed to provide pursuant to the plans and specifications (“Plans”) attached (or to be attached) hereto as Exhibit “C” and made a part hereof. In the event the Plans are not attached to this Lease as of the date of execution hereof, this Lease shall terminate, at Landlord’s option, on the day next following the 14th day from the date hereof unless Landlord and Tenant initial and attach the Plans to this Lease on or before such date. Landlord’s approval of and initialing of any plans and specifications shall be at Landlord’s sole discretion. All Tenant Improvements shall be made and constructed only by Landlord or Landlord’s designee. Except to the extent otherwise agreed (and described on an addendum to the Plans), the making and constructing of the Tenant Improvements shall be at Tenant’s expense. “Building Standard” shall mean the type, brand and/or quality of materials Landlord designates from time to time to be the minimum quality to be used in the Building or the exclusive type, grade or quality of material to be used in the Building.

2. Lease Grant. Subject to and upon the terms herein set forth, Landlord leases to Tenant and Tenant leases from Landlord the Premises.

3. Lease Term.

(a) This Lease shall continue in force during a period beginning on the Commencement Date and continuing until the expiration of the Lease Term, unless this Lease is sooner terminated or extended to a later day under any other term or provision hereof.

(b) If by the date specified in Paragraph l(e) the Tenant Improvements have not been substantially completed pursuant to the Plans due to omission, delay or default by Tenant or anyone acting under or for Tenant, Landlord shall have no liability as a result of such noncompletion and the obligations of this Lease (including without limitation, the obligation to pay rent) shall nonetheless commence as of the Commencement Date.

(c) If, however, the Tenant Improvements are not substantially completed due to any reason other than an omission, delay or default by Tenant or someone acting under or for Tenant, then, as Tenant’s sole remedy for the delay in Tenant’s occupancy of the Premises, the Commencement Date shall be delayed and the rent herein provided shall not commence until the earlier to occur of actual occupancy by Tenant or substantial completion of the Tenant Improvements.

4. Use. The Premises shall be used for office purposes and for no other purpose. Tenant agrees not to use or permit the use of the Premises for any purpose which is illegal

2

including the sale, directly or indirectly, of pornographic material, or the sale of any other product or service which, in Landlord’s judgement, creates a nuisance or which would increase the cost of insurance coverage with respect to the Project or the Building.

5. Base Rental.

(a) Tenant agrees to pay to Landlord during the Lease Term, without any setoff or deduction whatsoever, the Base Rental and all such other sums of money as shall become due hereunder as additional rent, all of which are sometimes herein collectively called “rent”, for the nonpayment of which Landlord shall be entitled to exercise all such rights and remedies as are herein provided in the case of the nonpayment of Base Rental. The annual Base Rental for each calendar year or portion thereof during the Lease Term, together with any estimated adjustments thereto pursuant to Paragraphs 20, 21, and 29 hereof, shall be due and payable in advance in equal monthly installments on the first day of each calendar month during the Lease Term and any extensions or renewals thereof, and Tenant hereby agrees to pay such Base Rental and any adjustments thereto to Landlord at Landlord’s address provided herein (or such other address in Tulsa County as may be designated by Landlord in writing from time to time) monthly, in advance, and without demand. If the Lease Term commences on a day other than the first day of a calendar month or terminates on a day other than the last day of a calendar month, then the installments of Base Rental and any adjustments thereto for such month or months shall be prorated, based on the number of days in such month.

(b) In the event any installment of rent is not paid when due and payable, Tenant shall pay a late charge of $25.00 per day for each day of delinquency.

6. Basic Cost Increase Adjustment. Intentionally omitted.

7. Services to be Furnished by Landlord. Landlord agrees to furnish Tenant the following services:

(a) Hot and cold water at those points of supply provided for general use of tenants in the Building on the floor(s) on which the Premises are located and central heat and air conditioning in the Premises in season, at such temperatures and in such amounts as are reasonably considered by Landlord to be standard or as required by governmental authority. Landlord shall provide heating, air-conditioning, utilities, and electricity twenty-four (24) hours per day, seven (7) days per week.

(b) Routine maintenance and electric lighting service for all Exterior Common Areas, Building Common Areas, Single Floor Common Areas on the floor on which the Premises are located, and Service Areas in the manner and to the extent deemed by Landlord to be standard.

(c) Janitor service in the Premises, Monday through Friday, exclusive of normal business holidays; provided, however, if Tenant’s floor covering or other improvements require special treatment, Tenant shall pay the additional cleaning cost attributable thereto as additional rent upon presentation of a statement therefor by Landlord. Tenant shall cooperate with Landlord’s employees in the furnishing by Landlord of janitorial services at such times (including Normal Business Hours) as Landlord elects to have the necessary work performed; provided, however, that janitorial services performed by Landlord during Normal Business Hours shall be performed in such a manner as to not interfere unreasonably with Tenants use of the Premises.

(d) Subject to the provisions of Paragraph 13, facilities to provide all electrical current required by Tenant in its use and occupancy of the Premises.

(e) All Building Standard fluorescent bulb replacement in the Premises and fluorescent and incandescent bulb replacement in the Building Common Areas, Single Floor Common Areas on the floor on which the Premises are located, and Service Areas.

(f) Landlord may elect to provide security in the form of limited access to the Building during other than Normal Business Hours. In such event Landlord may require those tenants requesting access to the Building during other than Normal Business Hours to pay a fee for access to partially reimburse Landlord for the cost of the system which limits after-hours access. Landlord, however, shall have no liability to Tenant, its employees. Agents, invitees or licensees for losses due to theft or burglary or for damages done by unauthorized persons on the Premises and Landlord shall not be required to insure against any such losses. Tenant shall

3

cooperate fully in Landlord’s efforts to maintain security in the Building and shall follow all regulations promulgated by Landlord with respect thereto.

The failure by Landlord to any extent to furnish these services or the interruption or termination of these defined services in whole or in part, resulting from causes beyond the reasonable control of Landlord shall neither render Landlord liable in any respect nor be construed as an eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from the obligation to fulfill any covenant or agreement hereof. Should any of the equipment or machinery used in the provision of such services for any cause cease to function properly, Tenant shall have no claim for offset or abatement of rent or damages on account of an interruption in service occasioned thereby or resulting therefrom.

8. Tenant Improvements to be Made by Landlord. Except for those of the Tenant Improvements to be at Landlord’s cost, all installations and improvements now or hereafter placed on the Premises shall be for Tenant’s account and at Tenant’s cost (and Tenant shall pay ad valorem taxes and increased insurance thereon or attributable thereto), which cost shall be payable by Tenant to Landlord in advance as additional rent. All such installations and improvements must be approved in writing by Landlord in advance of installation or construction.

9. Maintenance and Repair of Premises by Landlord. Except as otherwise expressly provided herein, Landlord shall not be required to make any repairs to the Premises, the Building, or the Project.

10. Graphics. Tenant shall not erect or install any sign or other type display whatsoever, either upon the exterior of the Building, upon or in any window, or in any lobby, without the prior express written consent of Landlord. The color and fabric of the lining of all drapes or, if unlined, the draperies themselves which Tenant desires to place on exterior windows or openings of the Building must be approved by Landlord prior to their installation so that a uniform color appearance may be preserved from the exterior of the Building. Landlord agrees to furnish a directory of the names and locations of its tenants and to install and maintain the same at a convenient location in the lobby of the Building. The initial listing of the name and room number of the Tenant shall be furnished without charge. The listings of additional names or room numbers and changes or revisions of listings shall be made by Landlord at the cost of Tenant.

11. Care of the Premises by Tenant. Tenant agrees not to commit or allow any waste to be committed on any portion of the Premises, and at the termination of this Lease to deliver up the Premises to Landlord in as good condition as at the date of the commencement of the term of this Lease, ordinary wear and tear excepted.

12. Repairs and Alterations by Tenant. Tenant covenants and agrees with Landlord that all repairs and replacements to the Building or Project occasioned by damage done to the Building or Project or any part thereof caused by Tenant or Tenant’s agents, employees, invitees, or visitors shall be made by Landlord or Landlord’s designee at the Tenant’s sole cost and expense. Such repairs shall restore the Building or Project to as good a condition as it was in prior to such damage and shall be effected in compliance with all applicable laws. Tenant shall pay the Landlord’s cost of such repairs and alterations to the Landlord in advance as additional rent. Tenant agrees with Landlord not to make or allow to be made any alterations to the Premises, install any vending machines on the Premises, or place signs on the Premises which are visible from outside the Premises, without first obtaining the prior written consent of Landlord in each such instance, which consent may be given on such conditions as Landlord may elect. Any and all alterations to the Premises shall be made by Landlord or Landlord’s designee and shall become the property of Landlord upon termination of this Lease (except for movable equipment or furniture owned by Tenant). Landlord may, nonetheless, require Tenant to remove any and all fixtures, equipment and other improvements installed on the Premises which removal, if required, shall be performed by Landlord or Landlord’s designee and, in such event Tenant shall pay to Landlord on demand Landlord’s cost of restoring the Premises to Building Standard.

13. Use of Electrical Services by Tenant. Tenant’s use of electrical services furnished by Landlord shall be subject to the following:

(a) Tenant’s electrical equipment shall be restricted to that equipment which individually does not have a rated capacity greater than .5 kilowatts per hour and/or require voltage other than 120/208 volts, single phase. Collectively, Tenant’s equipment shall not have an electrical design load greater than an average of 2 watts per square foot of Net Rentable Area of the Premises.

4

(b) Tenant’s lighting shall not have a design load greater than an average of 2 watts per square foot of Net Rentable Area of the Premises.

(c) If Tenant’s consumption of electrical services exceeds either the rated capacities and/or design loads as per Paragraphs 13(a) and 13(b), or generates heat in excess of that Landlord’s air conditioning system is designed to handle, then Tenant shall remove such equipment and/or lighting to achieve compliance within ten (10) days after receiving notice from landlord or, upon receiving Landlord’s prior written approval, such equipment and/or lighting may remain in the Premises, subject to the following:

(i) Tenant shall pay for all costs of installation and maintenance of submeters, wiring, additional air conditioning systems and other items required by Landlord, in Landlord’s discretion, to accommodate Tenant’s excess design loads and capacities or heat generation.

(ii) Tenant shall reimburse to Landlord, upon demand, the cost of the excess demand and consumption of electrical service at rates charged to Landlord (which rates shall be in accordance with any applicable laws) as well as all costs of operating additional air conditioning systems deemed necessary by Landlord on account of Tenant’s excess consumption and/or heat generation.

(iii) Landlord may, at its option, upon not less than thirty- (30) days’ prior written notice to Tenant, discontinue the availability of such extraordinary utility service and/or air conditioning service. If Landlord gives any such notice, Tenant will contract directly with such public utility at Tenant’s cost for the supplying of such utility service to the Premises.

14. Parking. During the term of this Lease, Tenant shall have the non-exclusive use in common with Landlord, other tenants of the Building, their guests and invitees, of the non-reserved common automobile parking areas, driveways, and footways, subject to rules and regulations for the use thereof as prescribed from time to time by Landlord. Landlord reserves the right to designate parking areas within the Project or in reasonable proximity thereto, for Tenant and Tenant’s agents and employees. Tenant shall provide Landlord with a list of all license numbers for the cars owned by Tenant, its agents and employees. In the event that Tenant, its agents and employees, park on portions of the Common Area other than those assigned to Tenant, Landlord reserves the right to charge Tenant as additional rental hereunder Twenty-five Dollars ($25.00) for each such occurrence.

15. Laws and Regulations. Tenant agrees to comply with all applicable laws, ordinances, rules and regulations of any governmental entity or agency having jurisdiction of the Premises.

16. Building Rules. Tenant will comply with the rules of the Building and the Project adopted and altered by Landlord from time to time and will cause all of its agents, employees, invitees and visitors to do so; all changes to such rules will be sent by Landlord to Tenant in writing. The initial rules for the Project are attached hereto as Exhibit “D” and made a part hereof.

17. Entry by Landlord. Tenant agrees to permit Landlord or its agents or representatives to enter into and upon all or any part of the Premises or to the Building at all reasonable hours (and in emergencies at all times) to inspect the same, to show the Premises to prospective purchasers, mortgagees, tenants or insurers, or to clean or make repairs, alterations or additions thereto, and Tenant shall not be entitled to any abatement or reduction of rent by reason thereof.

18. Assignment and Subletting.

(a) Tenant shall not assign, sublease, transfer, sell or encumber this Lease or any interest therein. Any attempted assignment, sublease, transfer, sale or encumbrance by Tenant in violation of the term and covenants of this paragraph shall be void.

(b) All cash or other proceeds of any assignment, sublease, transfer, or sale of Tenant’s interest in this Lease, whether consented to by Landlord or not, shall be paid to

5

Landlord, notwithstanding the fact that such proceeds exceed the rentals called for hereunder, unless Landlord agrees to the contrary in advance in writing, and Tenant hereby assigns to Landlord all rights it might have or ever acquire in any such proceeds. This covenant and assignment shall run with the land and shall bind Tenant and Tenant’s heirs, executors, administrators, personal representatives, successors and assigns. Any assignee, sublessee, transferee, or purchaser of Tenant’s interest in this Lease (all such assignees, sublessees, transferees, and purchasers being hereinafter referred to as “Successors”), by assuming Tenant’s obligations hereunder, shall assume liability to Landlord for all amounts paid to persons other than Landlord by such Successor in consideration of any such assignment, subletting, transfer, or sale in violation of the provisions hereof.

19. Mechanic’s Liens. Tenant will not permit any mechanic’s or materialman’s lien or liens to be placed upon the Premises, the Building, or the Project and nothing in this Lease shall be deemed or construed in anyway as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any person for the performance of any labor or the furnishing of any materials to the Premises, the Building, or the Project, or any part thereof, nor as giving Tenant any right, power, or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to any mechanic’s, materialman’s, or other liens against the Premises. In the event any such lien is attached to the Premises, then, in addition to any other right or remedy of Landlord, Landlord may, but shall not be obligated to, discharge the same. Any amount paid by Landlord for any of the aforesaid purposes shall be paid by Tenant to Landlord on demand as additional rent.

20. Insurance.

(a) Landlord shall maintain fire and extended coverage insurance on the Building and the Premises in such amounts, as the Building’s mortgagees shall require payable solely to Landlord or the mortgagees of the Building, as their interests shall appear. Tenant shall maintain at its expense, in an amount equal to full replacement cost, fire and extended coverage insurance on all of its personal property, including removable trade fixtures, located in the Premises and in such additional amounts as are required to meet Tenant’s obligations pursuant to Paragraph 24 hereof. Tenant’s insurance pursuant to the provisions of Paragraphs 20(a) and 20(b) hereof shall provide that such insurance may not be cancelled or expire without at least thirty (30) days’ prior written notice to Landlord from the insurer. Tenant shall, at Landlord’s request from time to time, provide Landlord with current certificates of insurance evidencing Tenant’s compliance with this Paragraph 20(a) and Paragraph 20(b).

(b) Tenant and Landlord shall, each at its own expense, maintain a policy or policies of comprehensive general liability insurance with respect to the respective activities of each in the Building with the premiums thereon fully paid on or before due date, issued by and binding upon an insurance company approved by Landlord, such insurance to afford minimum protection of not less than $1,000,000 combined single limit coverage of bodily injury, property damage or combination thereof and shall name Oral Roberts University and Tower Realty Group, Inc. as additional insureds. Landlord shall not be required to maintain insurance against thefts within the Premises, the Building or the Project generally.

21. Property Taxes. Landlord agrees (subject to the provisions of Paragraph 6 hereof) to pay all ad valorem taxes levied against the Project, but Tenant shall be liable for all taxes levied against personal property and trade fixtures placed by Tenant in the Premises. If any taxes for which Tenant is liable under this Paragraph are levied against Landlord or Landlord’s property and if Landlord elects to pay the same or if the assessed value of Landlord’s property is increased by inclusion of personal property and trade fixtures placed by Tenant in the Premises and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is liable hereunder.

22. Indemnity. Landlord and its officers, agents, managers, and employees shall not be liable to Tenant, or to Tenant’s agents, servants, employees, customers, or invitees for any injury to person or damage to property caused by any act, omission, or neglect of Tenant, its agents, servants, or employees, invitees, licensees or any other person entering the Project under the invitation of Tenant or arising out of the use of the Premises by Tenant and the conduct of its business or out of a default by Tenant in the performance of its obligations hereunder. Tenant hereby indemnifies and holds Landlord and its officers, agents, managers, and employees harmless from all liability and claims for any such damage or injury.

23. Waiver of Subrogation Rights. Anything in this Lease to the contrary notwithstanding, Landlord and Tenant each hereby waives any and all rights of recovery, claim,

6

action, or cause of action, against the other, its agents, officers, managers, or employees, for any loss or damage that may occur to the Premises, or any improvements thereto, or the Building or the Project, or any improvements thereto, or any personal property of such party therein, by reason of fire, the elements, or any other cause(s) which are insured against under the terms of the standard fire and extended coverage insurance policies referred to in Paragraph 20 hereof, regardless of cause or origin, including negligence of the other party hereto, its agents, officers, managers, or employees.

24. Casualty Damage. If the Premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give prompt written notice thereof to Landlord. In case the Building shall be so damaged that substantial alteration or reconstruction of the Building shall, in Landlord’s sole opinion. be required (whether or not the Premises shall have been damaged by such casualty) or in the event any mortgagee of the Building should require that the insurance proceeds payable as a result of a casualty be applied to the payment of the mortgage debt or in the event of any material uninsured loss to the Building, Landlord may, at its option, terminate this Lease by notifying Tenant in writing of such termination within ninety (90) days after the date of such damage. If Landlord does not thus elect to terminate this Lease, Landlord shall commence and proceed with reasonable diligence to restore the Building to substantially the same condition in which it was immediately prior to the happening of the casualty, except that Landlord’s obligation to restore shall not exceed the scope of the work required to be done by Landlord at Landlord’s expense in originally constructing the Building and installing the Tenant Improvements, nor shall Landlord be required to spend for such work an amount in excess of the insurance proceeds actually received by Landlord as a result of the casualty. When the portions of the Premises originally furnished at Landlord’s expense have been restored by Landlord, Tenant shall, at Tenant’s expense, complete the restoration of the Premises, including the reconstruction of all improvements in excess of those Tenant Improvements originally installed at Landlord’s expense, and the restoration of Tenant’s furniture and equipment. Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from such damage or the repair thereof, except that, subject to the provisions of the next sentence, Landlord shall allow Tenant a fair diminution of rent during the time and to the extent the Premises are unfit for occupancy. If the Premises or any other portion of the Building or the Project be damaged by fire or other casualty resulting from the fault or negligence of Tenant or any of Tenant’s agents, employees, or invitees, the rent hereunder shall not be diminished during the repair of such damage and Tenant shall be liable to Landlord for the cost of the repair and restoration of the Building or the Project caused thereby to the extent such cost and expense is not covered by insurance proceeds.

25. Condemnation. If the whole or substantially the whole of the Building or the Premises should be taken for any public or quasi-public use, by right of eminent domain or otherwise, or should be sold in lieu of condemnation, then this Lease shall terminate as of the date when physical possession of the Building or the Premises is taken by the condemning authority. If less than the whole or substantially the whole of the Building or the Premises is thus taken or sold, Landlord (whether or not the Premises are affected thereby) may terminate this Lease by giving written notice thereof to Tenant; in which event, this Lease shall terminate as of the date when physical possession of such portion of the Building or Premises is taken by the condemning authority. If this Lease is not so terminated upon any such taking or sale, the Base Rental payable hereunder shall be diminished by an equitable amount, and Landlord shall, to the extent Landlord deems feasible, restore the Building and the Premises to substantially their former condition, but such work shall not exceed the scope of the work done by Landlord in originally constructing the Building and the Tenant Improvements, nor shall Landlord in any event be required to spend for such work an amount in excess of the amount received by Landlord as compensation for such taking. All amounts awarded upon a taking of any part or all of the Building or the Premises shall belong to Landlord, and Tenant shall not be entitled to, and expressly waives all claims to, any such compensation.

26. Damages From Certain Causes. Landlord shall not be liable to Tenant for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition, or order of governmental body or authority or by any other cause beyond the control of Landlord. Nor shall Landlord be liable for any damage or inconvenience, which may arise through repair or alteration of any part of the Building, the Project, or the Premises.

27. Events of Default/Remedies.

(a) The following events shall be deemed to be events of default by Tenant under this Lease: (i) Tenant shall fail to comply with any provision of this Lease or any other

7

agreement between Landlord and Tenant all of which terms, provisions and covenants shall be deemed material; (ii) the leasehold hereunder demised shall be taken on execution or other process of law in any action against Tenant; (iii) Tenant shall fail to promptly move into and take possession of the Premises when the Premises are ready for occupancy or shall cease to do business in or abandon any substantial portion of the Premises; (iv) Tenant shall become insolvent or unable to pay its debts as they become due, or Tenant notifies Landlord that it anticipates either condition; (v) Tenant takes any action to, or notifies Landlord that Tenant intends to file a petition under any section or chapter of the United States Bankruptcy Code, as amended, or under any similar law or statute of the United States or any State thereof; or a petition shall be filed against Tenant under any such statute or Tenant or any creditor of Tenant’s notifies Landlord that it knows such a petition will be filed or Tenant notifies Landlord that it expects such a petition to be filed; or (vi) a receiver or trustee shall be appointed for Tenant’s leasehold interest in the Premises or for all or a substantial part of the assets of Tenant.

(b) If Tenant does not make payment when due of any rental installment required of Tenant in the Lease, or if default by Tenant under this Lease otherwise occurs, in addition to the imposition of appropriate late charges, Landlord may, at its option, declare the total Base Rental due or to be due under this Lease immediately due and payable and, if the same is not paid upon demand, said total Base Rental shall be past due, delinquent, and in default.

If Tenant does not make payment when due of any rental installment, Tenant waives notice of rent due and demand for payment of said unpaid installment and waives notice and demand by Landlord for the Tenant to quit and vacate the Premises if such rent not be paid.

(c) Upon the occurrence of any event or events of default by Tenant, whether enumerated in this Paragraph 27 or not, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand for possession whatsoever (and without limiting the generality of the foregoing), Tenant hereby specifically waives notice and demand for payment of rent or other obligations due and waives any and all other notices or demand requirements imposed by applicable law): (i) terminate this Lease in which event Tenant shall immediately surrender the Premises to Landlord; (ii) terminate Tenant’s right to occupy the Premises and re-enter and take possession of the Premises (without terminating this Lease); (iii) enter upon the Premises and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant further agrees that Landlord shall not be liable for any damages resulting to the Tenant from such action; and (iv) exercise all other remedies available to Landlord at law or in equity, including, without limitation, injunctive relief of all varieties.

In the event Landlord elects to re-enter or take possession of the Premises after Tenant’s default, Tenant hereby waives notice of such re-entry or repossession and of Landlord’s intent to re-enter or take possession. Landlord may, without prejudice to any other remedy which he may have for possession or arrearages in rent, expel or remove Tenant any other persons who may be occupying said Premises or any part thereof. In addition, the provisions of Paragraph 30 hereof shall apply with respect to the period from and after the giving of notice of such election to Tenant. All Landlords’ remedies shall be cumulative and not exclusive. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default.

(d) This Paragraph 27 shall be enforceable to the maximum extent not prohibited by applicable law, and the unenforceability of any portion thereof shall not thereby render unenforceable any other portion. To the extent any provision of applicable law requires some action by Landlord to evidence or effect the termination of this Lease or to evidence the termination of Tenant’s right of occupancy, Tenant and Landlord hereby agree that notice, either oral or by telephone, or by any act of Landlord that comes to the attention of Tenant, its agents, servants, or employees, which reflects Landlord’s intention to terminate, shall be sufficient to evidence and effect the termination herein provided for, but Tenant hereby agrees that, as between Landlord and Tenant, its successors and assigns, no such notice shall ever be necessary to effect a termination hereunder.

(e) Landlord shall be in default hereunder in the event Landlord has not begun and pursued with reasonable diligence the cure of any failure of Landlord to meet its obligations hereunder within thirty (30) days of the receipt by Landlord of written notice from Tenant of the alleged failure to perform. In no event shall Tenant have the right to terminate or rescind this Lease as a result of Landlord’s default as to any covenant or agreement contained in this Lease or as a result of the breach of any promise or inducement hereof, whether in this Lease or elsewhere. Tenant hereby waives such remedies of termination and rescission and hereby agrees that Tenant’s remedies for default hereunder and for breach of any promise or inducement

8

shall be limited to a suit for damages and/or injunction. In addition, Tenant hereby covenants that, prior to the exercise of any such remedies, it will give the mortgagees holding mortgages on the Building notice and a reasonable time to cure any default by Landlord.

28. Peaceful Enjoyment. Tenant shall, and may peacefully have, hold, and enjoy the Premises, subject to other terms hereof, provided that Tenant pays the rent and other sums herein recited to be paid by Tenant and performs all of Tenant’s covenants and agreements herein contained. This covenant and any and all other covenants of Landlord shall be binding upon each of landlord and its successors only with respect to breaches occurring during the respective periods of ownership of each of the Landlord’s interest hereunder.

29. Consumer Price Index Adjustment. Effective the first day following each one-year period of the Lease Term, the Base Rental hereunder shall be increased over the Base Rental payable hereunder during the preceding year by an amount which represents a percentage increase in the Base Rental payable during the preceding year, equal to the percentage increase in the CPI (hereafter defined) between the most recent CPI publication prior to the commencement of the preceding one-year period and the most recent CPI publication as of the date thirty (30) days prior to such annual adjustment in Base Rental. CPI shall mean the Consumer Price Index for All Urban Consumers (CPI-U) for all items (Dallas/Forth Worth, Texas Area) published by the Bureau of Labor Statistics, U.S., U.S. Department of Labor (1967 equals 100). If the Bureau of Labor Statistics shall ever cease to compile or publish the CPI-U, then CPI shall thereafter mean such other index of prices published by the U. S. Government as most nearly approximates the CPI-U now published. All calculations made hereunder shall, if necessary, be adjusted to reflect any change in the base year used in calculating the CPI. Landlord shall be entitled to require that the payment of the adjustment to Base Rental provided for in this paragraph be made in monthly installments equal to 1/12 of such adjustment for each year during the remainder of that year, such installments being due and payable on the first day of each calendar month during such year.

30. Holding Over. In the event of holding over by Tenant after expiration or other termination of this Lease, or in the event Tenant continues to occupy the Premises after the termination of Tenant’s right of possession pursuant to Paragraph 27 (c)(ii) hereof, Tenant shall, throughout the entire holdover period, pay rent equal on a per diem basis, to twice the Base Rental and additional Base Rental which would have been applicable had the term of this Lease continued through the period of such holding over by Tenant. No holding over by Tenant after the expiration of the Lease Term shall be construed to extend the term of the Lease. The provision of this paragraph shall not be in place of or in lieu of, but shall be in addition to, the provisions of Paragraph 27(b).

31. Subordination to Mortgage. Tenant accepts this Lease subject and subordinate to any mortgage, deed of trust or other lien presently existing or hereafter arising upon the Premises, upon the Building or upon the Project as a whole, and to any renewals, refinancing and extensions thereof, but Tenant agrees that any such mortgagee shall have the right at any time to subordinate such mortgage, deed of trust or other lien to this Lease on such terms and subject to such conditions as such mortgagee may deem appropriate in its discretion. Landlord is hereby irrevocably vested with full power and authority to subordinate this Lease to any mortgage, deed of trust or other lien now existing or hereafter placed upon the Premises, the Building or the Project as a whole, and Tenant agrees upon demand to execute such further instruments subordinating this Lease or attorning to the holder of any such liens as Landlord may request. The terms of this Lease are subject to approval by the Building’s permanent lender(s), and such approval is a condition precedent to Landlord’s obligations hereunder. In the event that Tenant should fail to execute any instrument of subordination herein required to be executed by Tenant promptly as requested, Tenant hereby irrevocably constitutes Landlord as its attorney-in-fact to execute such instrument in Tenant’s name, place and stead, it being agreed that such power is one coupled with an interest. Tenant agrees that it will from time to time upon request by Landlord execute and deliver to such persons as Landlord shall request a statement in recordable form certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), stating the dates to which rent and other charges payable under this lease have been paid, stating that Landlord is not in default hereunder (or if Tenant alleges a default stating the nature of such alleged default) and further stating such other matters as Landlord shall reasonably require.

32. Landlord’s Lien. Intentionally omitted

9

33. Attorney’s Fees. In the event either party defaults in the performance of any of the terms of this Lease and the other party employs an attorney in connection therewith, the defaulting party agrees to pay the other party’s reasonable attorney’s fees.

34. No Implied Waiver. The failure of Landlord to insist at any time upon the strict performance of any covenant or agreement of this Lease or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of rent due under this Lease shall be deemed to be other than on account of the earliest rent due hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy in this Lease provided.

35. Personal Liability. The liability of Landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited to the interest of Landlord in the Project and Tenant agrees to look solely to Landlord’s interest in the Project for the recovery of any judgment from the Landlord, it being intended that Landlord shall not be personally liable for any judgment or deficiency.

36. Security Deposit. The Security Deposit shall be held by Landlord without liability for interest and as security for the performance by Tenant of Tenant’s covenants and obligations under this Lease, it being expressly understood that the Security Deposit shall not be considered an advance payment or rental or a measure of Tenant’s damages in case of default by Tenant. Unless otherwise provided by mandatory non-waivable law or regulation, Landlord may commingle the Security Deposit with Landlord’s other funds. Landlord may, from time to time, without prejudice to any other remedy, use the Security Deposit to the extent necessary to make good any arrearages of rent or to satisfy any other covenant or obligation of Tenant hereunder. Following any such application of all or any part of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount. If Tenant is not in default at the termination of this Lease, Landlord shall return the balance of the Security Deposit remaining after any such application to Tenant. If Landlord transfers its interest in the Premises during the term of the Lease, Landlord may assign the Security Deposit to the transferee and thereafter shall have no further liability for the return of such Security Deposit.

37. Notice. Any notice in the Lease provided for must, unless otherwise expressly provided herein, be in writing, and may, unless otherwise in this Lease expressly provided, be given or be served by depositing the same in the United States mail, postpaid and certified and addressed to the party to be notified, with return receipt requested. Notice deposited in the mail in the manner hereinabove described shall be effective from and after the expiration of three (3) days after it is so deposited. Notices mailed shall be addressed to the parties at the following addresses:

If to Landlord:	If to Tenant:
Oral Roberts University	ENGlobal Engineering, Inc.
c/o Tower Realty Group, Inc.	2448 East 811t St., Suite 3300
2488 E. 8Ist St., Suite 188	Tulsa, OK 74137
Tulsa, Ok 74137

or in each case to such other address as either party may from time to time designate in writing.

38. Severability. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law.

39. Recordation. Tenant agrees not to record this Lease.

40. Governing Law. This Lease and the rights and obligations of the parties hereto shall be interpreted, construed, and enforced in accordance with the laws of the State of Oklahoma.

10

41. Force Majeure. Whenever a period of time is herein prescribed for the taking of any action by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions, or any other cause whatsoever beyond the control of Landlord.

42. Time of Performance. Except as expressly otherwise herein provided, with respect to all required acts of Tenant, time is of the essence of this Lease.

43. Transfers by Landlord. Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Premises, the Building, the Project, and property referred to herein, and in such event and upon such transfer Landlord shall be released from any further obligations hereunder and Tenant agrees to look solely to Landlord’s successor in interest then occupying Landlord’s position hereunder for the performance of such obligations.

44. Commissions. Landlord and Tenant hereby indemnify and hold each other harmless against any loss, claim, expense, or liability with respect to any commissions or brokerage fees claimed on account of the execution and/or renewal of this Lease and due to any action of the indemnifying party.

45. Effect of Delivery of This Lease. Landlord has delivered a copy of this Lease to Tenant for Tenant’s review only, and the delivery hereof does not constitute an offer or option to Tenant for Tenant to lease the Premises. This Lease shall not be effective until a copy executed by both Landlord and Tenant is delivered to and accepted by Landlord.

46. Relocation. In the event the Premises contain 5,000 square feet or less of Net Rentable Area of the Premises, Landlord shall be entitled to cause Tenant to relocate from the Premises to a comparable space (“Relocation Space”) within the Building at any time after reasonable written notice not in excess of ninety (90) days is given to Tenant of Landlord’s election. Any such relocations shall be entirely at the expense of Landlord or the third party tenant replacing Tenant in the Premises. Such a relocation shall not terminate or otherwise affect or modify this Lease except that from and after the date of such relocation, “Premises” shall refer to the Relocation Space into which Tenant has been moved, rather than the original Premises as herein defined.

47. Building Name. Landlord reserves the right at any time and from time to time to change the name by which the Building is designated.

48. Corporate Authority. If Tenant is a corporation, Tenant warrants that it has legal authority to operate and is authorized to do business in the state of Oklahoma. Tenant and the person executing this Lease on behalf of Tenant warrant that the person or persons executing this Lease on behalf of Tenant has authority to do so and to fully obligate Tenant to all terms and provisions of this Lease. Tenant shall, upon request from Landlord, furnish Landlord with a certified copy of resolutions of Tenant’s Board of Directors authorizing this Lease and granting authority to execute it to the person or persons who have executed it on Tenant’s behalf.

49. Exhibits. Exhibits “A”, “B”, “C”, “D” and Addendum are attached hereto and incorporated herein and made a part of this Lease for all purposes:

50. Prior Agency Disclosure. Tenant acknowledges that prior to its entering into this Lease the Landlord and Tower Realty Group, Inc. have disclosed to Tenant that:

(a) Tower Realty Group, Inc. is a licensed real estate broker in Oklahoma,

and,

(b) with regard to the Building, Tower Realty Group, Inc. is the Landlord’s leasing agent and property manager.

51. Broker. The parties hereto agree that the sole broker who negotiated and brought about this transaction was Austin Neal of Tower Realty Group, Inc. and Mendy Ward of CB Richard Ellis. Landlord agrees to pay a commission therefor as per separate agreement.

Tenant represents it neither consulted nor negotiated with any broker other than Austin Neal of Tower Realty Group, Inc. and Mendy Ward of CB Richard Ellis with regard to the

11

Leased Premises. Tenant agrees to indemnify, defend and save Landlord harmless from and against any claims for fees or commissions from anyone other than Austin Neal of Tower Realty Group, Inc. and Mendy Ward of CB Richard Ellis, and with whom Tenant has dealt in connection with the Premises or this Lease.

The representations and indemnities contained in this Section 51 shall survive the expiration or earlier termination of this Lease.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in multiple counterparts as of the day and year first above written.

WITNESS:

/s/ [ILLEGIBLE]    

Name

WITNESS:

/s/ Jennifer Cody    

Name

LANDLORD

Oral Roberts University

an Oklahoma corporation

By:	/s/ [ILLEGIBLE]
Title:	Vice President

TENANT

IDS Engineering, Inc.

dba ENGlobal Engineering, Inc.

a Texas corporation

By:	/s/ William A. Coskey
Title:	President

12

Exhibit “A”

LEGAL DESCRIPTION

According to the recorded plat thereof Tulsa County, City of Tulsa, State of Oklahoma, known as:

A tract of land that is part of Lot One (I), Block One (I), of ORAL ROBERTS UNIVERSITY HEIGHTS 2ND ADDITION, an Addition to the City of Tulsa, Tulsa County, Oklahoma, according to the Recorded Plat thereof, more particularly described as follows, to-wit:

STARTING at the Northwest comer of said Lot 1; thence South 89 degrees 48’ 06” E along the Northerly line of Lot 1 for 939.90 feet to the POINT OF BEGINNING of said tract of land; thence continuing South 89 degrees 48’ 06” E along said Northerly line for 558.08 feet; thence S 0 degrees 11’ 54” W for 30.29 feet to a point of curve; thence Southerly and Southwesterly along a curve to the Right, with a central angle of 45 degrees 00’ 00” and a radius of 217.87 feet, for 171.12 feet to a point of Reverse curve; thence Southwesterly along a curve to the left with a central angle of 38 degrees 21’ 41” and a radius of 191.83 feet, for 128.44 feet to a point of compound curve, thence Southwesterly, Southerly and Easterly along a curve to the left, with a central angle of 96 degrees 38’ 19” and a radius of 18.83 feet for 31.77 feet to a point of tangency; thence S 89 degrees 48’ 06” E along said tangency for 50.01 feet; thence S 00 degrees 11’ 54” W for 254.33 feet; thence N 89 degrees 48’ 06” W for 41.82 feet to a point of curve; thence Westerly, Southerly and Southeasterly along a curve to the left, with a central angle of 101 degrees 10’ 31” and a radius of 18.83 feet, for 33.26 feet to a point of compound curve; thence Southeasterly and Easterly along a curve to the left with a central angle of 78 degrees 49’ 29” and a radius of 511.83 feet, for 704.16 feet to a point of tangency; thence S 89 degrees 48’ 06” E along said tangency for 656.38 feet to a point on the Easterly line of said Lot 1, said point being 1008.29 feet Southerly of the Northeast comer thereof; thence S 0 degrees 24’ 38” W along said Easterly line for 598.22 feet; thence N 89 degrees 53’ 47” W along an extension of and along the Northerly line of Lot 1 in Block 1 of UNIVERSITY VILLAGE, an Addition to the City of Tulsa, Tulsa County, Oklahoma, for 2538.15 feet to the Northwest comer of said Lot 1 of University Village; thence N 0 degrees 01’ 32” W for 0.00 feet to a point of curve; thence Northerly along the Westerly line of Lot 1 of ORAL ROBERTS UNIVERSITY HEIGHTS 2ND ADDITION on a curve to the right, with a central angle of 0 degrees 00’ 58” and a radius of 350.00 feet, for 0.10 feet to a point of tangency; thence N 0 degrees 00’ 34” W along the Westerly line of said Lot 1 on said tangency for 602.32 feet; thence S 89 degrees 48’ 06” E for 546.16 feet to a point of curve; thence Easterly and Northeasterly along a curve to the left, with a central angle of 78 degrees 49’ 29” and a radius of 511.83 feet, for 704.16 feet to a point of compound curve; thence Northeasterly, Northerly, and Westerly along a curve to the left, with a central angle of 101 degrees 10’ 31” and a radius of 18.83 feet, for 33.26 feet to a point of tangency; thence N 89 degrees 48’ 06” W along said tangency for 41.82 feet; thence N 00 degrees 11’ 54” E for 254.33 feet; thence S 89 degrees 48’ 06” E for 50.01 feet to a point of curve; thence Easterly, Northerly, and Northwesterly along a curve to the left, with a central angle of 96 degrees 38’ 19” and a radius of 18.83 feet, for 31.77 feet to a point of compound curve; thence Northwesterly along a curve to the left, with a central angle of 38 degrees 21’ 41” and a radius of 191.83 feet, for 128.44 feet to a point of reverse curve; thence Northwesterly and Northerly along a curve to the right, with a central angle of 45 degrees 00’ 00” and a radius of 217.87 feet, for 171.12 feet to a point of tangency; thence N 0 degrees 11’ 54” E along said tangency for 21.30 feet to a point of curve; thence Northerly and Northwesterly along a curve to the left, with a central angle of 22 degrees 01’ 21” and a radius of 24.00 feet, for 9.22 feet to the Point of Beginning of said tract of land.

LESS AND EXCEPT:

A tract of land that is part of Lot 1 in Block I of ORAL ROBERTS UNIVERSITY HEIGHTS 2ND ADDITION, an Addition to the City of Tulsa, Tulsa County, Oklahoma, said tract of land being described as follows, to-wit:

Starting at the Northwest comer of Lot 1 of University Village, an Addition to the City of Tulsa, Tulsa County, Oklahoma, thence S 89 degrees 53’ 47” E along the Northerly line of said Lot 1 for 779.12 feet to the “Point of Beginning” of said tract of land; thence N 0 degrees 06’ 13” E for 64.50 feet; thence S 89 degrees 53’ 47” E for 58.00 feet; thence S 0 degrees 06’ 13” W for 64.50 feet to a point on the Northerly line of Lot 1 of “University Village”; thence N 89 degrees 53’ 47” W along said Northerly line for 58.00 feet to the Point of Beginning of said tract of land.

13

Exhibit “C”

TENANT IMPROVEMENTS

Tenant accepts the “Premises” in as-is condition.

14

Exhibit “D”

RULES AND REGULATIONS

1. Sidewalks, doorways, vestibules, halls, stairways, and similar areas shall not be obstructed nor shall refuse, furniture, boxes or other items be placed therein by Tenant or its officers, agents, servants, and employees, or used for any purpose other than ingress and egress to and from the leased premises or for going from one part of the Building to another part of the Building. Canvassing, soliciting, and peddling in the Building are prohibited.

2. Plumbing fixtures and appliances shall be used only for the purposes for which constructed and no unsuitable material shall be placed therein.

3. No signs, directories, posters, advertisements, or notices shall be painted or affixed on or to any of the windows or doors, or in corridors or other parts of the Building, except in such color, size, and style, and in such places as shall be first approved in writing by Landlord in its discretion. Landlord will prepare one (1) building standard identification sign at Landlord’s expense. No additional signs shall be posted without Landlord’s prior written consent as to location and form, and the cost of preparing and posting such signs shall be borne solely by Tenant. Landlord shall have the right to remove all unapproved signs without notice to Tenant, at the expense of Tenant.

4. Tenant shall not do, or permit anything to be done in or about the Building, or bring or keep anything therein, that will in any way increase the rate of fire or other insurance on the Building, or on property kept therein or otherwise increase the possibility of fire or other casualty (example: Candles, halogen floor lamps, electric heaters).

5. Landlord shall have the power to prescribe the weight and position of heavy equipment or objects, which may overstress any portion of the floor. All damage done to the Building by the improper placing of such heavy items will be repaired at the sole expense of the responsible tenant.

6. A tenant shall notify the Building manager when safes or other heavy equipment or objects are taken in or out of the Building, and the moving shall be done after written permission is obtained from Landlord on such conditions as Landlord shall require. Any moving in or moving out of Tenant’s equipment, furniture, files, and/or fixtures shall be done only with prior written notice to Landlord, and Landlord shall be entitled to prescribe the hours of such activity, the elevators which shall be available for such activity and shall, in addition, be entitled to place such other conditions upon Tenant’s moving activities as Landlord deems appropriate. Tenant shall bear all risk of loss relating to damage incurred with respect to Tenant’s property in the process of such a move, and in addition, shall indemnify and hold Landlord harmless as to all losses, damages, claims, causes of action, costs and/or expenses relating to personal injury or property damage sustained by Landlord or any third part on account of Tenant’s moving activities.

7. Corridor doors, when not in use, shall be kept closed.

8. All deliveries must be made via the service entrance and elevators designated by Landlord for service, if any, during normal working hours. Landlords Written approval must be obtained for any delivery after normal working hours.

9. Each tenant shall cooperate with Landlord’s employees in keeping leased premises neat and clean.

10. Tenant shall not cause or permit any improper noises in the Building, or allow unpleasant odors to emanate from the leased premises, or otherwise interfere, injure, or annoy in any way other tenants or persons having business with them.

11. No animals shall be brought into or kept in or about the Building.

12. No boxes, crates, or other such materials shall be stored in hallways or other Common Areas. When Tenant must dispose of crates, boxes, etc., it will be the responsibility of Tenant to dispose of same prior to, or after the hours of 7:30 a.m. and 5:30 p.m., so as to avoid having such debris visible in the Common Area during Normal Business Hours.

15

13. No machinery of any kind, other than ordinary office machines such as computers, typewriters and calculators, shall be operated on leased premises without the prior written consent of Landlord.

14. Tenants or their employees shall not use nor keep in the Building any flammable or explosive fluid or substance (including live Christmas trees and ornaments), or any illuminating materials including candles. No space heaters, halogen floor lamps or fans shall be operated in the Building.

15. No bicycles, motorcycles or similar vehicles will be allowed in the Building.

16. No nails, hooks, or screws shall be driven into or inserted in any part of the Building except as approved by building maintenance personnel. Nothing shall be affixed to, or made to hang from the ceiling of the Premises without Landlord’s prior written consent.

17. Landlord has the right to evacuate the Building in the event of an emergency or catastrophe.

18. Outside food services will be allowed in Tenant’s leased premises only.

19. No additonal locks shall be placed upon any doors without the prior written consent of Landlord. Landlord shall furnish all necessary keys, and the same shall be surrendered upon termination of this Lease, and Tenant shall then give Landlord or his agent an explanation of the combination of all locks on the doors or vaults. Landlord shall initially give tenant two (2) keys to the Demised Premises. Tenant shall make no duplicates of such keys. Additional keys shall be obtained only from Landlord, at a fee to be determined by Landlord.

20. Tenant will not locate furnishings or cabinets adjacent to mechanical or electrical access panels to prevent personnel from servicing such units as routine or emergency access may require. Cost of moving such furnishing for Landlord’s access will be at Tenant’s expense. The lighting and air conditioning equipment of the Building will remain the exclusive charge of the Building designated personnel.

21. Tenant shall comply with parking rules and regulations as may be posted and distributed from time to time.

22. Hangtags are provided for each Tenant and their employees and must be displayed properly in vehicles while on CityPlex property.

23. Employees are not to park in Visitor parking.

24. Upon second vehicle violation notice, vehicles will be towed at owners’ expense.

25. Tenants and their employees are not allowed to advertise “For Sale” any vehicles on CityPlex Towers property.

26. Tenants have the option of allowing their employees to have access to the building with Security Codes provided by the Management Company. Any transferring of codes will result in immediate deletion from the security system.

27. No portion of the Building shall be used for the purpose of lodging rooms.

28. Tenant will not place vending machines or dispensing machines of any kind in the leased premises.

29. Prior written approval, which shall be at Landlord’s sole discretion, must be obtained for installation of window shades, blinds, drapes, or any other window treatment of any kind whatsoever. Landlord will control all internal lighting that may be visible from the exterior of the Building and shall have the right to change any unapproved lighting, without notice to Tenant, at Tenant’s expense.

30. No tenant shall make any changes or alterations to any portion of the Building without Landlord’s prior written approval, which may be given on such conditions as Landlord may elect. All such work shall be done by Landlord or by contractors and/or workmen approved by Landlord working under Landlord’s supervision.

16

31. Smoking is prohibited on the North, East and West sides of the building. Smoking is permitted in the designated areas of the building and in the smoking rooms designated by Landlord within the building.

In the event that Tenant, it’s agents and employees smoke in any area other than those described above, Landlord reserves the right to charge Tenant as additional rent hereunder, Fifty Dollars ($50.00) for each such occurrence.

CityPlex Security personnel on-site as well as will monitor the non-smoking areas by video.

32. Landlord reserves the right to rescind any of these rules and make such other and further rules and regulations as in its judgment shall from time to time be needful for the operation of the Building, which rules shall be binding upon each Tenant upon delivery to such Tenant of notice thereof in writing.

Last Revision: August 18, 2002

17

CONFIRMATION OF PRIOR AGENCY DISCLOSURE

The Oklahoma Real Estate Commission Rules require a licensee, as agent or principal, to clearly disclose the agency relationship(s) to the Landlord and Tenant prior to their entering into a binding agreement, and to confirm the prior agency disclosure in a separate provision, incorporated in or attached to that agreement.

In compliance with this Commission Rule, Landlord and Tenant confirm that before they entered into this Lease Agreement, Tower Realty Group, Inc. and Austin Neal had previously disclosed that they represent the Landlord.

LANDLORD
Oral Roberts University, an Oklahoma corporation
By:	/s/ [ILLEGIBLE]
Title:	Vice President
DATE: 10-20-03

TENANT
IDS Engineering, Inc., dba ENGlobal Engineering, Inc. a Texas corporation
By:	/s/ William A. Coskey
Title:	President
DATE: 10-16-03

18

ADDENDUM

TO CITYPLEX TOWER OFFICE LEASE AGREEMENT

BY AND BETWEEN

ORAL ROBERTS UNIVERSITY, AN OKLAHOMA

CORPORATION, LANDLORD

AND IDS ENGINEERING, INC.

DBA ENGLOBAL ENGINEERING,

A TEXAS CORPORATION, TENANT

1.    Base Rental—Tenant’s monthly base rental, subject to adjustments as called for in the Lease, shall be as follows:

November 1, 2003—November 30, 2003—$ 0.00

December 1, 2003—October 31, 2004—$4,875.25/per mo

2.    Landlord grants tenant the right to utilize cubicles currently located on the 37^th Floor for the term of this lease. Tenant is responsible for moving and setup of the cubicles.

19

EX-10.76

Exhibit 10.76

SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

THIS SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (hereinafter, this “Agreement”) is entered into as of the 27th day of October, 2003, to be effective as of June 30, 2003 (the “Effective Date”), by and among IDS ENGINEERING, INC., d/b/a ENGLOBAL ENGINEERING, INC., a Texas corporation, THERMAIRE, INC., d/b/a THERMAL CORPORATION, a Texas corporation, ENGLOBAL CONSTANT POWER, INC., a Texas corporation, ENGLOBAL CORPORATE SERVICES, INC., a Texas corporation, IDS ENGINEERING MANAGEMENT, LC, a Texas limited liability company, ENGLOBAL ENGINEERING, INC., a Texas corporation, ENGLOBAL SYSTEMS, INC., a Texas corporation, PETROCON ENGINEERING OF LOUISIANA, INC., a Louisiana corporation, R.P.M. ENGINEERING, INC., d/b/a ENGLOBAL ENGINEERING, INC., a Louisiana corporation, ENGLOBAL CONSTRUCTION RESOURCES, INC., d/b/a PETROCON CONSTRUCTION RESOURCES, INC., a Texas corporation, and ENGLOBAL TECHNOLOGIES, INC., a Texas corporation, (individually, a “Borrower” and collectively, “Borrowers”), FLEET CAPITAL CORPORATION, a Rhode Island corporation (“Fleet”), as Agent (Fleet, in such capacity, the “Agent”), and the financial institution(s) listed on the signature pages hereof and their respective successors and assigns (each individually a “Lender” and collectively “Lenders”).

RECITALS

A.    Borrowers, Agent and Lender have entered into that certain Second Amended and Restated Loan and Security Agreement, dated as of December 21, 2001, as amended by that certain First Amendment to Second Amended and Restated Loan and Security Agreement entered into as of March 26, 2002, executed by Borrowers, Agent and Lender, and by that certain Second Amendment to Second Amended and Restated Loan and Security Agreement, dated July 31, 2002, executed by Borrowers, Agent and Lender, and by that certain Third Amendment to Second Amended and Restated Loan and Security Agreement, dated November, 2002, executed by Borrowers, Agent and Lender, and by that certain Fourth Amendment to Second Amended and Restated Loan and Security Agreement and Amendment to other Loan Documents, entered into on March 26, 2003, executed by Borrowers, Agent and Lender, and by that certain Fifth Amendment to Second Amended and Restated Loan and Security Agreement, entered into as of August 7, 2003, executed by Borrower, Agent and Lender (as amended, the “Loan Agreement”).

B.    Borrowers, Lender and Agent desire to amend the Loan Agreement as hereinafter set forth.

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

1

ARTICLE I

Definitions

1.01    Capitalized terms used in this Agreement, to the extent not otherwise defined herein, shall have the same meaning as in the Loan Agreement, as amended hereby.

ARTICLE II

Amendments

2.01    Amendment to Section 8.3.2 of the Loan Agreement.    Effective as of the Effective Date, Section 8.3.2 of the Loan Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof:

“8.3.2 Ratio of Senior Debt and Equus Term Note to EBITDA. Maintain, on a Consolidated basis, as of the last day of each calendar month, beginning July 31, 2003 and continuing on the last day of each thereafter occurring calendar month, a ratio of (i) the sum of (a) Borrower’s Senior Debt on such date (provided, however, that in this calculation of the Senior Debt of Borrower, the unpaid amount of the Revolving Credit Loans on such date shall be deemed to be the Average Monthly Revolving Credit Loan Balance for such month) and (b) the unpaid principal amount of the Equus Term Note on such date, to (ii) Borrower’s EBITDA for the twelve- (12) calendar month period ending on such date, equal to or less than 2.75 to 1.00.”

ARTICLE III

Conditions Precedent

3.01    Conditions to Effectiveness.    Notwithstanding anything herein to the contrary, the effectiveness of this Agreement is subject to the satisfaction of the following conditions precedent, unless specifically waived in writing by Agent and Lender:

(a)    Agent shall have received, in form and substance satisfactory to Agent, (i) this Agreement, duly executed by Borrowers, (ii) the Consent, Ratification and Release attached hereto, duly executed by each Guarantor, and (iii) such additional documents, instruments and information as Agent or its legal counsel, Patton Boggs LLP, may request.

(b)    All corporate proceedings taken in connection with the transactions contemplated by this Agreement and the agreements described in clause (a) above and all documents, instruments and other legal matters incident thereto shall be satisfactory to Agent and its legal counsel, Patton Boggs LLP.

2

ARTICLE IV

No Waiver

4.01    Nothing contained herein shall be construed as a waiver by Agent or Lender of any covenant or provision of the Loan Agreement, the other Loan Documents, this Agreement, or of any other contract or instrument between Borrowers and Agent and/or Lender, and Agent and/or Lender’s failure at any time or times hereafter to require strict performance by Borrowers of any provision thereof shall not waive, affect or diminish any right of Agent and/or Lender to thereafter demand strict compliance therewith. Agent and Lender hereby reserve all rights granted under the Loan Agreement, the other Loan Documents, this Agreement and any other contract or instrument between Borrowers, Agent and/or Lender.

ARTICLE V

Ratifications, Representations and Warranties

5.01    Ratifications.    The terms and provisions set forth in this Agreement shall modify and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the other Loan Documents, and except as expressly modified and superseded by this Agreement, the terms and provisions of the Loan Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Borrowers, Agent and Lender agree that the Loan Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

5.02    Representations and Warranties.    Borrowers hereby represent and warrant to Agent and Lender that (a) the execution, delivery and performance of this Agreement and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of Borrowers and will not violate the Articles of Incorporation or Bylaws of Borrowers; (b) the representations and warranties contained in the Loan Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date; (c) no Event of Default or Default under the Loan Agreement has occurred and is continuing, unless such Event of Default or Default has been specifically waived in writing by Agent and Lender; (d) Borrowers are in full compliance with all covenants and agreements contained in the Loan Agreement and the other Loan Documents, as amended hereby; and (e) Borrowers have not amended their Articles of Incorporation or Bylaws since the date of the original, unamended Loan Agreement.

ARTICLE VI

Miscellaneous Provisions

6.01    Survival of Representations and Warranties.    All representations and warranties made in the Loan Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Agreement, shall survive the execution and delivery of this Agreement and the other Loan Documents, and no investigation by Agent or Lender or any closing shall affect the representations and warranties or the right of Agent or Lender to rely upon them.

3

6.02    Reference to Loan Agreement.    Each of the Loan Documents, including the Loan Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Loan Agreement, as amended hereby, are hereby amended so that any reference in such Loan Documents to the Loan Agreement shall mean a reference to the Loan Agreement, as amended hereby.

6.03    Expenses of Agent and Lender.    As provided in the Loan Agreement, Borrowers agree to pay on demand all costs and expenses incurred by Agent and Lender in connection with the preparation, negotiation and execution of this Agreement and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the costs and fees of Agent’s and Lender’s legal counsel, and all costs and expenses incurred by Agent and/or Lender in connection with the enforcement or preservation of any rights under the Loan Agreement, as amended hereby, or any other Loan Documents, including, without limitation, the costs and fees of Agent’s and Lender’s legal counsel.

6.04    Severability.    Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

6.05    Successors and Assigns.    This Agreement is binding upon and shall inure to the benefit of Agent, Lender and Borrowers and their respective successors and assigns, except Borrowers may not assign or transfer any of their rights or obligations hereunder without the prior written consent of Lender.

6.06    Counterparts.    This Agreement may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.

6.07    Effect of Waiver.    No consent or waiver, express or implied, by Agent or Lender to or for any breach of or deviation from any covenant or condition by Borrowers shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty.

6.08    Headings.    The headings, captions, and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

6.09    Applicable Law.    THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

4

6.10    Final Agreement.    THE LOAN DOCUMENTS, AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AGREEMENT IS EXECUTED. THE LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AGREEMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWERS, AGENT AND LENDER.

6.11    Release.    EACH BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE “OBLIGATIONS” OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM AGENT AND/OR LENDER. EACH BORROWER HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT AND LENDER, THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AGREEMENT IS EXECUTED, WHICH SUCH BORROWER MAY NOW OR HEREAFTER HAVE AGAINST AGENT AND/OR LENDER, THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY “LOANS”, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AGREEMENT.

[The Remainder of this Page Intentionally Left Blank]

5

ACCEPTED as of the date first written above.

BORROWERS:
IDS ENGINEERING, INC., d/b/a ENGLOBAL ENGINEERING, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

THERMAIRE, INC., d/b/a THERMAL CORPORATION
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

ENGLOBAL CONSTANT POWER, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

ENGLOBAL CORPORATE SERVICES, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

IDS ENGINEERING MANAGEMENT, LC
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

ENGLOBAL ENGINEERING, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

ENGLOBAL SYSTEMS, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

PETROCON ENGINEERING OF LOUISIANA, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

R.P.M. ENGINEERING, INC., d/b/a ENGLOBAL ENGINEERING, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

ENGLOBAL CONSTRUCTION RESOURCES, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

ENGLOBAL TECHNOLOGIES, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

Accepted in Dallas, Dallas County, Texas:

AGENT:

FLEET CAPITAL CORPORATION

By:	/s/    Dan Hughes
Name: Title:	Dan Hughes Vice President

LENDERS:

FLEET CAPITAL CORPORATION

By:	/s/    Dan Hughes
Name: Title:	Dan Hughes Vice President

CONSENT, RATIFICATION AND RELEASE

Each of the undersigned hereby consents to the terms of the within and foregoing Agreement, confirms and ratifies the terms of its guaranty agreement relating to the Obligations and of each collateral document it has executed in connection with the Obligations (collectively, the “Documents”), and acknowledges that the Documents to which it is a party are in full force and effect and ratifies the same, that it has no defense, counterclaim, set-off or any other claim to diminish its liability under such Documents, that its consent is not required to the effectiveness of the within and foregoing Agreement, and that no consent by it is required for the effectiveness of any future amendment, modification, forbearance or other action with respect to the Loans, the Collateral, or any of the other Loan Documents. EACH OF THE UNDERSIGNED HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES EACH OF AGENT AND EACH LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AGREEMENT IS EXECUTED, WHICH THE UNDERSIGNED MAY NOW OR HEREAFTER HAVE AGAINST AGENT OR ANY LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY “LOANS”, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AGREEMENT.

ENGLOBAL CORPORATION
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

1

IDS ENGINEERING, INC., d/b/a ENGLOBAL ENGINEERING, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

THERMAIRE, INC., d/b/a THERMAL CORPORATION
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

ENGLOBAL CONSTANT POWER, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

ENGLOBAL CORPORATE SERVICES, INC.
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

IDS ENGINEERING MANAGEMENT, LC
By:	/s/    R. W. Raiford
Name: R. W. Raiford Title: CFO

2

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael L. Burrow, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ENGlobal Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2003

//s// Michael L. Burrow P. E.

Michael L. Burrow

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Robert W. Raiford, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ENGlobal Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2003

//s// Robert W. Raiford

Robert W. Raiford

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ENGlobal Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission, the undersigned certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to ENGlobal and will be retained by ENGlobal and furnished to the Securities and Exchange Commission or its staff upon request.

Date: November 12, 2003

/s/ Michael L. Burrow

Michael L. Burrow, P. E.

Chief Executive Officer

/s/ Robert W. Raiford

Robert W. Raiford

Chief Financial Officer